Featured Report
Climate in the Boardroom: How Asset Manager Voting Shaped Corporate Climate Action in 2021
Despite the escalating climate crisis, systemically important U.S. companies continue to invest in the expansion and continued use of fossil fuels, further accelerating global warming. The systemic and unhedgeable risks posed by climate change to long-term asset values and the stability of the financial system itself requires bold and ambitious action by investors to avert further global economic and financial catastrophe.Through their shareholder voting, large asset managers have both the power and fiduciary responsibility to hold corporate directors accountable to clear standards of net-zero alignment across climate-critical sectors. However, in 2021, proxy voting by asset managers with over $1 trillion in AUM remained insufficient to the scale and urgency of the climate crisis. Without additional board-level accountability from these largest and most influential shareholders to transition to net-zero pathways, companies in climate-critical industries such as oil and gas, electricity production, and financial services will continue to drive warming beyond 1.5°C—threatening the lives and livelihood of millions and placing trillions of dollars of shareholder value and financial system stability at increasing risk.
KEY FINDINGS:
Vanguard, BNY Mellon, T. Rowe Price, Wellington, and JPMorgan Asset Management all demonstrated strong support for status-quo governance of climate risks across all climate-critical S&P 500 companies in the oil and gas, electric power, and financial services industries, by voting for more than 98% of management-sponsored directors. Fidelity voted for 100% of these directors.
BlackRock notably increased support for climate-related resolutions in 2021, yet still supported 96% of management-proposed directors at S&P 500 companies in these three sectors, down only marginally from its level of support in 2020. This was largely driven by a dip in its support for directors at U.S. oil and gas companies, where BlackRock supported 91% of directors in 2021, down from 98% in 2020.
Voting leaders Legal & General Investment Management (“LGIM”), PIMCO, and Amundi Asset Management overwhelmingly opposed board leaders and directors at 19 U.S. companies with decarbonization targets, capital expenditures, and/or policy influence activities that Majority Action identified as demonstrably not aligned with net-zero pathways in the oil and gas, electric power, and banking industries.
In contrast, Vanguard and Fidelity supported the chairs and lead independent directors at all 19 companies. BlackRock voted to re-elect the entire board at 11 of these 19 companies, and voted in favor of the chair and/or lead independent director at 15.
No major asset manager’s proxy voting policy explicitly seeks to hold companies accountable to limiting warming to 1.5°C, unlike leading asset owners and managers, including competitor Engine No. 1’s ETF management firm. Policies at Vanguard, Fidelity, and State Street make no mention of voting against directors on the basis of climate performance.
BlackRock has made major revisions to its voting policies, clarifying that votes against directors could be taken on the basis of climate-related business practices, not just disclosures. However, BlackRock’s policy implementation falls far short of peer and best-practice standards, failing to specify industry-specific standards for decarbonization, not linking director voting to performance along such standards, and not publishing company assessments against such standards.
RECOMMENDATIONS:
Majority Action recommends that asset managers and owners take responsibility for mitigating climate risks to their clients’ and beneficiaries’ portfolios by:
Adopting or updating proxy voting policies before the 2022 shareholder annual meeting season, to target limiting warming to 1.5°C, set expectations that portfolio companies will take action to reduce their emissions consistent with that goal, and enable voting against directors at companies that fail to do so.
Establishing and communicating clear, industry-specific standards for assessing corporate decarbonization plans aligned with limiting warming to 1.5°C, in particular in the climate-critical industries of oil and gas, electric power, and financial services, and disclosing company assessments against those standards.
Asset owners are urged to revise asset manager search criteria, requests for proposals and assessments to include criteria for proxy voting on systemic climate risk at climate-critical companies.