Featured Report

Climate in the Boardroom: How Asset Manager Voting Shaped Corporate Climate Action in 2022

 
 

Climate change poses significant, undiversifiable, portfolio-wide risks to long-term and institutional investors with broad market exposure. During the 2022 proxy season, there was a growing divide between the four largest asset managers — BlackRock, Vanguard, Fidelity, and State Street Global Advisors— and their peers that are increasingly holding board directors accountable for corporate climate performance.


Companies in climate-critical sectors continue to invest in and finance the continued use and expansion of fossil fuel production and consumption far beyond carbon budgets that limit warming to 1.5°C or 2°C. Large asset managers have a fiduciary duty to hold corporate directors accountable for practices that create risk for long-term investors. Read the report for how asset managers can and should mitigate the impact of systemic risks such as climate change in the long-term interest of their clients’ portfolios.   

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    • Overall, large asset managers’ support for directors at climate-critical companies remains stubbornly high. During the 2022 proxy season, 14 of the 20 asset managers supported more than 95 percent of management-sponsored directors at these companies, up from 13 asset managers in the prior season.

    • The gap between the leading asset managers – those with the lowest support for management-sponsored directors at climate critical companies in 2022 – and the majority of large asset managers continued to grow, further polarizing the group.

    • The five asset managers with the lowest support for such directors – PIMCO, Amundi Asset Management, Legal & General Investment Management, UBS Asset Management , and Franklin Templeton – further decreased their support by 6.7 percentage points on average from the previous season.

    • By contrast, five large asset managers increased their support for such directors. This group included the two largest and most influential asset managers, BlackRock, which increased its support by 1.9 percentage points, and Vanguard, which increased its support by 0.5 percentage points to support 100 percent of management-sponsored directors at failing climate-critical companies.

    • The four largest asset managers – BlackRock, Vanguard, State Street, and Fidelity – have remained strong supporters of the status quo at climate-critical companies. In 2022, they supported directors at climate-critical companies at an equivalent or greater rate than directors at S&P 500 index companies as a whole. In the four years since the Intergovernmental Panel on Climate Change issued its groundbreaking report that detailed the dangerous impacts of global warming beyond 1.5°C above pre-industrial levels, the Big Four’s support for directors at climate-critical companies has remained between 96 and 100 percent.

    • Most of the largest asset managers have acknowledged that climate oversight and accountability firmly rests with the board of directors. Prior to the start of the 2022 proxy season, seven of the largest asset managers updated their respective proxy voting policies to enable voting against directors at companies failing to meet climate performance expectations, bringing the total asset managers with such policies to 12 of the 20 analyzed in this report.

    • Despite recognition of the need for director accountability for corporate climate performance, most asset manager proxy voting policies still set expectations for climate-critical companies that are so low as to rarely trigger a vote against a director for failures of climate oversight. Of the 12 asset managers with policies that enable votes against directors for climate oversight failure, only three supported fewer than 95 percent of directors at climate-critical companies. Only one asset manager – Legal & General – explicitly set limiting warming to 1.5°C as a goal of their proxy voting policies and expected companies to take action on emissions consistent with a 1.5°C trajectory rather than merely make climate-related disclosures.

  • Majority Action recommends that asset managers adopt or update proxy voting policies that address the material and systemic climate risk facing shareholders. These policies should feature, at a minimum:

    1. An intention that proxy voting be aligned to the goal of limiting global temperature rise to 1.5°C;

    2. A clear and explicit expectation that portfolio companies take action on emissions consistent with a 1.5°C pathway, including target setting and capital allocation, instead of merely disclosing how the company perceives and manages its own climate risks; and

    3. A commitment to vote against directors at companies that have failed to meet the climate performance targets.