A new study questions the credibility of three major international asset managers on environmental protection and climate change. This emerges from a publication by the City, University of London (pdf). The research focuses on the relationship between the world’s largest asset managers and the fossil fuel industry.
These are BlackRock, Vanguard and State Street. That have promised tackle climate change and support sustainable finance. These “Big Three” collectively manage more than $20 trillion, or $20,000 billion. Thanks to that enormous wealth, they are a large and influential shareholder in many companies.
But according to the researchers, this influence is not used to encourage large CO2 emitters to become more sustainable. They conclude this on the basis of voting behavior at shareholders’ meetings. The study looked at companies in the fossil industry, cement industry and mining. These are the sectors that are responsible for the majority of industrial greenhouse gas emissions.
‘Deadly distraction’
The ‘Big Three’ vote more often against resolutions aimed at improving the environment than they support those resolutions. At the same time, BlackRock, Vanguard and State Street typically support management decisions about dividend payments, share buybacks, executive compensation and board elections.
The environmental resolutions that the Big Three do vote for are limited and patchy and therefore more likely to fail. And so, the researchers conclude, the term greenwashing too mild. They describe the practice as ‘deadly distraction’, pointing out that the time for distracting environmental problems is over.
Bluntly
Rients Abma, director of Eumedion, an interest group for institutional investors, thinks the research is somewhat succinct: “Resolutions are all about the precise wording. There can therefore be various reasons why the asset managers voted for or against.”
According to Abma, environmental resolutions can be proposed by shareholders, whereby in, for example, England and the United States, owning a certain percentage of working capital must be met, or a certain amount of shareholders who want to sign up in advance.
“In addition, the shareholder takes the seat of the board a bit, while that is not entirely the intention,” says Abma, “Shareholders have a controlling function, not a managing one. You invest in a company because you have confidence that it will management is pursuing the right strategy.”
According to Abma, only if the board makes insufficient progress with, for example, climate policy, are many large asset managers inclined to vote in favor of shareholder resolutions. “Another option is to vote against the appointment or reappointment of the directors.”
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