What proxy votes show about how dead ESG is

Looking at some recent headlines about the drops in BlackRock’s and Vanguard’s support for shareholder resolutions, it would seem as if ESG is all but dead — with politicians winning the odd battle they’re waging on the asset managers.

After all, BlackRock supported just 7% of environmentally and socially themed shareholder resolutions globally between July 1, 2022, and June 30, 2023, compared with 22% in the prior proxy year, according to the company’s recent report on its voting and an analysis by Bloomberg.

Meanwhile, Vanguard voted in favor of just 2% of environmental and social shareholder proposals, down from 12%, the asset manager disclosed this week. The data are being published as fund sponsors file their annual N-PX forms with the Securities and Exchange Commission, which require that they show how they voted.

There are plenty of stories out there about the low levels of support (they are indeed low). But there are two things to keep in mind: The number of shareholder resolutions has risen dramatically over the past several years (along with the scope of the demands within them), and big asset managers like Vanguard and BlackRock are hardly at the forefront of sustainable investing.

“It’s not the end of ESG. It’s probably the end of a phase in ESG, though,” said Lindsey Stewart, director of investment stewardship research at Morningstar.

There was a lot of excitement in 2021 when asset managers’ support for ESG-themed proposals was higher, he noted. It was also a time when the SEC started making it difficult for public companies to deny shareholder resolutions votes on their proxy ballots.

But the things shareholders were asking for then are significantly different from what they have leaned toward over the past year, Stewart said.

Two years ago, for example, proposals focused on getting companies to start disclosing data. Today, thanks in part to those resolutions and pressure from regulators, disclosure of ESG data is more common. With that being table stakes, shareholders have moved on to ask public companies to change their practices, such as setting carbon-reduction goals — and asset managers have tended to view that kind of request as too prescriptive.

The phase that’s coming to an end, Stewart said, is a belief that asset managers will bring about important changes necessary for the world to be more just and sustainable. Essentially, we can’t expect funds to stand in for government action. While asset managers can help encourage change at the public companies in their portfolio, they can (or will) only do so much.


Big companies like BlackRock have gotten so big because they tend to be good at making people money. While CEO Larry Fink has spoken numerous times about goals around stakeholder capitalism, the company’s motivations related to proxy voting and engaging portfolio companies come down to financially material concerns. The company is far from alone in seeing very real risk and return connected to ESG issues.

BlackRock declined to comment on its recent proxy votes, but a spokesperson pointed to statements made in the recently published report.

In the report, Joud Abdel Majeid, BlackRock’s global head of investment stewardship, noted that there was a 34% increase in the number of shareholder resolutions over the past year focused on social and environmental issues.

“We observed a greater number of overly prescriptive proposals or ones lacking economic merit,” Abdel Majeid stated in the report.

The drop in the percentage of resolutions BlackRock supported has more to do with the quality of the resolutions than a change in the company’s stance on ESG issues, which it reiterated are material in nature.

Similarly, a Vanguard spokesperson pointed to that firm’s recent report. Although Vanguard’s support for environmental and social proposals dropped significantly, that decline was due in part to resolutions asking for things that companies have already started doing (or are doing enough to satisfy Vanguard).

“Despite changes in voting results, which are driven largely by the volume and substance of the proposals presented, our approach to evaluating shareholder proposals — including those on environmental and social matters — has been consistent over time,” the Vanguard report stated.

Across the board, support for shareholder resolutions declined from a median of 25% in the U.S. in the 2021-2022 proxy season to 15% in the 2022-2023 season, BlackRock noted, citing data from ISS.

There was also a drop in the portion of shareholder proposals that saw significant support, Stewart said. In several proxy seasons prior to the most recent, about 35% to 40% of environmentally themed resolutions were seen as “key” shareholder proposals, meaning that they saw at least 40% support from independent directors, according to Morningstar. This past year, that appears to have dropped to about 20% or less, Stewart said.

“Whether that’s down to the [ESG] backlash, on the voting side I wouldn’t draw a straight line,” he said. But, “it does change the climate and the conversation around what’s happening with these shareholder proposals … Asset managers are pushing back on prescriptive resolutions — whether [those resolutions] are pro- or anti-ESG.”

Because N-PX data was still being submitted to the SEC as of Thursday, a complete picture about how asset managers voted isn’t yet available. So it’s hard to know whether fund providers known for being sustainable changed much in their voting habits. What is clear, though, is that those fund companies undoubtedly supported environmental and social proposals at a much higher rate.

A separate report issued Wednesday by Morningstar listed Vanguard as “low” in its ESG commitment level and rated BlackRock just slightly higher at “basic.” Meanwhile, U.S. firms such as Boston Trust Walden, Domini and Parnassus were among the eight companies globally with the highest rating, “leader,” which was a category ahead of “advanced,” a group that included AllianceBernstein, Amana, Brown Advisory, Federated Hermes, Nuveen and Wellington Management.

There’s no shortage of companies that view environmental and social issues as financially material, and that does not appear to have changed amid the political backlash over the past year in the U.S. And it could be that the anti-ESG movement is showing signs of tiring, as the topic didn’t come up at all during the first Republican presidential candidates debate last Wednesday.

It could also be that asset managers change their language to avoid attracting attention.

“They may decide for political convenience to call it something else,” Stewart said. “But the idea isn’t going anywhere. That’s for sure.”

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