Our Take, Doug Sheridan
BlackRock rejected most ESG proposals last year because they were “over-reaching, lacking economic merit,” and “unlikely to help promote long-term shareholder value.”
Our Take, Doug Sheridan
The WSJ Editorial Board writes, a new report by the Committee to Unleash Prosperity shows asset managers have curbed their ESG enthusiasm. Last year’s report revealed most funds backed political resolutions unrelated to enhancing shareholder value, such as forcing companies to divest from fossil fuels or adopt racial equity audits.
The news this year is that some are now backtracking. The latest report finds that support for ESG resolutions dropped 25% in 2023 from 2022, including a 30% drop among the 25 most active fund families.
The report ranks of the top 40 funds based on their votes on 50 of the most extreme proxy proposals. The best records belong to Dimensional Fund Advisors, T. Rowe Price and Vanguard, all of which opposed ESG measures more than nine times out of 10 and earned A grades in the report.
BlackRock earned a B and ranks fourth on the list, up from C a year earlier. CEO Larry Fink has done some rethinking since he became an ESG advocate in 2018.
BlackRock rejected most ESG proposals last year because they were “over-reaching, lacking economic merit,” and “unlikely to help promote long-term shareholder value.”
BNP Paribas, Victory Capital Management and Danske Bank all earned F- grades, approving nearly all of the 50 damaging shareholder proposals that were scored in the ranking. That includes proposed racial equity audits for Walmart and Chevron, and forcing Kroger and Amazon to adopt plans to use less plastic.
The retreat from ESG was nonetheless wide and significant. One cause of the shift is asset managers’ growing reluctance to follow the direction of the proxy-adviser duopoly, ISS | Institutional Shareholder Services and Glass Lewis. The firms claim about 97% of the market for guidance on shareholder votes, and they back ESG at an overwhelming rate.
Both earned lower grades than most of the funds they advise—a D for Lewis Glass and an F for ISS. Until last year most fund managers seemed to accept the duopoly’s recommendations as gospel.
Today more fund execs are second-guessing the proxy advisers’ guidance. “It is increasingly clear that proxy advisers have undue influence,” wrote J.P. Morgan CEO Jamie Dimon in his letter to shareholders. His firm’s asset-management arm was among the dozens that rejected more ESG proposals last year, and he suggested managers ought to do more of their own research on how to vote.
The funds rejecting ESG are embracing their responsibility to investors. All asset managers have a fiduciary duty to maximize returns, and that includes their approach to proxy voting. The advisory firms and other ESG enthusiasts offer strained theories to suggest that costly climate policies somehow boost profits. But fund families should know better, and investors would be wise to flee if they don’t.
Shareholder value isn't everything. And it's that kind of thinking that got us in this national mess we're living in. There are several other stake holders to be considered. And the investors should just be thankful they have a place to park their money that earns more than those Treasuries ever will. Because... while investors supply the hard cold cash, the workers are the ones who do the actual work. The managers manage. And all the stakeholders make a web of support that the businesses absolutely rely on. Without the stakeholders, there isn't a business to be had. But the investors like to think it's all about them, and they want everything geared to pleasing only them. And they want it all. They hate sharing anything and believe it's their due. We can live without investors easier than they can live without us. So being a tide that lifts ALL boats is what they need to be focusing on.