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Accusations of collusion questioned

Five US asset managers recently decided to exit or amend their participation in the Climate Action 100+ (CA100+) engagement initiative. The initiative has faced accusations of collusive behaviour, which it denies. 

This was according to a new report from Morningstar, “Climate Action 100+ Departures Put Proxy Voting in the Spotlight”, which said the evidence cited by the managers was ‘overstated’. 

Invesco, JPMorgan, Pimco, and State Street have left the initiative, whilst BlackRock has restricted its participation to its non-US business. 

The actions are reminiscent of 2023’s rush of insurers leaving the Net Zero Insurance Alliance (NZIA), which began around this time last year and started with DACH re/insurers such as Zurich, Munich Re, and Hannover Re. It was largely said to be due to – unconfirmed in all instances except for Munich Re – fears that the group’s market share made it in breach of competition law.

Those fears came about partly after a paper from Germany’s financial regulator, the Federal Financial Supervisory Authority (BaFin), published its views on collaborative engagement around ESG measures in March, which could have swayed matters. 

At the time, Zurich listed a wish for more independence in fighting for its net zero causes and possible frustrations at the slow pace of change. Munich Re, however, listed possible risks of antitrust breaches due to the group’s market share as a part reason for its departure. 

Proxy voting fall out? 

Morningstar’s recent research recorded that the five asset managers had exited or amended signatories’ support for 20 climate-related resolutions flagged by CA100+ at an average of 45%, with a range of 10% to 95%. 

The research organisation said that their observation of proxy-voting records showed no evidence of collusion, which raised the possibility that the companies made the choice around the extremely politicised atmosphere that surrounds climate or ESG-related action in the US finance systems. 

“The 50 CA100+ signatories we reviewed supported an average 76% of the resolutions. Support by 10 non-signatories averaged 27%.”

These conditions have been heightened in the past few months as the industry prepares for a possible return of Donald Trump to the presidency, with polls showing him pulling ahead of Joe Biden. 

“Proxy-voting records for the 20 flagged resolutions in 2023 suggest a wide range of voting approaches among CA100+ signatories, not collusion,” said Morningstar’s report, which was authored by Lindsey Stewart, CFA Director of Investment Stewardship Research. 

“The 50 CA100+ signatories we reviewed supported an average 76% of the resolutions. Support by 10 non-signatories averaged 27%,” it said. “The 35 asset manager signatories supported an average 74% of the resolutions, ranging from 10% to 100%. Average support by five non-signatory asset managers in the US stood much lower, at 11%.” 

In the paper, Stewart said that “a wide range of signatory voting decisions on flagged resolutions suggests an absence of collusive voting behaviour”. 

“On average, the asset owners in our selection showed higher support for the flagged resolutions than the asset managers,” he added. “Across the entire group, support by the asset owners stood at 71% on average, compared with 66% for the asset managers.”

"Overall, the wide range of voting support by signatories and by the five exited and amended firms suggests that accusations of collusion by signatories are wide of the mark.” 

“We identified 13 institutions that have filed or co-filed flagged resolutions: seven asset managers and six asset owners. As could be expected, these institutions showed very high support (89%) for the 20 flagged resolutions in 2023.” 

Stewart said that average support for the flagged resolutions by the five companies that exited or amended their participation in CA100+ stood at 45%, “close to the average support level we observed for non-signatory asset owners”.

“However, the range of support by the five firms is wide, from 10% for BlackRock up to 95% for Pimco,” he continued. “Overall, the wide range of voting support by signatories and by the five exited and amended firms suggests that accusations of collusion by signatories are wide of the mark.” 

The results showed that the strategic investment and operations of asset managers will be under the microscope no matter what decisions are made – but warding off potential greenwashing accusations will also be a strategic need. 

 

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