Rebranding, and reviewing recent research

Proxy-Voting Insights is now Stewardship Snapshots. We're still bringing you the latest data-driven voting research, and adding a whole lot more.

As you already know, I've taken on an expanded role in Morningstar Sustainalytics' Stewardship Services team. After 10 editions, it feels like the right time to expand the focus of this newsletter too.

So, it's my pleasure to welcome almost 900 Proxy-Voting Insights readers to the Stewardship Snapshots newsletter.

First things first, I know how much this audience values investor-focused proxy voting research, and I certainly intend to keep that coming. But I'll also spotlight more of the key sustainability and governance topics that institutional investors and companies are engaging on. And I'll certainly be drawing on my new engagement services' colleagues expertise to get under the surface of some interesting new topics.

We'll have plenty of new research on this year's proxy-voting season coming soon. But first, here are five key insights from recent newsletters.

1) ESG shareholder resolutions: "More doesn't mean better," say asset managers.

The 2023 proxy year saw a step change in the perception of shareholder resolutions focused on environmental and social themes. In the year to June 30, 2023 the number of E&S shareholder resolutions grew by almost a quarter, from 273 to 337. But the number of key resolutions almost halved, from 102 to 53.

In the previous three proxy years, around 35 to 40% of E&S-focused resolutions were key resolutions – those which gained at least 40% support on an adjusted basis (that is, including only the votes of shareholders independent of the company).

This proportion fell to 16% in 2023, despite 23% overall growth in the number of E&S-focused proposals. Several of the largest asset managers rejected what they perceived as "overly prescriptive" or "redundant" asks of company boards by shareholders.

Number of environmental and social shareholder resolutions

As the chart above shows, voting results from the first nine months of the 2024 proxy year suggest that little has changed in asset managers' voting patterns since last year. We'll publish more about that soon.

Find out more

• Are There Too Many ESG Shareholder Proposals? — Article | Research paper
• What Would Happen to ESG Proposals If Vanguard, BlackRock and State Street Didn’t Vote? — Article | Research paper

2) A growing gap between the U.S. and Europe on key ESG votes.

Our research shows that the reduction in support for environmental and social resolutions is primarily down to a change in US asset managers' voting patterns, amid increasing hostility toward ESG integration from elements of the political spectrum. At the same time, European asset managers have maintained a high level of support for ESG-related shareholder proposals.

Average Support for Key ESG Resolutions

As a result, sustainability-focused investors are facing a more complicated landscape, and possibly greater difficulty, when it comes to aligning their investments with their own values. In Europe, where expectations of support for ESG resolutions are higher, and several of the US firms have large market share, these concerns are growing in intensity.

Find out more

• Voting on ESG: Ever-Widening Differences — Article | Research Paper

3) No, asset managers don't just copy-paste proxy adviser recommendations.

Elon Musk, Jamie Dimon and a host of other executives and board members have recently lamented that proxy advisors have too much influence over institutional shareholders' proxy-voting decisions.

However, we've found very little evidence supporting that view, and plenty to the contrary.

Our own research, and that of others, reveals that most asset managers use proxy advisors recommendations to implement their own bespoke voting preferences, instead of merely mirroring the benchmark policy recommendations often cited in the headlines.

Find out more

• Proxy Advisors Have Too Much Power, Says Elon Musk. Is He Right? — Article

4) Climate Action 100+: Collaborative but not collusive.

The biggest shock result of the proxy season happened before the season really got going. Four asset managers – Invesco, J.P. Morgan, Pimco, and State Street – exited the Climate Action 100+ collaborative engagement initiative, while BlackRock decided to curtail its participation.

Accusations of inappropriate collusion have been levelled at CA100+, but our own research indicates that such claims are hard to substantiate.

Voting records of CA100+ signatories varied widely during the 2023 proxy year. Looking geographically, European asset manager signatories are much more supportive of resolutions flagged for by the initiative for consideration than US managers. And by investor type, asset owners are slightly more supportive than asset managers overall.

Find out more

• Climate Action 100+ Departures Put Proxy Voting in the Spotlight — Article | Research Paper

5) Say-on-climate votes: After three years, results remain difficult to decode.

Say-on-climate votes have gained prominence in the European and Australian markets as a means of allowing shareholders to opine on companies' climate transition plans and reporting.

Overall support for these management resolutions has dipped since they first came onto the scene in the 2021 proxy year. But it's not so simple to identify the reasons why.

Say-on-Climate Resolutions: Percentage of Proposals Supported

As asset managers became more familiar with companies’ climate-related disclosures and risk management plans, their thinking on how to approach say-on-climate votes has developed, but not always in the same way. Our research shows that asset managers often reach the same voting decisions for very different reasons.

This is particularly true when those shareholders decide to withhold support for say-on-climate proposals. Many asset managers use these vote to signal their expectations of the company on their climate strategy. But others are signalling their opinion of overall disclosure quality, or sometimes relevant considerations that are not specific to each individual company.

Once you aggregate all those conflicting signals into market averages, it becomes almost impossible to assess shareholders’ overall view on the quality of companies’ climate plans in the way that was originally intended.

Find out more

• Say-on-Climate Votes: Asset Managers Send Mixed Signals — Article | Research Paper