Top Asset Managers That Support Environmental Shareholder Proposals
Environmental shareholder activism at publicly traded companies in the U.S. features some of the largest investors in the world supporting proposals sponsored by some of the smallest investors in the world. From 2015 to the present, most environmental shareholder proposals were brought to annual meetings of companies by relatively unknown investment groups such as As You Sow, Mercy Investment Services, The Park Foundation, Trillium Asset Management, Calvert Asset Management, The Unitarian Universalist Association of Congregations and the Presbyterian Church of the USA. Only occasionally have these proposals been co-sponsored or sponsored by significantly larger pension funds in the U.S. market known for their interests in corporate environmental policy. With these proposals, these small investors have commanded degrees of attention at corporations highly disproportionate to their usually miniscule ownership stakes. The 2017 proxy season is likely to bring continued increases in visibility for these investors, with added support from a few of the world’s leading asset managers.
How the Largest Asset Managers Have Voted on Environmental
In 2016, As You Sow, a social impact investor
based in Oakland, CA, brought an advisory proposal to the annual meeting of
Chevron asking management to provide an annual report to shareholders regarding
the company’s shale operations, policies regarding hydraulic fracturing, and
its efforts to minimize the adverse impacts of hydraulic fracturing. Although
the proposal failed to garner the requisite votes in favor to pass, it received
a noticeable 30% of votes cast. The resolution’s most outspoken supporter in
the shareholder base was another relatively small, environmentally-conscious
shareholder, The Sisters of St. Francis of Philadelphia. Support for the
resolution would not have reached 30%, however, without the “vote for”
recommendation of the leading proxy advisory firm, Institutional Shareholder
Services (ISS), and the actual votes of asset managers holding in excess of 5
million shares of the company’s stock. The resolution might have passed had a
handful of top investors changed positions and offered their support.
Voting records for the 2017 proxy season will be
more complete and ready to analyze in coming weeks. For now, voting records
from annual shareholder meetings from July 2012 through June 2016 show that several
of the world’s leading asset managers, as ranked by assets under management
(“AUM”), commonly vote “for” environmental shareholder proposals. Among those
are the following 17 asset managers which collectively hold approximately $11.66
AUM: State Street Corporation; Goldman Sachs Asset Management LP, JPMorgan
Investment Management, Inc., Legal & General Investment Management,
Northern Trust Investments, Norges Bank Investment Management, Deutsche Asset
& Wealth Management, TIAA-CREF Asset Management LLC, Allianz Global
Investors, AllianceBernstein LP, HSBC Global Asset Management, Morgan Stanley
Investment Management, Inc., Aberdeen Asset Management, Inc., Principal Global
Investors LLC, Hermes Equity Ownership Services, California Public Employees’
Retirement System (CalPERS) and RBC Global Asset Management, Inc.
Asset managers, as institutional investors, are
nonbank entities that trade securities in sufficient dollar or share amounts to
qualify for special treatment under U.S. and state law. Institutional investors
benefit from a reduced regulatory burden in buying and selling stocks because
the law presumes these investors are sophisticated buyers of securities and are
better able to appreciate and protect themselves and their investor-clients
from investment risk. This type of investors includes investment advisors, pension
funds, mutual funds, endowments and insurance companies. Their fiduciary duties
stem from, among other sources, the law of trusts and, in 43 U.S. states and
Washington, D.C., the Uniform Prudent Investor Act. Since institutional
investors invest substantially higher amounts of capital in the shares of
public companies as compared to retail shareholders, the largest of such
investors typically hold meaningful proportions of the outstanding stock in the
companies in which they invest. This concentrated shareholding in individual
companies means that institutional investors can influence voting outcomes at
annual meetings more perceptibly, and determinedly, than individual retail
shareholders who are unconnected and not organized.
Calculation of assets under management is based
on public disclosures by institutional investors in the last two years. As not
all institutional investors are required to report on a routine basis, and
given that assets under management may be calculated under various methods,
these figures should be taken as very general approximations only.
In the sample period, these AUM-leading investors
displayed a particular willingness to vote for environmental shareholder
proposals in comparison to their peers. At the high end of the group is Boston-based
State Street Corporation with an AUM of approximately $2.47 trillion, and at
the lower end of the group (although still among the largest investment
groups in the world) is Canada-based RBC Global Asset Management, Inc. with an
AUM of approximately $293 billion. A notable player on the list near RBC is
CalPERS, the largest pension fund in the U.S. CalPERS’ environmental investment
agenda has been and will continue to be empowered by the voting strength of
similarly-minded but even larger investment funds, among which are leading
European pension funds and investment companies discussed below.
The tables that follow show voting patterns of
these investors on five proposal types brought to shareholder meetings over the
course of this sample period: proposals for companies to create reports on sustainability
policies, climate change related policies and fracking activities; proposals
related to reporting on industrial waste, pollution and greenhouse gas
emissions; and proposals for companies to report on how they will be affected
by measures limiting the global increase in temperature to 2° Celsius pursuant
to the 2015 Paris Agreement.
In the sample period of July 1, 2012 to June 30
2016, 105 shareholder meetings featured a proposal to create a
sustainability report. Deutsche Asset & Wealth Management voted “for” the
proposal all but twice at the 45 shareholder meetings for companies facing this
proposal in which it was a shareholder.
Numbers in parentheses reflect number of times
the proposal was voted on by the asset manager and its managed funds at a
shareholder meeting of a public company domiciled in a U.S. state. “Split
Votes” indicates that at least one fund (including only one of several funds) under
management voted its shares “for” the resolution. Data is compiled from Proxy
70 meetings featured a proposal to create a
report regarding industrial waste, pollution and/or greenhouse gas emissions.
Deutsche Asset & Wealth Management again led this particular set of
investors in votes “for” such a proposal.
See caption above.
62 meetings featured a proposal to create a
report regarding climate change, pollution or greenhouse gas emissions. HSBC
Global Asset Management voted “for” the proposal at all but two of 38
shareholder meetings for the companies facing this proposal in which it holds
See caption above.
27 meetings featured a proposal to create a
fracking report. Five of the surveyed institutional investors supported such a proposal
at almost all meetings at which they voted on the proposal.
See caption above.
13 meetings featured a proposal to create a
report regarding the impact of the 2° Celsius scenario. The proposal has historically
appeared at annual meetings less frequently than other proposals but has
received by far the strongest and most consistent support from investors as
compared to other environmental proposals.
See caption above.
The investors most commonly voting “for” the
suite of environmental proposals examined above were HSBC Global Asset
Management, Deutsche Asset & Wealth Management, Northern Trust Investments
and CalPERS. CalPERS’ commitment
to environmental proposals is becoming well-known and any successes that it
promotes at ballot boxes in 2017 will further that reputation. Less commonly
explored has been the European presence at shareholder votes on environmental
A European, or Globalist, Approach?
Nine of the 17 major investors included in the
sample data are asset managers and pension funds based in Europe or Canada. Legal
& General Investment Management is the investment arm of London-based
financial services, insurance and pension management company Legal &
General plc. Norges Bank Investment Management is the investment management arm
of the Government of Norway. Deutsche Asset Management is a subsidiary of
Frankfurt-headquartered Deutsche Bank AG. Allianz Global Investors is a
financial services company of Munich-based Allianz SE. Alliance Bernstein is a
subsidiary of the French insurance conglomerate AXA S.A. HSBC Global Asset
Management is a private asset management firm and subsidiary of
London-headquartered HSBC Holdings plc. Aberdeen Asset Management is the global
asset management subsidiary of Scotland-based Aberdeen Asset Management plc. Hermes
Equity Ownership Services is the primary manager of the London-headquartered BT
Pension Scheme. RBC Global Asset Management is a Toronto-based investment
manager and an affiliate of the Royal Bank of Canada.
Asking why top-level non-U.S.-based investors are
more likely to support environmental proposals than certain of their U.S.-based
peers (who are not mentioned here) is an important question. It is commonly supposed
that U.S.-based asset managers are constrained from placing financial resources
at their disposal behind environmental concepts because their fiduciary duties
are less likely to tolerate the non-economic considerations implied by environmentally-influenced
But U.S. managers at least arguably have latitude in their fiduciary duties to
factor environmental considerations into their investment decisions, and arguably
not appreciably less than their European and Canadian counterparts. Moreover certain
institutional investors may believe, rightly or wrongly, that the determination
of how to vote at an annual meeting of a company is a material step removed from
the decision of whether to invest in the company. Investing in a company on a
theory informed by ESG criteria poses at least some legal risk to asset managers
constrained by fiduciary duties, but investing in a company for classic
investment thesis reasons and then voting at an annual meeting on a non-binding
ESG proposition arguably poses far less risk. If the differences between
European investors and their U.S. based peers are not explained fully by reference
to the law, such differences may still also result from perceptions about law.
Answers may also be looked for in other areas such as differing approaches to
financial analysis and even culture. Cultural differences between investment
managers can also exist, of course, between investment firms in the same country,
and this clearly applies in the U.S. as well.
That a broader, globalist trend may be at work is
seen in the operations of the UN-supported initiative known as Principles for
Responsible Investment (PRI). The PRI is an international network of investors
constituting over 1,700 signatories from 50 countries and representing US$62 trillion in assets.3 The
PRI’s mission is to explore the investment implications of ESG considerations and
to integrate these considerations into investment and stock ownership
decisions. The PRI developed six voluntary and aspirational Principles of
Responsible Investment, knowns as the “Principles,” which are (i) incorporating
ESG issues into investment analysis and decision-making, (ii) incorporating ESG
issues into ownership policies and practices, (iii) seeking appropriate
disclosures on ESG issues by the entities in which signatories invest, (iv)
promoting acceptance and implementation of the Principles within the investment
industry, (v) working together to enhance signatories’ effectiveness in
implementing the Principles and (vi) reporting on signatory activities and
progress in the implementation of the Principles.
According to a 2016 UN- and PRI-sponsored
report, Fiduciary Duty in the 21st
Century, the U.S. has just 227 PRI signatories. The report claimed
that, on a global level, U.S. asset managers lagged behind their European peers
in ESG integration in part because lawyers and consultants in the U.S. “tend to
advise their clients that the law requires them to have exclusive focus on
If more leading institutional investors do not
turn out in higher numbers for environmental proposals in the 2017 proxy season
than they did in 2016—a prospect that at present seems unlikely—the reason may
not necessarily be tied to traditionalist or environment-ambivalent outlooks in
the investment firms; it may be that investment firms more likely to vote
“against” than “for” these proposals are not compelled by the current state of environmental
shareholder resolutions. These resolutions typically contradict the
recommendations of corporate directors who are especially enabled to appreciate
the pros and cons of such proposals for both the welfare of the corporations
they manage and their shareholder constituencies. Major U.S. asset managers have
historically tended to defer, with reason, to the judgment of sitting
It may also matter to leading U.S. asset
managers that environmental shareholder proposals typically originate with
smaller shareholders. These smaller shareholders are generally heavy on social
agenda but exponentially lighter than major institutional investors in terms of
the responsibilities they bear to investors, the levels of ongoing engagement
they have with the directors of issuers, and their in-house capacity to evaluate
factors driving shareholder returns and ensuring sound operations of the
companies in which they invest.
Not all shareholders that bring environmental
proposals however are small in comparison to the institutional heavyweights.
New York State Common Retirement Fund manages approximately $178.6 billion4 in
assets and brought at least 13 environmental proposals to shareholder meetings between
2015 and 2017. Social investment funds with small asset pools can also form
strategic relationships with larger investors. For example, the Transition Pathway
Initiative is a coalition of investors including the Illinois-based
Westpath Investment Management (General Board of Pension and Health Benefits of
The United Methodist Church), the Church of England, England-based Aviva
Investors, France-based BNP Paribas and France-based Hermes Equity Ownership
Services. At the annual meeting of Chevron in 2016, referenced above, Westpath
joined forces with Hermes in backing a 2° Celsius
proposal that received 40.8% of the votes cast. This was one of the highest
proportions of “for” votes received on an environmental proposal by any
U.S.-traded corporation in 2016.
Will Changing Market Attitudes about ESG Tip the
Scales in 2017 and Beyond?
For many years environmental shareholder
proposals were discounted by corporations and corporate governance specialists as
largely unsupported by the market of investors and as unhelpful to companies. Proposed
legislation before the U.S. Congress would make it more difficult for
shareholders to bring environmental proposals to annual meetings through the
Rule 14a-8 process—based on the argument that such proposals are a distraction
to companies, harm the market and are not greatly valued by investors. Historically,
institutional investors and corporations have been wary of environmental
proposals on the theory that backing shareholder-driven ESG initiatives
jeopardizes their fiduciary duties to investors.
Yet the data above indicates that asset managers
holding approximately $11.66 trillion in investor assets—as well as PRI signatories—do
not see a problematic conflict between their voting preferences and the
interests of their investors and other constituents. If more asset managers in
the future affirmatively take the view that supporting environmental
shareholder proposals is within the bounds of their fiduciary duties, then more
investment managers may decide to support these proposals. Either way, an open
question in environmental shareholder activism is to what extent voting decisions
of top asset managers on environmental issues will be shaped in coming years by
the changing environmental sensibilities of their clients, as well as of the investment
analysts and managers on both buy and sell sides.
Voting trends suggest that publicly traded
companies in the U.S. may continue to feel pressures from U.S.-based pension
funds, European investors, and a growing number of significant U.S.-based asset managers to
alter their environmental policies, or at least their disclosure policies, even
at a time when U.S. domestic policy may be poised to loosen the regulatory
restrictions on their businesses and shift away from a focus on international
efforts to limit climate change, such as through the Paris Agreement.
Wood is an associate attorney at Vinson & Elkins L.L.P. in Houston, Margaret
Peloso is a counsel based in the firm’s Washington, DC office and Corinne Snow is
an associate in the firm’s Houston and New York offices.
1 The calculation of assets under management is
based on public disclosures by institutional investors in the last two years.
As not all institutional investors are required to report on a routine basis,
and given that assets under management may be calculated under various methods,
these figures should be taken as very general approximations only.
2 See Robert G. Eccles & Mirta D. Kastrapeli, The
Investing Enlightenment, at 7–8.
3 Principles for
Responsible Investment. See https://www.unpri.org/about.
4 Office of the New York State Comptroller, NYS Common Retirement Fund. See http://www.osc.state.ny.us/pension.
5 Eccles & Kastrapeli, supra n. 2.