Focus On Climate Proxy Votes by Major Investors

As proxy season comes upon us, votes on important shareholder resolutions on issues like climate change and human rights loom large.

So too, are the votes of the global powerhouses managing trillions of dollars of assets who have massive voting power, among them Vanguard, Fidelity, BlackRock, Bank of New York Mellon, JPMorgan, Goldman Sachs and State Street.

An annual study by Ceres and Fund Votes tracks the voting record of those firms that support climate change resolutions such as Morgan Stanley, Goldman Sachs, Legg Mason and Wells Fargo and contrasts them with the laggards which never vote for any social or environmental resolutions or have a limited voting record such as American Century, Putnam, Pioneer and Vanguard and BlackRock with two votes.

The fact that these “Votes Matter” was dramatically highlighted in the 2017 proxy season when Black Rock, Vanguard and State Street support for climate resolutions at three companies raised the vote over 50 percent (Occidental Petroleum was 67 percent, ExxonMobil 62 percent and PPL 56.8 percent).

Suddenly, corporations, which were previously reluctant, stepped up and agreed to report on the issues that were addressed in climate change resolutions.

For example, ExxonMobil indicated its board had discussed the vote and agreed to do the report requested by the New York State pension funds, Church of England and over 50 other co-filers. This was a dramatic turnaround from their earlier opposition.

Adding to the drama, for the first time Vanguard, BlackRock, and Fidelity began voting for selected resolutions. BlackRock’s public declaration that it would support the Exxon resolution received worldwide publicity and signaled a shift by investor giants.

But we should also give credit to the behind the scenes engagements with companies by BlackRock, Vanguard and State Street along with the traditional ESG investing leaders. These letters, conversations and meetings also have helped change the policies and practices of hundreds of companies.

In a recent letter to company CEOs, BlackRock CEO Larry Fink emphasized BlackRock’s engagement with over 1,000 companies stressing the important issues like climate change and board diversity.

When your largest investors stress the need to diversify your board, or more actively address climate change or develop new governance practices, it adds considerable credibility to the debate around climate or diversity and registers in company boardrooms.

We are not close to the end but more in the middle of this story. BlackRock and Vanguard have a long way to go, but seeing the impact of their first two climate votes last year at Exxon and Occidental Petroleum may motivate them to leverage their proxy votes at more companies.

In short, proxy votes, combined with active engagement, help change corporate thinking and behavior.

Thus the actions of Ceres and investors like Walden and Zevin Asset Management, who along with others have filed resolutions pressing companies like Bank of New York Mellon, Vanguard and BlackRock to improve their climate proxy voting, have had a significant ripple effect.

Timothy Smith

Director of ESG Shareowner Engagement, Walden Asset Management