ESG comes to the fore for asset managers’ voting

The financial and sustainability impact of companies’ actions is likely to shape asset managers’ voting records this year as advisers seek funds for their clients who act to invest sustainably.

Voting season typically takes places in April and May at listed companies’ annual general meetings ahead of the end of financial year, and ESG is likely to be a prominent issue. 

Research by the Responsible Investment Association Australasia, in its annual report, found 88 per cent of respondents said they expect their investments to be responsible and ethical, up from 83 per cent in 2022. Only 5 per cent of Australians said they have negative perceptions about responsible investing, and 76 per cent said they would consider moving funds if their current option did not align with their values.

“As consumers seek more transparency and alignment with their values, it’s crucial for financial institutions to step up and offer a wider range of responsible investment options, backed up by robust processes and third-party verification,” the organisation said.

VIEW ALL

View all

In light of this, asset managers have taken steps to increase their verification of these areas when it comes to their voting records.

GAM said: “As companies’ operations are increasingly challenged by economic, geopolitical, sustainability and cyber security risks, we expect the board to strengthen their competencies to manage the company’s exposure and navigate associated risks and opportunities.

“The financial and sustainability impact of these risks remains a high focus for regulators and investors, and will likely continue to shape the topic of shareholder resolutions we see at 2024 annual general meetings, particularly in regard to climate, social and artificial intelligence concerns.”

It said it will be looking closely at board performance, governance, the strategy in place and how it is implemented, as well as discussion of the risks and actions taken to mitigate them.

Meanwhile, Amundi said the firm has increased its transparency regarding the integration in its voting approach of environmental and social considerations. This includes significant votes and voting decisions on shareholder proposals related to sustainability topics such as environment, climate and human rights, and “say on climate” proposals.

At Fidelity International, climate change is a “systemic theme”, and the asset manager said it will vote against directors of companies that fail to meet its minimum expectations on climate change governance, policies and disclosure. Fidelity will continue to use its votes to advocate for companies to adopt decarbonisation strategies that support a credible just transition to net zero, it said. 

In a post, Emilie Goodall, head of stewardship - Europe, highlighted the company’s approach to miners, including Australian mega-cap stock BHP.

“While shareholders can use voting to communicate their preferred approach, there’s a risk that voting bluntly on a shareholder proposal might fail to capture that nuance and inadvertently incentivise companies to spin off dirty assets just to get them off their books. 

“Doing so does not solve the longer-term issue of how to end thermal coal production – it simply pushes the problem elsewhere. That’s why we supported the decision of BHP, an Australian mining giant, not to sell its Mount Arthur coal mine, but rather wind down production between now and its closure in 2030.”

VanEck said it uses proxy voting company Glass Lewis which has a set of ESG proxy voting guidelines that closely align with its views and are updated annually. These support proposals regarding the environment, in particular, those seeking improved sustainability reporting and disclosure about company practices that impact the environment.