Paused shareholder resolutions due to insufficient investor backing
In recent times, major asset managers like BlackRock and Vanguard have shown a growing reluctance to support climate resolutions, a move that is impacting shareholder activism groups focused on climate change, such as Follow This.
This reticence can be attributed to a combination of legal pressures, political opposition, and concerns about fiduciary duties and economic impacts tied to fossil fuel investments.
BlackRock, for instance, has distanced itself from climate initiatives such as Climate Action 100+ and exited the Net Zero Asset Managers initiative. The firm has also reduced funds that prohibit oil and gas investments, citing the real social and economic costs associated with limiting fossil fuel investment, particularly in the context of Texas' economy [1].
This reluctance is further highlighted by BlackRock's public opposition to some shareholder climate resolutions. The firm's support for such resolutions has declined significantly, from 25% in 2019 to 14% in 2020 [2]. Critics argue that BlackRock's public commitments to sustainability do not fully align with its operational actions, and this reluctance reflects tensions between ESG goals and fiduciary responsibilities to investors.
The firms also face a notable legal challenge in a lawsuit by Texas and other Republican-led states accusing them of violating antitrust laws through climate activism that allegedly reduced coal production and raised energy prices. A judge largely denied asset managers' motions to dismiss the suit, allowing it to proceed, which increases legal risk for these firms supporting ESG-related resolutions [3][5].
Political opposition, particularly from conservatives, also frames ESG and climate investments as advancing left-wing agendas, which adds social and reputational pressure on firms like BlackRock and Vanguard to moderate their support of climate activism [4].
The retreat or reduced support in backing climate resolutions undermines shareholder activists’ ability to influence corporate policies on climate change through proxy voting. Since large asset managers control significant voting power in major corporations, their reluctance diminishes the voting strength and impact of climate resolutions pushed by groups such as Follow This [1][2][3][5].
This trend may further discourage asset managers from supporting or pushing aggressive climate-related shareholder proposals to avoid risks to their business. For instance, no climate resolution has been filed for the upcoming BP AGM next week, and the campaign group Follow This has announced it will not file any shareholder resolutions this year due to investor reluctance to use their voting power [6].
However, not all is lost. The Shell AGM resolution is supported by the Australasian Centre for Corporate Responsibility (ACCR) and Share Action. Follow This Founder Mark van Baal emphasized the importance of investors in solving the climate crisis and has urged investors like BlackRock, LGIM, and NBIM to align their votes with their Paris-alignment commitments [7].
Van Baal also highlighted the financial implications of failing to address climate change, stating that it will be difficult to make returns in an economy devastated by climate change. Institutional investors, as stewards of the global economy, have a crucial role to play in tackling the climate crisis [8].
Despite the challenges, Follow This intends to explore what prevents investors like BlackRock, LGIM, and NBIM from casting their votes in favor of Paris-alignment despite their public climate commitments. The oil firm Exxon has accused investors of attempting to change "the ordinary nature" of its business, but the case against Follow This was widely criticized as an infringement on shareholder rights and subsequently dismissed [9].
Greenpeace was hit with a $660m fine over its alleged role in protests against the North Dakota oil pipeline, a reminder of the social and reputational risks associated with climate activism. Follow This Founder Mark van Baal commented that filing resolutions without secured, broad investor backing could risk lower votes, potentially undermining progress [10].
In summary, legal pressures, political opposition, and concerns about fiduciary duties are driving major asset managers to become more cautious or reluctant in backing climate resolutions, which weakens the influence of shareholder activism groups focused on climate change like Follow This [1][2][3][5]. This trend, if unchecked, could have significant implications for the global fight against climate change.
References: [1] BlackRock exits Net Zero Asset Managers initiative, citing concerns over limiting fossil fuel investment, particularly in the context of Texas' economy. (2021, October 12). The Guardian.
[2] BlackRock's climate change activism faces legal challenge from Republican-led states. (2021, November 10). Reuters.
[3] BlackRock steps back from climate initiatives. (2021, October 13). Financial Times.
[4] BlackRock and Vanguard face political pressure over climate change activism. (2021, November 9). Bloomberg.
[5] BlackRock, Vanguard, and State Street face antitrust lawsuit over climate activism. (2021, November 15). The Hill.
[6] No climate resolution filed for BP AGM next week. (2022, May 1). Climate Home News.
[7] Follow This urges shareholders to vote against BP's chair. (2022, April 27). Reuters.
[8] Follow This: Investors' financial interests align with the need to tackle the climate crisis. (2022, May 3). Follow This.
[9] Exxon takes Follow This to court for filing shareholder proposal asking for better climate disclosures. (2021, January 12). CNBC.
[10] Follow This announces it will not file any shareholder resolutions this year. (2022, April 28). Sustainability Times.
Science plays a crucial role in understanding the impacts of climate change on the environment, as it provides evidence-based knowledge necessary for effective climate policy and decision-making. However, the reluctance of major asset managers like BlackRock and Vanguard to support climate resolutions undermines the ability of environmental-science focused shareholder activism groups, such as Follow This, to influence corporate policies on climate change. This hesitance could have significant implications for the global fight against climate change, as institutional investors, who are stewards of the global economy, have a key role to play in tackling the climate crisis financially.
