Shareholder resolutions halted due to insufficient investor backing reportedly.
In a significant shift, major asset managers like BlackRock and Vanguard have become increasingly reluctant to back climate resolutions in fossil fuel companies. This retreat, primarily due to intense political and legal pressures, especially from Republican-led states such as Texas, has raised concerns about the future of climate action.
Mark van Baal, the founder of the campaign group Follow This, emphasised the importance of investors in tackling the climate crisis. He stated, "Given the political headwinds, the importance of investors is now greater than ever." However, van Baal also warned that filing resolutions without broad investor backing could risk lower votes, potentially undermining progress.
The reluctance of these asset managers is evident in their voting patterns. For instance, BlackRock supported only 4% of climate resolutions during the last AGM season, compared to 30% in 2021. Similarly, Vanguard backed only one out of 279 resolutions, according to ShareAction's latest Voting Matters Report.
This retreat undermines the former role of these asset managers as influential actors steering capital toward a low-carbon economy. The shift reduces the pressure these asset managers can exert on fossil fuel companies to transition to cleaner energy or improve climate risk management.
The political environment has led to lawsuits claiming that BlackRock, Vanguard, and other major asset managers colluded to reduce coal production and interfere with competition in energy markets through ESG-driven shareholder activism. Courts have allowed these cases to proceed, increasing regulatory scrutiny and legal risk on these firms' climate-related initiatives.
Under this political environment, asset managers have scaled back explicit climate commitments such as full participation in net-zero initiatives, reduced funds that exclude fossil fuels, and have come off “blacklists” that targeted firms opposing fossil fuel investments. BlackRock’s CEO Larry Fink acknowledged the social and economic costs of limiting investment in oil and gas, signaling a more cautious, pragmatic approach.
The retreat is not limited to BlackRock and Vanguard. This year, no climate resolution has been filed for the upcoming BP AGM next week. The Shell resolution, supported by the Australasian Centre for Corporate Responsibility (ACCR) and Share Action, is an exception. Follow This, which had previously called for a vote against the BP chair Helge Lund, has announced it will not file any shareholder resolutions this year due to investor reluctance to use their voting power.
The impact of this retreat is far-reaching. Since shareholder activism and ESG investments once channeled trillions toward sustainability goals—helping to reduce emissions and increase corporate climate transparency—the withdrawal weakens efforts to align finance with climate goals. Consequently, investment decisions are less influenced by climate risk, possibly leading to continued or increased fossil fuel financing just as global climate challenges intensify.
Van Baal stressed that investors are the last resort in solving the climate crisis. He noted that failure to tackle the climate crisis will cost investors billions. As such, Follow This's mission to work with financial institutions on tackling climate change remains unchanged, but it will now focus on engaging with investors.
The retreat of major asset managers from climate resolutions is a worrying development for those advocating for climate action. The continued support of these resolutions is crucial in steering the global economy towards a low-carbon future and addressing the pressing issue of climate change.
- The importance of environmental science in tackling climate change has become increasingly evident, as the withdrawal of major asset managers from climate resolutions could potentially undermine progress.
- The shift in financial strategies by asset managers like BlackRock and Vanguard, who are reducing funds that exclude fossil fuels and scaling back climate commitments, raises concerns about the future alignment of finance with climate goals in business.
