Investment stewardship and the shareholder voice are critical tools to push public companies for positive change and, we believe, represent important ways of enabling our clients to have impact beyond their investment capital alone. The shareholder resolution process allows clients, in partnership with shareholder advocacy experts, to engage with the companies in which they have invested to address a broad range of financially material issues such as promoting diversity, equity and inclusion (DEI) in hiring and promotion processes, setting and meeting greenhouse gas (GHG) emissions reduction targets and addressing the risks of misinformation and disinformation on major technology platforms.
In 2020, support for shareholder resolutions surged in response to calls for progress on racial justice issues and the social and economic challenges presented by the COVID-19 pandemic. Since that time, however, overall support has steadily declined over the past three years, driven predominantly by the largest institutional investors. Two of the “Big Three,” BlackRock and Vanguard, have consistently decreased their support and have voiced increasing criticism of certain environmental-, social- and governance- (ESG) related resolutions. This year, State Street, the last of the “Big Three,” also significantly reduced its support, dropping from a prior average of ~45% to just 23% in 2024.i These and other large institutional investors cite declining quality and broadening scope of resolutions for their dwindling support, with BlackRock noting that resolutions were “overreaching, lacked economic merit, or sought outcomes that were unlikely to promote long-term shareholder value.”ii In contrast, managers with strong pro- ESG voting histories showed only a slight decrease in support.
While changes in the quality and materiality of resolutions may play a role, it is also important to note that the decline in support coincides with the rise in anti-ESG sentiment and the increase in explicitly anti-ESG resolutions. In 2024, for the first time, anti-ESG resolutions accounted for all of the growth in the volume of resolutions.iii Despite Vanguard’s assurances that “lack of support for environmental and/or social proposals this year does not reflect a change in our team’s application of the funds’ voting policies,” and despite the general lack of success of anti-ESG resolutions, it is reasonable to infer at least some degree of correlation between these two trends.
Shareholder engagement is a critical avenue for investors to push back on the anti-ESG narrative and provide a reminder to companies of their concerns around financially material ESG issues to safeguard and enhance long-term portfolio value, both as individuals and as investors. Change can be slow but, despite the noise and the challenges posed by these urgent and material issues, we remain committed to impact investing and shareholder advocacy for the benefit of our clients, their investments, and all stakeholders. We thank our clients for lending their voices to this important work and look hopefully toward positive outcomes in the future.
How ESG Advocacy Works at LNW
Eligible LNW clients can support critical ESG resolutions with a simple signature. Every year, shareholder advocacy experts at organizations such as As You Sow, Open MIC and Reproductive Health Investors Alliance draft resolutions for which they need investor support in order to file for corporate annual meetings. For the 2024 annual meeting season, those issues included climate change, racial justice, corporate governance, microplastic pollution and more. We notify all eligible clients of the opportunity. Interested clients then choose if they want to support the proposals by signing a letter authorizing the shareholder advocacy organizations to file resolutions on their behalf.
We invite you to learn more about our clients’ participation in the 2024 proxy season through our 2024 Shareholder Resolution Impact Report.
i Morningstar. “ESG Shareholder Resolutions: The Big Three Still Hold the Key.” September 2024.
ii BlackRock. “2024 Global Voting Spotlight.” September 2024.
iii Morningstar. “ESG Shareholder Resolutions: The Big Three Still Hold the Key.” September 2024.
