Nordic investors and asset managers are suffering setbacks in their attempts to raise ESG standards at the AGMs of leading global companies, according to AMWatch analyst Flemming Højbo.
Flemming Højbo writes analyses for AMWatch about the Nordic asset and wealth management sector. Højbo was head of communications in the asset management industry for 15 years, and before that, he worked for 25 years as a financial and business reporter and as an editor. | Photo: Pr / Jan Bjarke Mindegaard
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“Success is going from failure to failure without losing your enthusiasm,” the saying goes.
How to keep up their enthusiasm is a hard question for a lot of Nordic institutional investors and asset managers during this current season of Annual General Meetings. They are facing heavy opposition when trying to raise ESG standards in some of the world’s leading companies, and are moving from defeat to defeat at AGM votes.
The lack of success in changing the course of ‘Big Tech’ and ‘Big Oil’ is significant.
- At the Amazon AGM all 14 proposals from minority shareholders were rejected. One of the proposals supported by Nordic investors such as ATP, Alecta and KLP, was to push the online retail giant to improve employee rights, including workers’ rights to unionize. It was the third year in a row that this proposal was shot down.
- At the Shell AGM, a resolution asking the energy giant to align with the goals of the Paris Climate Agreement was rejected. Only 19% voted for the resolution proposed by activist shareholder Follow This and 27 investors, including Swedish national pension funds AP3 and AP4. This was another setback for Follow This, which has filed climate resolutions at eight Shell annual meetings.
- At the Total Energies AGM an international coalition of 19 investors including Sweden’s AP7 fund called for the separation of the chair and CEO roles. Their efforts ended in failure. More than 75% of the shareholders voted for the CEO and Chair Patrick Pouyanne to continue another three-year mandate on the board.
A new low
The recent failures represent a trend of dwindling support for environmental, social and governance resolutions and proposals. The support steadily grew until 2021, when it peaked. Since then it has declined.
These four asset managers have such power that an additional 69 resolutions would have passed if they had supported them
Flemming Højbo, analyst, AMWatch
Last year support hit a new low, according to the latest report ‘Voting Matters 2023’ from the London-based NGO ShareAction which specializes in ESG issues. The report examined the voting of 69 of the largest asset managers in the world, representing total AUM equivalent to 60% of the global GDP.
Only eight, or 3%, of the 257 resolutions assessed in the report were passed last year. This is down from 21% in 2021.
The lack of support from the so-called ‘Big Four’ of BlackRock, Vanguard, Fidelity Investments and State Street Global Advisors had a striking impact, as they only supported 12.5% of the resolutions. These four asset managers have so much power that an additional 69 resolutions would have passed if they had supported them.
ESG backlash divides European managers
“Many of the very large asset managers are voting against most proposals. This is particularly pronounced within climate and is undoubtedly linked to the whole anti-ESG movement,” Anders Schelde, CIO at AkademikerPension, said in an interview.
Apparently, the political backlash against ESG in the United States is spreading across the Atlantic. More asset managers from the United Kingdom, such as Schroders and Abrdn, are following their US peers in an increasingly negative approach to shareholder resolutions on ESG.
That was the case at the Shell AGM, and this has opened a rift between UK-based asset managers and continental investors, the Financial Times reports.
Much ado about nothing
Now, the trend has become a major problem for the Nordic investors and asset managers that are committed to ESG, sustainable investments and active ownership. They depend on allies to obtain majorities in order to bring about change.
In the words of Abba, the winner takes it all, and If you can’t win the battles you fight to change the course of companies, you won’t be able to deliver on your promises to your investment clients.
Over recent years investors have put much more effort into voting and into publishing voting policies and opinions prior to the AGMs. Danish asset managers expressed their voices at 77,500 votes in 2023, increasing the number of votes by 46% in two years.
The risk is that all this work ends up being much ado about nothing, given that the number of votes or resolutions will not combat the climate crisis, improve governance or improve employee rights. It is passing the proposals and achieving changes that matters.
Investors under pressure – not companies
Instead of bringing about change at companies, some of the investors and asset managers appear to be the ones that are under pressure.
In such situations, clients may lose patience – and their faith in ESG investments
Flemming Højbo, analyst, AMWatch
This pressure grows when there is a discrepancy between ESG and sustainability goals of these managers and their lack of achievements. In such situations, clients may lose patience – and their faith in ESG investments.
The pressure from NGOs and climate activists is increasing as well. Recently, the climate movement Extinction Rebellion targeted the Paris offices of Amundi, the largest European asset manager, damaging the building and injuring some of the company’s security staff.
According to the activists, Amundi ”has the power to prevent destructive fossil fuel projects.”
Another week, another drama
The AGM season hasn’t finished yet, and another drama awaits next week, when a new high-profile battle is expected. The annual general meeting at electric car manufacturer Tesla will take place on Wednesday, and investor groups, including Nordic players, will demand changes to Tesla’s board. They will also try to stop a USD 46bn pay package for CEO Elon Musk.
Tesla versus the investors is shaping up to be another power struggle.
Flemming Højbo has researched and reported on the financial sector for decades. Flemming was a financial and business reporter, and an editor, for 25 years, as well as a communication partner and head of communication in the asset and wealth management industry for 15 years.