Despite the accelerating interest in sustainability resolutions, asset managers nearly always vote against environmental and social proposals.

A study from Robeco and Erasmus School of Economics looked at voting patterns of fund managers on environmental, social and governance (ESG) criteria. The researchers used over 20 million voting records filed with the U.S. Securities and Exchange Commission (SEC) between 2009 and 2019.

They found that less than 1% of environmental and social proposals are brought forward by management for shareholders to vote on during proxy season and at shareholder meetings. In 2018, only 38% of environmental proposals and 27% of social proposals were voted in favor of. However, the researchers did find that over time voting for ESG proposals has gradually increased.

The study also looked at the relationship between voting patterns and an asset manager’s size. Asset managers of large and passive funds vote significantly less often in favor of environmental and social proposals compared to medium-sized and active managers. About 29% of the smallest fund managers vote in favor of environmental proposals, while 39.3% of mid-sized managers and 13% of the largest managers vote in favor. Additionally, the largest managers and passive giants were found to vote in favor of proposals only 10% of the time.

Researchers also found that being a member of Principles for Responsible Investment (PRI) does not lead to more votes for ESG proposals. This is ironic considering that PRI is an organization that pledges to integrate ESG objectives into portfolios and investment strategies. PRI has over three thousand signatories, including the world’s largest three asset managers: BlackRock, Vanguard and State Street. The authors said, “the Big Three only voted 18% and 10% of the time in favor of environmental and social proposals, respectively, in 2018.”

The voting patterns clearly reveal that environmental and social proposals are unable to garner shareholders’ support to steer corporate agendas toward sustainability-focused decisions. The authors suggested that investors need to start encouraging their asset managers to vote for these issues instead of just pushing for more environmental and social proposals to be filed.

Source: “Sustainable voting behavior of asset managers: Do they walk the walk?” by Wilma de Groot, Jan de Koning and Sebastian van Winkel, February 2021.