Differences in approach emerge: American fund managers lessen backing for climate-focused initiatives while European counterparts intensify their commitment
In a significant shift, support for Environmental, Social, and Governance (ESG) and climate resolutions among US-based asset managers has decreased, primarily due to regulatory changes, political pressures, and strategic shifts in approach.
According to recent findings, BlackRock, one of the world's largest asset managers, only supported 4% of environmental resolutions in 2024, a stark contrast to the nearly 30% support in 2021. This trend is reflected in the industry as a whole, with average support dropping from 16-20% in recent years to around 12-16%.
The decline in support has far-reaching implications for climate alliances such as the Net Zero Asset Managers (NZAM) and Climate Action 100+ (CA100+). The retreat by leading asset managers from active proxy voting on ESG issues undermines the influence these alliances exert via shareholder engagement and resolutions to push for corporate climate accountability.
The reduction in support and fewer filed resolutions weakens the leverage of these initiatives to hold companies accountable for emissions reductions and climate strategies. As ESG voting appetite wanes, the role of alliances may need to evolve, possibly focusing more on direct engagement, transition finance, and climate adaptation investments rather than proxy resolutions alone.
The polarized US political and regulatory environment risks fragmenting the investor coalition behind climate action, challenging alliances that rely on broad asset manager participation. This trend is evident in the suspension of activities by the Net Zero Asset Managers initiative following the departure of US managers such as Vanguard and BlackRock.
Despite the decline in support, it's important to note that many managers remain committed to tackling climate change. For instance, James Corah, head of Sustainability at UK manager CCLA, reaffirms the manager's commitment to achieving net-zero emissions on listed equities by 2050.
On the other hand, Vanguard's support dropped to 0%, having backed only one out of 279 resolutions. This stark contrast is highlighted in ShareAction's latest Voting Matters report, which indicates continued divergence between European and US managers, with European managers increasing their backing to 82%, compared to 19% for US managers.
The coalition of 26 asset owners representing some $1.2trn in assets, which includes BlackRock's largest UK client Aegon, Australian superannuation fund Ethical Investment, multiple LGPS Pools, and DC master trusts such as The People's Partnership and Nest, has issued a statement on stewardship alignment, emphasizing their continued commitment to tackling climate change.
Meanwhile, BNP Paribas Asset Management is working with clients to turn around their portfolios in regards to climate. Julien Halfon, head of Pension Solutions for BNP Paribas Asset Management, asserts that the manager has no intention of scaling back its climate ambitions.
In conclusion, the drop in support for ESG climate resolutions by US asset managers is driven by regulatory changes that limit shareholder proposal access, political backlash, and strategic shifts to manage reputational risk. This trend weakens the efficacy of climate alliances like NZAM and CA100+ that depend on shareholder resolutions and proxy voting as key tools to drive corporate climate action.
Science plays a crucial role in the discussion about climate-change, as it provides data that helps us understand the impact of human activities on the environment. This understanding is essential for making informed decisions in environmental-science, which is why the decline in support for climate resolutions among US-based asset managers could be concerning.
The investment sector, including businesses and financial institutions, can contribute to tackling climate change through transition finance, climate adaptation investments, and direct engagement with companies. For instance, BNP Paribas Asset Management is currently working with clients to turn around their portfolios in regards to climate.
As the US political and regulatory environment remains polarized, alliances relying on broad asset manager participation, such as the Net Zero Asset Managers (NZAM) and Climate Action 100+ (CA100+), may need to adapt and focus on alternative strategies, such as direct engagement and transition finance, to remain effective in pushing for corporate climate accountability.
