This AGM season it’s time for asset owners to step up

At ShareAction, AGM season is always a hive of frenetic activity. As usual this year we’re busy marshalling investors for shareholder resolutions and will be proactively raising issues and posing questions at AGMs. But we’re also aware that 2025 could well be rather different. The ESG backlash that first emerged in the US is biting hard and with significant risk of contagion.

The 2024 iteration of our annual analysis of asset manager voting patterns showed that support amongst US managers for our sample of environmental and social resolutions fell to an average of 19% - half of the 2022 figure – even as European asset managers heroically supported 82% of the same resolutions on average. Blackrock backed just 4% of these resolutions, down from 40% in 2022; Vanguard voted in support of just one of 279 resolutions in the sample. These dismal numbers are likely to be maintained this year, not least given the appointment of Paul Atkins as Chair at the SEC.

There’s a silver lining to all this: after years of picking through greenwash, we can at least now tell who was paying lip service to the value of sustainability and who is genuinely committed. This clarity on asset manager positioning offers an opportunity (and a challenge) for asset owners.

Asset owners have always been a critical influence in shaping how asset managers steward investee companies. But the moment we are in, with certain large asset managers actively rolling back their climate pledges and engagement, throws the role - and responsibility - of asset owners into far sharper relief.

What are we observing so far? Positively, there are several high profile examples of asset owners stepping up: the UK-based People’s Pension moved £28 billion (about USD $37 billion) away from State Street, partly on grounds of voting misalignment, while the New York City Comptroller has publicly threatened to move funds from managers not aligned with its climate goals. However, for now it remains the case that many asset owners continue to devolve voting and engagement to asset managers without clear direction, scrutiny, accountability or sanction.

This matters greatly. The approach of asset owners to stewardship in 2025 will set the tone for how the wider capital markets community acts in the remainder of this climate-critical decade. If asset owners make clear that they view climate risk as financially material for their beneficiaries – and demand stewardship that responds to that risk – asset managers are far more likely to face down attempts to limit shareholder rights.

In this moment, gestures from asset owners won’t cut it. Take Pass Through Voting (PTV) as an interesting example. The PTV offer is growing, and we welcome the trend of asset owners taking greater control of how their votes are cast. But PTV is a first step: it can’t be an excuse to sustain mandates for years with asset managers who ‘cancel out’ clients’ voting decisions with their own. A risk is that PTV sees asset owner votes disconnect from dialogue with investee firms. Instead, voting should be a key tool within a coherent engagement and escalation strategy with investee companies (as we propose in our guidance on escalation). 

So here’s what we’re calling asset owners to do to rise to the challenge of 2025’s AGM season.

Firstly, asset owners can recognise their power and responsibility as fiduciary owners, and develop voting policies that reflect the importance of environmental, social and governance risks to beneficiaries’ long-term interests. 

Secondly, asset owners can acknowledge that voting has greatest value when deployed as part of a bigger stewardship toolkit. To secure the best results, it will sometimes be necessary for investors to escalate the pressure they apply to companies, using a greater range of the tools available to them. For example, investors should not shy from voting against directors where companies are behaving egregiously or placing capital at undue risk. For the first time this year, ShareAction has called for votes against directors as part of our annual Resolutions to Watch list. Other bodies such as the Association of Member-Nominated Trustees (AMNT) have set out clear ‘red line’ voting policies.

And if asset managers say they can’t (or won’t) align to what asset owners are looking for to protect the interests of beneficiaries, then it makes sense to use client power by moving funds to an asset manager who will. Ultimately, only the movement of assets will impose the discipline in the market needed to drive stewardship standards higher.

Such actions require real determination and effort. No free lunches; no easy short cuts to acting in ways that protect assets for the long-term and sustain the natural and social systems that underpin our economies. The millions of people whose funds are invested by institutional asset owners deserve nothing less.

So, for any asset owners reading this: this is your moment. Use it well.

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By Catherine Howarth (ShareAction)

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