Climate Risk Hypocrites exposed by Morningstar’s Jackie Cook and Tom Lauricella. The authors found support for climate-related proposals rose at Fidelity, State Street Global Advisors, and Vanguard. Support fell at American Funds and BlackRock. (Top Fund Companies’ Climate Change Votes: A Very Mixed Picture)
With their massive amounts of money under management, these firms are often among the largest shareholders at many of the world’s biggest companies. …
Continued low support for climate change proxy resolutions at BlackRock is therefore particularly notable. In January, its CEO Larry Fink said, “We are facing the ultimate long-term problem. … Every government, company, and shareholder must confront climate change. …
[F]or the first time in the history of Morningstar’s proxy vote data base, State Street Global Investors and Fidelity … supported a majority of the climate-related disclosure requests that shareholders placed on the ballot.
The overall number of proposals going to a vote is down because companies are more willing to negotiate. However, another factor is that the “SEC now routinely sides with corporate management when asked for permission to leave resolutions off the ballot …”
Climate Risk Hypocrites at ESG Funds
We pour money into ESG/sustainability funds. We want good returns AND a salubrious planet. Jon Hale, also of Morningstar, reports that Americans invested $3.2 billion in sustainable funds during July. That brought the year-to-date total to $24.1 billion, surpassing the calendar-year record of $21.4 billion set last year. (ESG fund flows set record, and it’s only July)
Jackie Cook notes most of the largest funds have offerings with ESG mandates. “We dug deeper into the votes on ESG funds to see if they aligned with the principles that investors might expect around climate change.”
- BlackRock and Vanguard’s ESG funds voted against the resolution at JPMorgan that missed a majority vote in support by less than 0.5%. This resolution asked the board to explain efforts to reduce greenhouse gas emissions associated with the bank’s lending activities; JPMorgan is considered to be the biggest fossil-fuel lender globally. BlackRock and Vanguard are JPMorgan’s largest shareholders, owning 6.70% and 7.86% of the company, respectively. Had these two supported the issue, the resolution would have passed with more than 60% support. …
- Vanguard’s ESG funds voted against a climate change resolution at Bloomin Brands (BLMN) that was sponsored by Green Century. The proposal asked that Bloomin, which owns Outback Steakhouse, to provide an accounting of efforts to mitigate supply-chain greenhouse gas emissions, including deforestation and land-use change. The resolution earned 27% support from shareholders. BlackRock and Vanguard hold a combined 28% of shares in the company, yet both voted against across their respective suites of funds.
Greenwashers Catering to Greenwishers
Climate Action 100+ is an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. Why join if you do not support the organization’s actions? Cook notes:
Of the 12 climate-linked resolutions flagged by CA100+, BlackRock, which joined the $42 trillion coalition in January, opposed all but two. Fidelity and Vanguard opposed every one of the resolutions.
How do they get away with it? They get away with it because very few have access to the data to call funds out. Yes, the SEC requires funds to report their votes but only once a year and in a coded format most cannot read.
My petition to the SEC could generate competition by funds around ensuring proxy votes align with investor values. (Rulemaking Petition for Real-Time Disclosure of Proxy Votes, SEC File 4-748, Jul. 9, 2019) Under a Biden administration, we can make real progress. Otherwise, expect more floods, fires, and destruction as the money we invest is voted against our own values.
Silence Not Golden
Victoria Mills, head of EDF’s corporate climate policy program, notes:
Silence on climate policy is not neutrality; it effectively endorses the anti-climate advocacy agenda of powerful industry groups. The business case for climate policy is clear, and the time for companies to make their voices heard is now.
They find the vast majority of companies remain silent on climate issues. Companies are reluctant to oppose popular climate policies. Instead, they pay trade associations, like the US Chamber of Commerce, to do their dirty work.
For example, the U.S. Chamber of Commerce commended the Department of Labor’s proposed amendment to ERISA. That will force many retirement plans to base investment decisions only on traditional accounting. There is widespread agreement that strong ESG correlates with strong financial performance. ESG metrics are essential to financial decision making.
As explained above, support for ESG shareholder proposals is growing. Yet, corporate executives resist. Again, Ms. Mills:
In a world where stakeholder capitalism is both an expectation and urgent need, the Chamber’s position on ESG funds is outdated and untenable. It’s also baffling, given the increasing importance of ESG metrics to both investors and companies.
Neglecting ESG factors heightens systemic risk and threatens the long-term stability of retirement plans. The Department of Labor’s proposed rule restricting access to ESG funds – and the Chamber’s support for it – isn’t just bad policy, it’s also bad for hardworking Americans saving for their future.
Check out the Environmental Defense Fund’s Climate Authenticity Meter.
Related to Climate Risk Hypocrites
- Mutual Fund Wars Over Fees AND Proxy Votes
- Morningstar Direct Uncovers ESG Hypocrites
- How Fund Families Support ESG-Related Shareholder Proposals
- Sustainability at Morningstar
- Vanguard’s Political Disclosure Vote: Wrong!
- BlackRock’s Big Problem
- Assessing Company Alignment with the UN SDGs