Green Finance Advisor of Friends of the Earth (HK)
A recent research conducted by Dutch investment manager Robeco’s Wilma de Groot and Jan de Koning, and Sebastian van Winkel of the Erasmus School of Economics, suggests that asset managers continue to predominantly vote against social and environmental proposals. Their results have important implications for investors striving for direct impact on the sustainability agenda of corporates.
They investigated asset manager characteristics that influence ESG voting patterns using a decade of voting data with more than 20 million observations. Not only did they found that Asset managers predominantly vote against social and environmental proposals, most ironically, asset managers who have signed up to the United Nations-backed Principles for Responsible Investment (PRI), a network in which membership means you are pledging to support ESG as part of your investing strategy, are nevertheless failing to do so as well.
The PRI was started in 2006 with the stated mission of encouraging action that benefits “the environment and society as a whole.” But shareholder voting records reveal that’s just not happening. Only 35% of PRI signatories backed U.S.-based environmental resolutions as recently as 2018, and only about 24% voted in favor of social proposals.
“In order to ‘walk the walk’ instead of ‘talking the talk’, asset owners can encourage their managers to increase the number of proposals filed on environmental and social topics. This may be an important first step as the currently low figures could be sending a negative signal to directors about the importance of these issues. Asset owners can also make the assessment of sustainable voting practices an integral part of their manager selection, due diligence and monitoring,” de Groot adds.
The PRI has subsequently released a new investor guidance for voting on shareholder resolutions, urging investors to see voting not necessarily as part of an escalation strategy but rather as a tool for clear, effective and accountable investment stewardship.
“Greenwashing” could be everywhere, whether it is your MPF, mutual funds, or ETF, which labelled them as Green or ESG focused, or a stock or bond issue, or even Asset owners and asset managers which claimed themselves as environmental friendly. ESG conscious investors should definitely pressure the asset managers to do better and walk the talk!
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