Introduction

Climate change is described as a systemic risk that threatens the stability of the global financial system, jeopardising asset values and investment returns across all asset classes. The 2020s are identified as a critical decade for climate action. The report notes that 2024 was the hottest year on record, with Hurricane Helene and Hurricane Milton causing at least 250 deaths and more than $110 billion in damages. Furthermore, 2025 began with climate-fuelled wildfires in Los Angeles that could cost more than $250 billion.

Aside from human impacts, world GDP is already estimated to contract by 19% in the next 25 years due to locked-in emissions, independent of future decarbonisation pathways. Diversified investors are warned that the only way to decrease systematic climate risk is to mitigate it in the real economy. Researchers estimate that over 40% of global equity value is at risk if decarbonisation efforts do not accelerate, with potential losses exceeding 50% if climate tipping points are reached.

The big four’s climate proxy voting

This report analyses the 2024 climate proxy voting performance of the four largest asset managers: BlackRock, Fidelity (including Geode), State Street, and Vanguard. These “Big Four” manage over $17 trillion in US client assets and hold more than 20% of shares in the S&P 500. The analysis covers 38 shareholder proposals at 36 Russell 3000 companies, focused on decarbonisation, climate lobbying, and climate finance. These proposals were selected because they received at least 20% support and positive recommendations from proxy advisors like ISS or Glass Lewis.

Decarbonisation

Despite the urgent need for emissions reductions, the Big Four were largely unwilling to support proposals for science-based targets or climate transition plans. Vanguard did not support any of the 38 proposals in scope, while BlackRock supported only three. Fidelity backed the highest number of decarbonisation proposals. Asset managers were more inclined to support disclosure proposals at small-cap companies than those asking large-cap multinationals to set targets. The Big Four also voted against most proposals mentioning Scope 3 disclosures, despite value-chain emissions accounting for an average of 75% of a company’s carbon footprint.

Climate lobbying

Climate lobbying is recognised as a critical aspect of corporate strategy, as negative lobbying can stall an orderly transition and increase portfolio risks. BlackRock, Geode, and Vanguard voted against every climate lobbying proposal. State Street was the most supportive, with over 75% of its funds backing three proposals. Proposals at PACCAR and NextEra were flagged by Climate Action 100+ due to board unresponsiveness, but only Fidelity supported these flagged votes.

Climate finance

Banking and insurance firms play a pivotal role in driving systemic decarbonisation. However, BlackRock and Vanguard voted against every climate finance proposal. State Street outshone its peers by supporting Clean Energy Financing Ratio proposals, with over 70% of its funds voting for those at Bank of America, Goldman Sachs, and Morgan Stanley. Support for insured emissions proposals was lacking; State Street, Fidelity, and Geode supported only one of three proposals, while BlackRock and Vanguard supported none.

Climate proxy voting at the big four’s sustainable funds

The voting records of funds marketed as sustainable, ESG, or climate-focused often contradict their stated mandates. Vanguard’s sustainable funds voted against every climate proposal. Even funds explicitly marketed as “Paris-aligned” failed to vote for a majority of decarbonisation proposals. For instance, BlackRock’s iShares Paris-Aligned Climate MSCI USA ETF (PABU) voted against every decarbonisation proposal. Additionally, Fidelity’s conventional funds sometimes outperformed its sustainable funds in supporting GHG disclosures and climate lobbying.

Public pension funds and their asset managers: divergence in climate proxy voting

There is a significant divergence in voting between large US public pension funds and their asset managers, BlackRock and State Street. Pension funds are uniquely vulnerable to climate risks as they must deliver long-term consistent returns. With the exception of funds in Florida and Texas—where anti-ESG politics have limited fiduciary action—the largest public pension funds demonstrated far higher support for climate shareholder proposals than their asset managers. These funds supported emissions disclosure and transition planning at higher rates, including proposals focusing on Scope 3 emissions.

Director accountability at ExxonMobil

The 2024 director elections at ExxonMobil served as a litmus test for accountability. ExxonMobil initiated a lawsuit against shareholders Arjuna Capital and Follow This to exclude a climate proposal, which was viewed as an assault on shareholder rights. In response, six of the nine largest pension funds voted against Chairman and CEO Darren Woods and Lead Independent Director Joseph Hooley. Conversely, the Big Four asset managers voted in favour of the entire board, failing to hold directors accountable for governance failures driven by poor climate strategy.

Recommendations

The report recommends that all investors explicitly acknowledge that climate change poses systemic risk and set clear climate performance expectations for issuers, including net-zero commitments by 2050 and science-based medium-term targets. Investors should be active owners through sustained engagement and proxy voting aligned with these expectations. Asset owners are urged to be active clients by communicating climate expectations to managers and proxy advisors, and establishing consequences when these service providers do not meet standards.