In an age of accelerating climate catastrophe and increasing corporate commitment to a green pivot, most investors are still refusing to support environmental and socially minded shareholder resolutions.
As depressing as that is, it gets worse: Money managers who have signed up to the United Nations-backed Principles for Responsible Investment, a network in which membership means you are pledging to support ESG as part of your investing strategy, are nevertheless failing to do so.
The PRI was started in 2006 with the stated mission of encouraging action that benefits “the environment and society as a whole.” But shareholder voting records reveal that’s just not happening.
A study from Dutch investment manager Robeco and the Erasmus School of Economics found that only 35% of PRI signatories backed U.S.-based environmental resolutions as recently as 2018, and only about 24% voted in favor of social proposals.
While the numbers may have crept up in 2019 and 2020, the fact remains that the majority of environmental and social recommendations fail to garner enough shareholder support to steer the corporate agenda “towards sustainability focused decision making,” Robeco said in its 41-page report.
To be a member of PRI (and thus free to tell the world your company is part of a group promoting ESG) you have to agree to follow its principles. There is as yet no comprehensive mechanism by which PRI requires members prove they are following through on their commitments, a fact that arguably leaves the door open for greenwashing.
Robeco is calling on the PRI to require that money managers provide more evidence of their engagement activities, and “demonstrate pro-sustainable voting behavior as a prerequisite to be awarded” high marks from the industry group.
PRI Chief Executive Officer Fiona Reynolds said, in response to the Robeco and Erasmus study, that the PRI is “actively considering the inclusion of engagement and/or voting requirements,” as part of an effort to press investors to fulfill their oversight and stewardship responsibilities.
On Tuesday, the PRI released new investor guidance for voting on shareholder resolutions, urging (but not requiring) investors to see voting for “shareholder resolutions not necessarily as part of an escalation strategy, but rather as a tool for clear, effective and accountable investment stewardship.” In a statement, Reynolds said “voting in support of shareholder resolutions that align with investors’ ESG principles should be viewed as an essential complement to engagement.”
On its website, the PRI calls itself “the world’s leading proponent of responsible investment.” It has more than 3,700 signatories, including the world’s biggest asset managers—BlackRock Inc., Vanguard Group Inc. and State Street Global Advisors. The PRI’s first principle states that its members will incorporate environmental, social and governance (ESG) issues into their investment analysis and decision-making processes.