Largest US asset managers cut support for climate change proposals

The three largest US asset managers cut their support for so-called ESG proposals by shareholders during the last voting season amid Republican pushback against the controversial investing policy, according to a report.

State Street, BlackRock and Vanguard — which collectively own about 20% of the shares of all companies in the S&P 500, giving them oversized influence during the proxy season — shied away from backing Environmental, Social and Governance resolutions that focus on topics such as climate change, workforce diversity and human rights when compared to previous years, Bloomberg reported.

State State’s investing unit said it supported 6% of environmental shareholder proposals in the first half of the year and 7% of social ones, less than it did in the same period last year. 

The Boston, Mass.-based firm – which manages $4.4 trillion – said the ESG proposals were becoming increasingly “prescriptive” and “complex.”

The Vanguard Group – which managed around $7 trillion as of 2021 – said last month that it didn’t back any environmental resolutions.

The Malvern, Penn.-based investment advisor echoed State Street’s claim that the proposals were becoming too “prescriptive.”

“The proposals did not address financially material risks to shareholders at the companies in question,” Vanguard said in its US Regional Brief report.

BlackRock Inc. – which manages around $10.5 trillion dollars, according to Statista – said it voted for 4% of the environmental proposals in the 12 months ending June, which is below the 7% it voted for the year before.

The New York City-based firm said shareholder proposals face opposition when they are of “poor quality or unconnected to how a company delivers long-term shareholder value.”

The pullback in support is a sharp turnaround from 2021, when US companies and money managers launched a slew of environmental initiatives.

The current political climate had a clear impact on the asset managers’ policy pivot, Morningstar Sustainalytics’ Lindsey Stewart told Bloomberg.

“But the fact is, even some of the pro-ESG resolutions were badly worded or lacked a clear benefit to shareholders, so it’s not surprising that firms rejected many of these resolutions,” he said.

Total shareholder support for environmental and social resolutions dropped to 19% in the latest proxy season from about 22% in the same period last year, according to Morningstar.

The decline in shareholder support aligns with a similar shift among business leaders. Chief executive officers have pushed sustainability down on their lists of priorities, according to a survey by Bain & Co. 

Concerns about inflation, artificial intelligence and geopolitics now top the lists, Bain said. 

The resolution flip-flop comes as Republicans have been pressuring the finance industry and large companies to reverse their environmental and DEI goals, claiming “wokeism.” 

Conservative activist Robby Starbuck, in particular, has been leading the call for DEI reversals. 

The 35-year-old unsuccessfully ran for Congress in Tennessee in 2022. 

Backed by more than 620,000 followers on X, Starbuck has cornered businesses like Tractor Supply, Harley-Davidson and Ford into abandoning their DEI initiatives by threatening them with boycotts.

Now, the finance industry is facing the same heat to reverse its climate change and social goals. State pensions in Texas and Florida have already pulled money from BlackRock.

The top three money managers’ voting records stand in contrast with some European rivals, who continue to focus on sustainability goals, Stewart told Bloomberg.

 State Street, Vanguard and BlackRock did not immediately respond to requests for comment.