ShareAction’s Jeanne Martin says asset owners have a duty to question their asset managers on voting policies, as some of the biggest players were found to be blocking progress on climate change.
With great power – and money – comes great responsibility. Or so Guy Opperman, the last pensions minister, thinks.
Throughout his tenure, Mr Opperman urged the pensions industry to use its power to make a difference. In October, he went as far as to suggest that pension funds fire their asset managers if they are “struggling to have an impact” – for example, those who do not support climate resolutions.
A recent study by ShareAction suggests that asset owners need to investigate their managers’ climate-voting performance and give them a shake-up if they are asleep at the wheel.
The report analyses how 57 of the world’s largest asset managers – whose services are used by a large number of UK pension funds – voted on 65 resolutions related to climate change.
It found clear discrepancies between how asset managers use their voting rights to drive corporate change on climate across the globe.
European managers outperform US counterparts
In particular, US asset managers, such as Capital Group, T Rowe Price and BlackRock, were found to be blocking progress on climate change by failing to support climate-related resolutions. This is despite them publicly committing to climate action and being members of investor engagement initiatives on climate change.
For example, BlackRock, JPMorgan, Fidelity, Wellington Management International, Northern Trust and State Street Global Advisers – some of the 10 asset managers who voted for the fewest number of resolutions on climate – have supported the Taskforce on Climate-Related Financial Disclosures, and joined an engagement initiative on climate other than the Principles for Responsible Investment.
Conversely, European asset managers, such as UBS Asset Management, Aviva Investors, and Legal & General Investment Management, were more likely to use their voting rights to hold the worst polluters to account.
These results are concerning, as the 20 largest US fund managers control about 35 per cent of global assets, more than double the 14 per cent run by the top 20 European players.
Why voting matters
Voting is the primary means by which investors can exert influence over their investee companies, and help avert catastrophic climate change. It is also often the only real evidence that beneficiaries and asset owners have of their asset managers acting on their behalf on issues such as climate change.
Despite rising public concern about climate change and recent climatic events such as the devastating fires in the Amazon, many asset managers are still failing to use their voting rights to address the financial risks of the climate crisis.
So are asset owners paying attention to how their asset managers vote on climate issues?
A ShareAction/AODP survey of the world’s 100 largest public pension funds suggest that only a fraction of them are.
As stewards of capital for millions of beneficiaries, asset owners have a duty to monitor the engagement activities and proxy voting records of their asset managers.
ShareAction’s recommendations for pension fund trustees
Review asset managers’ climate-related performance and proxy voting record on climate resolutions during their mandate, and scrutinise their track record when you are choosing an asset manager. You pay millions in fees, often for the management of cheap tracker funds. So the question is, are you getting your money’s worth in good quality stewardship?
Set clear engagement priorities for your asset managers, and track progress. These engagement priorities should clarify what type of action is requested from companies, and which companies you consider to be most at risk in your portfolio. You should expect your asset managers to be working towards a portfolio aligned with a 1.5 degree pathway.
Require your asset managers to develop and publish an escalation strategy in case engagement milestones are not met. This should include voting for climate resolutions. Asset managers should also explain how feedback from company engagement feeds in to their voting decisions.
Pension savers are connecting the dots between their finances and the climate crisis. At the same time, pension funds are facing calls to prove they are having a positive impact on society. Now is the time to take your asset manager to task if they are not taking climate voting seriously.
Jeanne Martin is a campaign manager at ShareAction
