Proxy Voting on Climate: European Asset Managers’ Evolving Approach

A new Morningstar report highlights more thorough scrutiny of corporate climate strategies and a growing sense of investor confidence
1 May 2024
Proxy Voting on Climate

As concerns over climate change intensify, European asset managers are stepping up and showing a more assertive role in proxy voting on climate. This emerging trend, as seen in a new Morningstar report, highlights a significant shift towards a more thorough scrutiny of corporate climate strategies and a growing sense of confidence within the investment community when it comes to influencing corporate climate strategies. 

Say on Climate resolutions offer a powerful mechanism for shareholders to guide and approve (or disapprove) of a company’s approach to managing climate risks. The Morningstar report, which reviews the voting patterns of 25 leading asset managers, shows that Say on Climate resolutions continue to gain traction in proxy voting, illustrating shareholders’ active role in steering corporate sustainability agendas.

Critically, Say on Climate’s usage amongst asset managers reflects an essential shift towards greater engagement in environmental issues. This is especially crucial in sectors directly impacted by climate risks, such as energy and utilities, where decisive action is urgently needed.

Empowering proxy voters to have their Say on Climate

The Morningstar report finds that asset managers are not just passively endorsing all proposals, but rather that their support is thoughtful and informed. They are increasingly selective, choosing to back resolutions that are comprehensive and which demonstrate clear, actionable strategies towards decarbonisation. This careful scrutiny could help ensure that only the most credible and well-constructed climate strategies receive approval, enhancing the quality of corporate climate action. 

The report details how a spectrum of motivations drive asset managers’ voting decisions. It outlines how some asset managers abstain from votes to underscore the importance of direct board accountability in climate strategy implementation. Others explicitly reject proposals to signal the need for more aggressive climate action plans. This diversity in voting rationale reflects a maturation in the understanding and approach to environmental risk management that is being taken amongst Europe’s investment leaders.

For climate-conscious investors, understanding these subtleties in voting behaviour is valuable. It offers insights into how asset managers align their investment strategies with sustainable and responsible environmental practices. This shift not only serves investors’ interests but also sets a higher standard for corporate behaviour, pushing companies towards more effective and transparent climate strategies.

What is the path forward for proxy voting on climate?

The proactive stance of European asset managers in proxy voting is setting a new benchmark in corporate governance regarding climate change. This trend may enhance the overall quality of corporate climate initiatives, promoting a more accountable and sustainable approach to environmental challenges. As this trend continues, it could profoundly impact how companies worldwide address the complexities of climate change and sustainability. Asset management’s engagement with Say on Climate underscores a promising trend towards more dynamic and effective governance in addressing climate change. 

1 May 2024