U.S. asset managers have wide-ranging views regarding environmental, social and governance (ESG) practices, reports new proxy voting data from Morningstar today.
The results analyzed the voting records and policy stances of the 10 largest asset managers in the country, finding that most tend to agree on climate-related disclosures, such as Scope 1 and 2 greenhouse gas emissions (GHG), along with workforce-related disclosures like workforce management, safety, and working conditions.
Mandating Scope 3 greenhouse gas (GHG) disclosures in companies remained unpopular among U.S. managers, especially with BlackRock and Dimensional Fund Advisors voicing unsupportive policies on the emission type. Scope 3 emissions, which occurs when companies indirectly buy, use, or dispose of products from suppliers, accounts for over 70% of all businesses total carbon footprint and leads contributions towards climate change, according to Deloitte.
State Street, Invesco, and Franklin Templeton were among those who shared the most support for key shareholder resolutions in 2023. BlackRock voiced high support among environmental issues and low support for social matters, while JPMorgan issued a “medium” support level on both environmental and social themes.
Workforce composition and diversity, along with fair treatment of workers, was the most supported issue among U.S. asset managers, with eight in 10 managers adding supportive language in their voting policies. These included Franklin Templeton, Invesco, State Street, Capital Group, BlackRock, JPMorgan, and Vanguard.
Asset managers typically reviewed societal impacts on a “case-by-case” basis or did not address the issue at length, reported Morningstar. T. Rowe Price was the only company among U.S. and European asset managers to likely oppose proposals that “seek to apply company-level solutions to a broad societal problem,” noted Morningstar. On the other hand, policies by BlackRock, State Street, and Invesco referenced circumstances in which they would consider support for additional transparency on social issues.
Nature and biodiversity matters saw support among several U.S. asset managers, including State Street, JPMorgan, Invesco, BlackRock, and Fidelity. Franklin Templeton, Dimensional, Vanguard, and T. Rowe Price did not address the themes in their policies, while Capital Group remained neutral on the subject.
Morningstar also predicts to see more resolutions addressing nature and biodiversity in the coming year, following the completion of the Taskforce on Nature-related Financial Disclosures reporting framework in 2023, which some asset managers referred to in their policies.
Supportive policy language does not automatically mean actual backing on environmental and social proposals, noted Morningstar in its research. For example, while State Street, JPMorgan, and BlackRock all reported medium to high levels of support on some policies, all have recently exited or limited their focus on climate-related issues. “The departure of State Street and JPMorgan from the Climate Action 100+ engagement initiative—with BlackRock also limiting participation to its international business—has captured news headlines recently,” wrote Morningstar.
Notably, BlackRock made waves last year when company CEO Larry Fink said he would stop using the term “ESG,” adding that it had become too politicized. While Fink reinforced that BlackRock wouldn’t change its stance on ESG issues, a company report released last year showed it had supported a smaller share of ESG shareholder proposals compared to prior years.
Still, Morningstar observes that neither asset manager has shifted its voting policy since limiting their ESG interactions, therefore potentially signaling a continued commitment. “Given that none of the firms have so far modified their voting policy following the announcement, this development would appear to reflect the existing direction of travel for those firms’ stewardship efforts,” Morningstar noted. “With no clear catalyst for further changes in these firms’ stances on environmental and social issues, it appears that the wide range of voting outcomes and manager rationales witnessed last year will persist into 2024.”
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