Our findings indicate that the ‘Big Three’s’ most recent attempts to distance themselves from sustainable finance are less a U-turn and more a consolidation of a long-standing position of climate obstructionism.
Researchers
12 May 2023
Environment 'taking a backseat' as asset managers prioritise shareholder value
The world’s largest asset management companies are “firmly-orientated” towards securing short-term shareholder returns rather than backing the urgent changes needed to transition to a low-carbon future, a new study has found.
Despite pledges to introduce new environmental, social and governance (ESG) funds for investors and to use proxy votes to support shareholder action in the boardrooms of the world’s biggest polluters, academics found the actions of asset managers were more frequently in line with the incumbent management of those firms and working against environmental goals.
In fact, the academics found that the voting behaviour of the asset managers’ ESG funds on environmental resolutions was almost identical to that of their non-ESG funds, with their combined voting decisions more likely to lead to the failure of those resolutions than to their success.
The findings were revealed in a paper co-authored by Dr Joseph Baines, of King’s College London, and Dr Sandy Brian Hager, of City, University of London, and published in the journal Competition and Change.
“For the Big Three, environmental stewardship has always taken a backseat to shareholder value, and so their sudden abandonment of the rhetoric of sustainable finance when market conditions deteriorate should come as no surprise.
“In other words, the Big Three have generally been laggards rather than leaders in shareholder engagement regarding the climate crisis, and developments in the past year only confirm this.”
Between them, the so-called ‘Big Three’ – Blackrock, Vanguard, and State Street – manage over £20trillion in assets and own more than 20 per cent of shares in the average company on the S&P500 index – a list of the 500 biggest publicly-owned companies in the US.
The group of 100 fossil fuels, mining and cement companies listed on the stock markets are known as the carbon majors, and the Big Three are all in the top five biggest shareholders in a third of them, with their equity holdings having increased markedly over the last 25 years.
Using the proxy voting record of the Big Three at carbon major firms between 2014-2021, the academics found they were more than three times more likely to oppose than support environmental resolutions.
The data also found that the Big Three had never opposed a management proposal on dividend payments or stock buybacks and also backed management resolutions on director appointments at the carbon major firms 91 per cent of the time.
The academics added: “Overall, our findings show that the Big Three generally do not use their voice to defy management and act as environmental stewards. Instead, they appear to be little more than stewards of the status quo of shareholder value maximisation.”
Researchers
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You can read the study in full here.
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Senior Lecturer in International Political Economy