Industry Updates

Vanguard lags BlackRock and State Street in support of ESG issues

Morningstar research found Vanguard supported 28% of ‘key’ ESG resolutions

Theo Andrew

ESG finance

Vanguard’s level of support for key ESG resolutions is less than half of its two closest rivals BlackRock and State Street Global Advisors (SSGA), Morningstar research has found.

BlackRock and SSGA expressed proxy voting support for 55% and 60% of 100 ESG-related resolutions marked as “key” by Morningstar – in line with the 20 biggest US asset managers at 59% – while Vanguard supported just 28% of the resolutions.

BlackRock, Vanguard and SSGA – known as the ‘Big Three’ – represent 43% of the US fund market with a combined $10.3trn assets under management (AUM), $8.9trn of which is in passive funds, according to Morningstar Direct.

The trio, which have all been heavily targeted by the anti-ESG movement in the US, voted differently on more than two-thirds of key resolutions with Vanguard living up to its record of low backing for social and environmental issues.

Most notably, Vanguard voted against all resolutions on civil rights and racial equity as well as environment-related issues other than climate.

BlackRock voted in support of 70% of civil rights and racial equity resolutions while SSGA shows its highest level of support for human rights and ethical use of technology, supporting over 90% of resolutions, the research found.

The trend also played out across other themes, with Vanguard reporting seven out of 23 key environmental proposals (30%) while BlackRock and SSGA supported 57% and 61%, respectively.

On social topics, BlackRock and SSGA supported 55% and 60%, respectively, while Vanguard supported 27%.

BlackRock has taken the brunt of the ESG backlash in the US with Republican states boycotting firms such as UBS Asset Management and BNP Paribas Asset Management for excluding certain sectors from their ESG products.

Since then, asset managers have been attempting to convince anti-ESG states in the US of their non-green credentials.

Last December, Vanguard withdrew from the Net Zero Asset Managers (NZAM) initiative, a major investment industry group created to battle climate change, stating it wants to improve clarity for its investors.

Meanwhile, BlackRock founder, chairman and CEO Larry Fink did not mention ESG once in his annual letter to shareholders, as he attempted to cater to both pro and anti-sustainability investors.

It comes as the focus on the voting practices of the ‘Big Three’ has arguably never been higher while the impact of passive power is becoming increasingly scrutinised.

In 2022, BlackRock, Vanguard and SSGA owned 23% of S&P 500 companies, a figure which could potentially be closer to 37% when considering pension funds, according to recent academic research.

All three have announced plans to pass on their proxy voting powers to investors over the past year, with SSGA recently extending these powers to 82% of eligible passive ETFs and mutual funds.

Despite this, it is widely anticipated investors will continue to rely on their fund manager to make the proxy voting decisions on their behalf.

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