Highlighting a recent report from the pro-growth Committee to Unleash Prosperity, as it may come up from members of your investment committee or investment service providers: Putting Politics over Pensions, a ‘Report Card on Investment Fund Managers and Proxy Voting Behavior’.
The Committee was founded in 2015 as an outgrowth of prior 'supply side economics' groups, to promote ‘government policies that have been proven…to maximize economic growth’. They’ve found press attention over the last few years for their writings on “ESG” practices that “reduce the profitability” of companies. There are fairly big names involved with the group, including a well-known former writer and editorial board member at the Wall Street Journal.
The report covers a ranked assessment of investment managers based on the voting records of over 600 firms across ‘50 of the most extreme ESG-oriented resolutions in the 2023 proxy voting season.’ While there is no detail on the 50 resolutions, the report gives examples, including ‘…curtailing the financing or insuring of fossil fuels…’, ‘adopting racial/ethnic and gender quotas in hiring’ and other social or environmentally oriented issues. In general, these are seen by the Committee as ‘radical proposals’ where ‘almost all may or will reduce shareholder returns’ and therefore ‘a vote for these resolutions is in direct conflict with the fiduciary obligation these firms have to their clients’. Unlike thorough academic studies, there’s little but selected and older research referenced to support these last statements.
Depending on your current proxy voting / engagement policies, you may wish to see your manager rank poorly in this report. For example, of the most active proxy voting managers, Blackrock received a “B” grade (on an A to F scale), while Newton a “C” and BNP Paribas an “F-“. The appendix starting on page 17 lists all the managers reviewed, so you can find yours, knowing essentially an “A” rating means the manager voted against a majority of the 50 tracked resolutions, while an “F-“ means they voted for the resolutions.
Confirming other reports, the study finds overall support among investment managers for ESG-related resolutions dropped between 2022 and 2023. While these authors terms this ‘good news’, they found that investment managers were 30% less likely to support ESG proposals in 2023 versus the prior year, though ESG resolutions are supported more than half the time by ‘the large investment firms’.
Interestingly, the authors note ‘We have no problem with investors choosing for themselves funds that self-identify as operating on ESG principles’ and they found – oddly – that…
“…non-ESG funds were more likely to be supportive of ESG-oriented resolutions than the ESG branded funds…”
All around confusing, while the headline is eye-catching and you may have members of your professional and governance circles raising the report as a positive or negative (“look how low our manager ranked” --- “look how high our manager ranked”), so it may be helpful to be aware.
It also highlights the importance of having a proxy voting and engagement policy that reflects your faith-values. We urge this irrespective of your size. While it’s certainly needed for separate / segregated accounts with your investment manager, it’s an important communication tool to your manager to inform their voting practices.