The authors analyse how the largest US asset managers vote on subjects related to ESG by using 20 million voting records filed in Form N-PX with the US Securities and Exchange Commission over a decade (2009 to 2018). The report describes specific asset manager characteristics that influence ESG voting patterns.

Low number of environmental and social proposals are filed

The researchers find that few proposals related to environmental and social issues are brought forward, either by boards or shareholders, with less than 1% of such proposals being filed. This distribution is consistent over time, indicating that, while the number of votes on environmental (E) and social (S) (E and S) issues has increased over a decade, the real number of these proposals being put forward by management or active shareholders has not changed. The stagnation of filing E and S proposals seems to contradict the increased interest in responsible and sustainable investing over the last decade.

Asset managers vote against the majority of E and S proposals

Asset managers mostly vote against social and environmental proposals. Specifically, large and passive asset managers vote the least in favour of these proposals, and despite the increased attention to sustainability integration, they hardly vote more in favour of these proposals than a decade ago. Asset managers vote in favour of governance proposals between 76% and 92% of all proposals.

Signatories of the PRI do not vote more often in favour of E and S issues

Signatories of the United Nations-backed Principles for Responsible Investment (PRI) do not vote more often in favour of environmental and social issues. The PRI is an advocate of transparency in responsible investing, and the signatories commit themselves to considering ESG factors and integrating them into their investment and ownership decisions. While signatories pledge to incorporate ESG issues into investment analysis and decision-making processes, the PRI leaves it to asset managers to decide how to integrate ESG issues.

Recommendations

This report’s findings have significant implications for investors striving for a direct impact on corporations’ sustainability agendas. Asset managers’ voting record on E and S topics should at least reflect a willingness and commitment to take these environmental and sustainable matters to heart. The researchers recommend that the ultimate beneficial owners (e.g., pensioners, buyers of insurance products) be able to see to which extent the asset managers involved are truly putting their money to work in a sustainable manner. Another recommendation is for future research to shed light on the role of proxy advisers and voting on director approvals.