Which Investors Are Taking a Stand on Climate Through Proxy Voting

Say-on-climate resolutions are proposals by company management that let shareholders vote on the company’s climate risk strategy and reporting at the company’s annual meeting. First introduced three years ago, these proposals were seen as a revolution in sustainability governance practices. But while support for say-on-climate proposals has remained high, the message shareholders are sending seems increasingly confused, making it difficult to assess the investors’ views on a company’s climate risk plans.

For example, one investor may choose to abstain from a say-on-climate vote because it believes voting on climate strategy diminishes the board’s accountability. Another investor may agree but reject the proposal instead.

Still, such votes are worth examining closely to see which managers are taking a stand on climate through proxy voting. That is important to climate-aware investors.

What Is Say-on-Climate?

Unlike the shareholder resolutions on sustainability that I usually cover, say-on-climate resolutions are proposed by management, offering shareholders an opportunity to express an opinion on a company’s climate risk strategy and reporting. These votes are common in sectors highly exposed to climate risk: the energy, materials, and utilities sectors spring to mind immediately, but financials, industrials, and real estate are also affected.

Although say-on-climate hasn’t gathered momentum at companies in the United States, it has become common at major international companies, particularly in Europe and Australia. Our latest research paper reviews 25 asset managers’ voting records on 87 say-on-climate resolutions.

Market average support for these resolutions stood at 89% over the past three proxy years. The largest managers generally voted in support of companies’ published climate reporting and transition plans. Because of these firms’ larger shareholdings in these companies, the average support level shown above has stayed relatively high.

But over time, asset managers’ opinions on these disclosures have diverged, making it difficult to determine what message these shareholders are sending to companies on the adequacy of their plans.

A Wide Range of Opinions

The chart below shows support for say-on-climate resolutions by a selection of 25 of the largest managers of European equities. (We opted for this regional focus because over 80% of the resolutions were proposed at European companies.) This list includes several conventional and sustainability-focused European managers, as well as large US firms such as BlackRock, Dimensional, J.P. Morgan, State Street, and Vanguard.

A simple average of the percentage of resolutions supported by the 25 asset managers shows a decline from 92% in the 2021 proxy year to around 70% in the following two years—well below the market average. The difference arises because many of the managers in the group, other than the very largest, significantly reduced their support in the latter years.

What was the cause of this?

As asset managers became more familiar with companies’ climate-related disclosures and risk management plans, their thinking on how to approach say-on-climate votes has developed, but not always in the same way. Our research shows that managers often reach the same voting decisions for very different reasons. Here are some examples.

Same Decision, Different Rationale, Consistent Confusion

French asset manager Amundi “considers it essential that shareholders be able to comment on the company’s decarbonization strategy.” Amundi chose to signal its higher ambitions on climate by voting against or abstaining from most of the say-on-climate resolutions it voted on in 2022 and 2023. Several sustainability-conscious managers have shown similar voting patterns: abstaining or voting against proposals where they have serious reservations or sometimes choosing to support a proposal while highlighting lesser concerns.

British manager Abrdn changed its policy in 2023, choosing to abstain on most say-on-climate votes because “presenting the climate strategy as a stand-alone item risks diminishing … the direct responsibility and accountability of the board.” Dimensional holds a similar view on board accountability but, unlike Abrdn, the firm is conceptually opposed to say-on-climate resolutions—signaling this by rejecting nearly all such proposals since 2022.

Say-on-climate support by all the “Big Three” index firms exceeded 95% over the past three years, but even among these three, different voting perspectives were being applied. Vanguard treats these votes as an opportunity to express an opinion on the “coherence and comprehensiveness” of a company’s climate disclosure, rather than the climate strategy itself. State Street’s policy is similarly disclosure-focused, while BlackRock emphasizes “the oversight of and processes to manage material climate-related risks.”

For a company proposing a say-on-climate vote, it has become difficult to assess which of the shareholders withholding their support are doing so because of issues with the company’s own climate plans and disclosures or because of wider dissatisfaction with the voting process. And among those shareholders supporting the resolution, it takes a lot of careful research and outreach to know which managers still have concerns.

And once you aggregate all those conflicting signals into market averages, it becomes almost impossible to assess shareholders’ overall view on the quality of companies’ climate plans in the way that was intended when say-on-climate votes first arrived.

Say-on-Climate: Better for Assessing Asset Managers Than Companies

That’s not to say that say-on-climate resolutions are no use at all. In a way similar to sustainability-focused shareholder resolutions, say-on-climate voting records can be useful for assessing which asset managers are taking a stand on climate through proxy voting.

When accompanied by disclosures of vote rationales and climate-specific voting policies, these records help build a fuller picture of how a manager oversees climate risk in its investment strategies. This is a valuable tool in evaluating the alignment between managers’ and investors’ sustainability priorities to make more informed decisions on manager selection and proxy-voting policies. We’ll certainly return to this information in future research.