While 2022 was the hottest year on record for a number of countries globally, the world’s largest asset managers’ progress on climate action has cooled.
Investors filed a record number of shareholder resolutions relating to environmental and social issues during 2022’s proxy season. However, new analysis by non-profit ShareAction of how US, UK and European asset managers voted on these resolutions reveals that those with the biggest influence worked to block a number of key climate votes last year.
The overall share of support across surveyed investors for environmental or social resolutions (filed mainly in the US, with a handful from other countries) increased from 60% in 2021 to 66% last year, but this was mainly down to a surge of supportive votes from asset managers in Europe, where sustainability disclosures are tightening.
Overall, the total number of supportive votes from US and UK investors barely changed between 2021 and 2022. Worryingly, the data reveals how the world’s four largest asset managers – BlackRock, State Street Global Advisors, Vanguard Group and Fidelity Investments – have worked to block key climate votes going through.
This is particularly notable within the energy sector, where the world’s largest asset manager, BlackRock, went from supporting 72% of such votes in 2021 to just 16% in 2022.
In recent months, BlackRock has been caught in the crossfire of an anti-ESG backlash in the US, which has led to Republican politicians publicly disavowing investors who try to limit their fossil fuel investment. ShareAction suggests such hostility towards investors taking a stance on climate change could be a factor contributing to US asset managers reducing their support for environmental resolutions.
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ShareAction’s report also suggests that investors’ reluctance to challenge specific companies, particularly those in the oil and gas sector, could be related to record profits earned in the wake of the war in Ukraine, which translates to greater dividends and buybacks for shareholders.
BlackRock and State Street Global Advisors (SSGA), the world’s third-largest asset manager, were particularly reluctant to push oil majors to clean up their acts. Both asset managers voted against the majority of key resolutions at five companies in the energy sector, including a resolution requesting that Chevron set medium and long-term emissions reduction targets. BlackRock cited its “recognition of the progress and the updates to their strategy that Chevron has made to position their business model for the energy transition” as the reason for its lack of support.
Commenting more broadly on the company’s declining support for climate-friendly resolutions in a report published last summer, a BlackRock representative claimed that a number of resolutions it observed in 2022 were too stringent.
They note that whereas last year  climate-related shareholder proposals tended to address climate risk, often by requiring greater disclosure, in 2022, BlackRock observed a number of proposals considered to be "more prescriptive" by asking companies to decommission fossil fuel assets, cease fossil fuel exploration and development, and eliminate financing and insurance underwriting for fossil fuel projects.
Decisions made by the world’s most influential investors not to back climate action have significant implications given their outsized voting power.
ShareAction’s analysis reveals that six failed resolutions this year would have passed had at least one of the ‘big three’ – BlackRock, SSGA and Vanguard – voted in support of them, including two resolutions requesting that energy companies ConocoPhillips and Phillips 66 set decarbonisation targets.
Because asset managers have so much power to change the course of a company’s direction, the future of net zero may rest in their hands.
A number of asset managers included in the ShareAction report (including BlackRock, SSGA and, until recently, Vanguard) have committed to reach net-zero emissions by 2050 across their portfolio companies via membership in the Net Zero Asset Managers initiative (NZAM).
However, despite making pledges under NZAM, which requires members to implement a stewardship and engagement strategy with a “clear escalation and voting policy”, ShareAction’s report finds there is a marginal difference between the proportion of climate resolutions NZAM members supported (66%) in comparison with those that have not pledged to reach net zero (61%).
NZAM members have committed not just to reducing their own emissions, but those of their portfolio companies. As such, failure to vote in support of decarbonisation plans is not just a contradictory position, it places their own net-zero plans at risk.