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Proxy Voting by 50 U.S. Fund Families Growing support for ESG Resolutions, but the largest lag behind.
Key Takeaways:
× Asset-manager proxy voting support for ESG-related shareholder resolutions has increased considerably
over the past five years, with average support across 50 large fund families rising to 46% from 27%.
× Funds offered by Allianz Global Investors, Blackstone, Eaton Vance, and PIMCO were the most likely to
support shareholder-proposed ESG resolutions in 2019, voting for these resolutions more than 87% of
the time.
× Five of the 10 largest fund families—Vanguard, BlackRock, American Funds, T. Rowe Price, and DFA
Funds offered by Dimensional Fund Advisors—voted against more than 88% of ESG-related shareholder
resolutions.
× Large fund groups voting against ESG-related shareholder resolutions kept many of these initiatives from
achieving majority support. Nineteen of 23 resolutions earning more than 40% support would have
passed if supported by just one of the largest two asset managers.
Introduction
Investor concerns over sustainability issues have increased significantly in recent years, driven by the
increasing risks of climate change, the need to better serve all relevant stakeholders in order to drive
long-term shareholder value, and the growing materiality of reputation, with swift and severe
consequences for companies that violate their social license to operate.
One manifestation of investor concern over climate risk is the emergence of the Climate Action 100+
Initiative, or CA100+, a global coalition of investors representing $34 trillion in managed assets (as of the
end of 2019). Two years into its five-year action plan, this coalition has coordinated engagements with
the world’s most significant emitters of greenhouse gases. Members of the coalition have filed
shareholder resolutions at some of the largest emitters, both U.S. and international, calling for improved
climate disclosures in line with the Taskforce on Climate-related Financial Disclosure, or TCFD,
recommendations and, in the case of some U.S. electric utility and oil and gas companies, calling for
transparency on lobbying activities.
Recent European stewardship code revisions place a stronger obligation on fiduciaries to actively vote
proxies and disclose their voting records. The new U.K. Stewardship Code 2020 requires that asset
managers must explain why they voted against a shareholder resolution (where the standard has been
to explain votes against management’s position on an issue).
Morningstar Equity Research 6 February 2020 Contents 1 Key Takeaways 1 Introduction 3 The Proxy Process and Asset-Manager Stewardship 6 Five Years of Asset-Manager Voting on ESG Resolutions 12 A Close-Up Look at Asset-Manager Voting in 2019 24 Conclusion 26 Appendix A 27 Appendix B 29 Appendix C Jackie Cook Director of Manager Research +1 778-227-8221 [email protected]
Jon Hale Director, Sustainability Research Global Manager Research +1 312-696-6093 [email protected]
Important Disclosure The conduct of Morningstar’s analysts is governed by Code of Ethics/Code of Conduct Policy, Personal Security Trading Policy (or an equivalent of), and Investment Research Policy. For information regarding conflicts of interest, please visit: http://global.morningstar.com/equitydisclosures
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Proxy voting has taken on a new level of importance for investors globally—as a tool for effecting
governance changes and as a visible indicator of how investment fiduciaries are positioning themselves
on increasingly urgent sustainability issues.
In January 2020 two highly significant announcements from the world’s largest asset manager,
BlackRock, catapulted both the CA100+ and proxy voting to the forefront of investor efforts to achieve a
sustainable global economy. On Jan. 9th, BlackRock announced that it was joining the CA100+, and on
Jan. 15th, BlackRock’s CEO, Larry Fink, shared the view that climate risk is changing the fundamentals
of the financial system and that BlackRock would be aligning its investment approach with
sustainability, including how it votes proxies.
Morningstar’s proxy voting coverage shows that investor support for resolutions addressing the
governance of environmental and social risks, which we refer to here as ESG, concerns, reached a
record high in 2019.1 ESG-related shareholder resolutions were supported, on average, by 29 percent of
investor shares voted. The previous record high was 25% in 2018. These numbers belie the large number
of successful engagements preceding proxy votes, resulting in many resolutions that would have likely
garnered strong support not coming to a vote.2 In fact, far fewer climate-related resolutions appeared on
company ballots in 2019 than the number withdrawn.3
1 ESG is the acronym for environmental, social and governance. As the term is applied, it is typically used to refer to the governance—via transparency, board oversight, incentives and policies—of risks related to the human capital, reputational capital, environmental stewardship, climate risk, and so on. We have not included in this analysis resolutions that address shareholder rights or corporate governance arrangements without reference to social and environmental risks, such as share class voting rights; rights to call special meetings or act by written consent; takeover defenses; independent board chair; board declassification; board independence; senior executive stock retention, and so on. All resolutions covered in this analysis reference social or environmental risks in recommending governance or transparency improvements.
2 Hale, J. and Cook, J. 2019. “Proxy Season Shows ESG Concerns on Shareholders’ Minds.” Morningstar’s Sustainability Matters Column, Aug. 22, 2019. https://www.morningstar.com/articles/943448/proxy-season-shows-esg-concerns-on-shareholders-minds
3
Welsh, H. & Passoff, M. (2019). Proxy Preview 2019. As You Sow, March 2019. https://www.proxypreview.org/?redirect_to=https://www.proxypreview.org/2019/report-cover
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Exhibit 1 16-Year Trend in Average Support for Resolutions Addressing Environmental and Social Issues
Source: Morningstar’s Proxy Voting Database. Data as of 07/21/2019.
Open-end and exchange-traded mutual funds collectively own a sizable portion of the U.S. equity
market. As shareholders, the funds have the right, via the proxy process, to address issues with company
managements that may affect shareholder value. They can do this by voting on management and
shareholder proposals at company annual meetings, by proposing or cosponsoring shareholder
resolutions, and by engaging directly with management about issues of concern. Through these forms of
active ownership, the asset managers offering these funds have considerable power to promote
sustainable corporate business practices.
This report takes an in-depth look at how these influential stewards of U.S. equity capital—the large
asset managers offering mutual funds to U.S. investors—have voted on shareholder proposals focused
on sustainability, or ESG, issues.
The Proxy Process and Asset-Manager Stewardship
Proxy voting, engaging with corporate management, and filing shareholder resolutions are aspects of
the stewardship ecosystem that defines how shareholder democracy works in the U.S. equity market.4
The Proxy Process Underpins Active Ownership
The proxy process encompasses interactions between shareholders and investee companies enabled by
the formal voting rights attached to shares. Leveraging their ownership and voting rights, shareholders
may actively engage corporate management of investee companies in a dialogue about ESG risks. Many
of these engagements are initiated or given greater focus when shareholders file resolutions.
4 A term coined by Novick, B., Edkins, M., and Clark, T. 2018. “The Investment Stewardship Ecosystem.”Harvard Law School Forum on Corporate Governance and Financial Regulation. July 24, 2018. https://corpgov.law.harvard.edu/2018/07/24/the-investment-stewardship-ecosystem
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Engagement and proxy voting are complementary activities. Shareholder influence in company
engagements is enhanced by the willingness of shareholders to vote in favor of shareholder-initiated
proposals that address ESG risks, as well as to vote against executive compensation arrangements or
board nominees in certain situations. The public nature of proxy voting has a broader impact, as it
communicates investor expectations to other companies facing similar ESG risks, thereby scaling the
impact of each vote.
Large Asset Managers as Stewards of Capital Markets
As ESG risks take center stage, expectations of investment fiduciaries are evolving. Asset managers are
increasingly expected to be active owners, with respect to not only investee companies but also to the
stability and resilience of the financial system itself. This expectation is articulated in the U.K.’s recently
revised, and highly influential, stewardship code:
“… asset owners and asset managers play an important role as guardians of market integrity
and in working to minimise systemic risks as well as being stewards of the investments in their
portfolios.”5
The ongoing shift to passive investing has important implications for the exercise of active ownership by
large asset managers.6 As long-term and diversified owners, large asset managers are well-positioned to
capture the benefits of active ownership. This is especially true of asset managers focused on passive
investments. With no way to exit a stock, the only way to influence shareholder value at the company or
system level is through exercising active ownership rights. A failure to actively monitor investee
companies and shape governance practices to address sustainability risks could lead to vulnerabilities
across markets. Examples include transparency about climate resilience and decarbonization planning,
executive pay alignment with key sustainability performance metrics, and board diversity.
Fund Proxy Votes Reflect Asset Managers’ ESG Stewardship
Since 2004, U.S.-domiciled open-end and exchange-traded mutual funds have been required to report
their annual proxy voting records in SEC filings. Each year at the end of August, asset managers must
disclose—fund by fund, item by item—how they voted on portfolio company ballots for meetings held
in the preceding proxy calendar year, which runs from July through June.
These records shine a light on how investment fiduciaries, managing trillions of dollars of assets on
behalf of fund investors, exercise stewardship. Investors can use their votes on individual ballot items to
strengthen investee company governance of emerging ESG risks with votes that shape board oversight,
incentive structures, transparency, and company policies. Investors concerned about ESG risks often put
5 The Financial Reporting Council 2019. The U.K. Stewardship Code 2020. p. 4 https://www.frc.org.uk/getattachment/5aae591d-d9d3-4cf4-814a-d14e156a1d87/Stewardship-Code_Final2.pdf
6 Cook, J. & Sethi, J. 2019. “The Global Stewardship Movement Draws Passive Investors Into Active Ownership.” Oct. 11, 2019. Morningstar.com. https://www.morningstar.com/blog/2019/10/09/global-stewardship.html
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forward requests for greater transparency and stronger policies on how companies are overseeing and
addressing risks.
Exhibit 2 Asset Managers Mitigate Portfolio ESG Risks Leveraging Proxy Voting Power
Source: Morningstar.
Voting is executed by funds based on proxy voting guidelines set by fund advisors—the asset managers
offering the funds. Generally, passive fund providers maintain a more centralized system of proxy voting
administration, leveraging the resources required for researching and executing votes across multiple
funds in a family of funds. Actively managed funds may be voted independently by fund managers.
However, in practice, voting may be administered by asset managers in a variety of ways across the
funds offered.
How Asset Managers Operationalize Proxy Voting Strategies
Vanguard’s Investment Stewardship team currently administers proxy votes on behalf of the entire suite
of Vanguard funds. However, starting in 2020, Vanguard’s actively managed funds, accounting for
approximately 10% of assets under management, will be voted independently by their respective
managers.7
The Proxy Committee of T. Rowe Price, provider of mainly actively managed funds, develops a set of
positions on all major proxy voting issues, but leaves the ultimate discretion for proxy voting up to
7 Vanguard Investment Stewardship 2019. “Vanguard funds plan to grant proxy voting responsibilities to external managers.” https://about.vanguard.com/investment-stewardship/perspectives-and-commentary/proxy_ext_mgrs.pdf
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individual portfolio managers. In practice, this results in a high degree of voting consensus across
shareholder-sponsored ballot items.8
Invesco’s mutual funds and PowerShares’ ETFs take guidance from a Global Proxy Advisory Committee
which “provides a forum for investment teams to monitor, understand and discuss key proxy issues and
voting trends within the Invesco complex” and assumes responsibility for voting proxies unless explicitly
delegated to the respective investment management team. All investment teams track voting via
Invesco’s proprietary Fund Manager Portal.9
BlackRock’s stewardship team, with members in various international offices, directs proxy voting across
BlackRock’s global offering of non-ESG mutual funds and ETFs, which includes all iShares ETFs.
BlackRock’s ESG funds vote independently.10
State Street’s full suite of funds—including its SPDR ETF offerings as well as its ESG funds—vote in
unison according to a strategy administered by the asset manager’s Global Stewardship Team.11
Using Morningstar’s multiyear-fund voting data, we examine votes by large asset managers on
shareholder-sustainability proposals voted at public-company annual general meetings (AGMs) over the
past five proxy seasons, along with a more-detailed analysis of the 2019 proxy season.
Resolutions addressing sustainability risks are filed by shareholders under conditions regulated by the
U.S. Securities and Exchange Commission. They request target companies’ management to make
disclosures or implement policies or governance arrangements that address issues such as climate risk,
environmental stewardship, diversity and inclusiveness, human and worker rights, corporate political
influence, public health and product safety, animal welfare, ethical business conduct, cyber security,
and online content governance.
Five Years of Asset-Manager Voting on ESG Resolutions
Between 2015 and 2019, 1,033 shareholder-initiated ESG resolutions were voted at U.S. company AGMs,
an average of 207 per year. In this section we examine the five-year voting record of 50 of the largest
fund families that offer funds to investors in the U.S.
8 T. Rowe Price Proxy Voting Guidelines. https://www.troweprice.com/content/dam/trowecorp/Pdfs/C35H15KRK_Final.pdf 9 Invesco’s Policy Statement on Global Corporate Governance and Proxy Voting. December 2019.
https://www.invesco.com/corporate/dam/jcr:472ccfeb-b3cc-411e-9996-afd238caa7ad/Invesco-Global-Proxy-Policy-Statement-June-2019.pdf 10 BlackRock Investment Stewardship 2019. https://www.BlackRock.com/corporate/literature/publication/blk-profile-of-BlackRock-investment-
stewardship-team-work.pdf 11 State Street 2018 Corporate Responsibility Report.
http://www.statestreet.com/content/dam/statestreet/documents/values/2018_STT_CR_Report.pdf
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The universe that we considered for inclusion consists of those ranked in the Morningstar Fund Family
150 as of July 2019.12 These are the largest 150 fund families by fund assets under management in the
U.S. To identify the most influential fund groups, we selected the 30 largest fund families from the list,
plus others on the list that also ranked among the world’s largest 100 asset managers according to the
Investment & Pensions Europe, or IPE, Global 400 Asset Manager Ranking.13 Based on these criteria we
identified 53 fund families. Three were screened out of the final list as they voted on fewer than 25 ESG
resolutions in one or more years of the survey: AXA, Aberdeen, and Dodge & Cox.
Wellington Management ranks 13th on the IPE list. The funds it subadvises for Hartford are considered
under the Hartford fund family. For two of the 50 fund families we split the votes into two subgroups.
Fidelity’s index funds, subadvised by Geode Capital Management, are considered separately because
Geode votes the proxies of the funds it subadvises and is itself ranked 55th in the IPE ranking of asset
managers. Nuveen funds are considered separately from TIAA Funds as they continue to vote
independently following the acquisition of Nuveen Investors by TIAA-CREF in 2014. The analysis is
therefore based on the votes of funds belonging to one of 52 fund groups derived from 50 fund families.
Within fund complexes where voting is delegated to portfolio managers, and particularly within
multimanager-fund complexes, votes on one resolution can differ from manager to manager. Of the 52
fund groups, 10 had mixed votes, on 10% or more of the resolutions voted where no consensus vote
could be identified. There were no natural groupings in any of these cases (like TIAA versus Nuveen or
Fidelity actively managed versus Geode) that would eliminate the variance.
The proxy voting decisions of the fund families selected for the survey reflect the voting preferences of
large asset managers. The mutual funds offered to U.S. investors by these asset managers collectively
control $16.9 trillion—or 88% of all U.S.-domiciled fund assets.14
The analysis is based on 516,788 votes cast (for, against, or abstain) across 1,033 individual ESG
resolutions by more than 2,000 funds offered within the 52 fund groups. Funds with ESG mandates are
excluded from the analysis because, in many cases, they follow a separate proxy voting strategy from
the rest of the family of funds to which they belong. The five-year analysis includes ballots voted from
July 2014 through June 2019 and reported in fund companies’ N-PX filings.
Growing Asset-Manager Support for ESG Resolutions
Over the past five years, we observe growing asset-manager support for ESG-shareholder proposals
reflected in aggregated votes across fund families. In fact, asset-manager support has increased every
year since 2015. Average support across the 52 fund groups increased by 19 percentage points, to 46%
in 2019 from 27% in 2015, and jumped by more than six percentage points in each of the two most
12 Laske, M. 2019. “Morningstar Fund Family 150.” Morningstar Research Services. July 2019 https://www.morningstar.com/lp/fund-family-150 13 Moreolo, C.S. 2019. “Top 400 Asset Managers: AUM grows 1% amid market volatility.” Investments & Pensions Europe. June 5, 2019.
https://www.ipe.com/top-400-asset-managers-aum-grows-1-amid-market-volatility/10031518.article 14 Calculated to be $19.3 trillion according to Morningstar’s Fund Family 150 ranking.
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recent proxy years. Appendix B shows support by each of the 52 fund groups for resolutions voted across
the five-year survey period.
DWS, Allianz Global Investors, Blackstone, Nuveen and AQR Funds supported ESG-shareholder
proposals most often over the full five-year period. Fund group DWS led the way, supporting 89% of all
998 items voted. DFA, Voya, Lord Abbett, BlackRock, and Vanguard supported shareholder proposals
least often. DFA only supported nine out of 1,004 ESG resolutions voted over the five years.
Exhibit 3 The 10 Most and Least Supportive Fund Groups Over Five Years
Source: Morningstar’s Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2014 to 30 June 2019. Votes have been aggregated over 5 years. Support is calculated as percent of all votes cast ‘for’, ‘against’ and ‘abstain’.
Some asset managers significantly increased their support for ESG-related shareholder proposals in
2019. American Century had the biggest increase. After supporting only 2% (13 of 720) of ESG
resolutions voted from 2015 through 2018, the fund group supported 56% (76 of the 135) of ESG
resolutions voted in 2019.
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Eaton Vance, which acquired responsible investment asset manager Calvert Research and Management
in 2016, went from supporting 20% of ESG resolutions in 2015 to supporting 87% of resolutions in 2019.
Calvert’s funds themselves are not represented in Eaton Vance’s votes in this analysis because they
follow explicit ESG-investing mandates and a separate set of voting guidelines.15
Pioneer supported only 1% of resolutions it voted from 2015 to 2018 and then jumped to supporting 28%
in 2019. Pioneer Investments was acquired by Amundi, the largest European asset manager in IPE’s
2019 ranking, in July 2017. Full integration of Pioneer Investments into Amundi was completed early in
2019. The increase in support for ESG-shareholder resolutions by Pioneer-branded funds is consistent
with Amundi’s strong focus on ESG investing. In addition to offering a range of specialized ESG-
investment products, in 2018 Amundi embarked on a three-year plan to incorporate ESG criteria into all
funds by 2021, including its ETFs.16
Exhibit 4 Fund Groups That Expanded Their Support of ESG Shareholder Proposals by at Least 20%
in 2019
Source: Morningstar Direct.
Fifteen of the 52 fund groups expanded their support for ESG-related shareholder resolutions in 2019 by
more than 20 percentage points over their respective previous four-year averages. Fidelity’s index funds
(managed by Geode) unanimously abstained on all 431 resolutions voted in 2015 and 2016, before
inching up to 7% of votes “for” in 2017 and then jumping to 30% and 53% votes “for” in 2018 and 2019.
15 Securities and Exchange Commission. 2018. Calvert Funds Proxy Voting Policy and Procedures. Adopted Oct. 10, 2017, as revised April 5, 2018. https://www.sec.gov/Archives/edgar/data/319676/000094039418001332/calvertcomplexsupp.htm
16 Fitzpatrick, N. 2019. “Executive Interview: Amundi Plans to “Stigmatise” ESG Laggards.” Funds-Europe. December 2019. https://www.funds-europe.com/dec-2019-jan-2020/executive-interview-amundi-plans-to-stigmatise-esg-laggards
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We also observe more asset managers casting a majority of their votes “for” ESG-shareholder proposals.
In 2015, only 12 fund groups supported most of the resolutions voted. In 2019, 25 fund groups supported
more than half of the ESG resolutions on which they voted. Those numbers include 11 fund groups that
voted in support of more than 75% of ESG proposals in 2019. In 2015 only DWS voted in support of more
than 75% of ESG resolutions.
Exhibit 5 Asset Managers Supporting at Least 75% of ESG-Shareholder Proposals in 2019
Source: Morningstar’s Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2014 to 30 June 2019. Support is calculated as percent of all votes cast ‘for’, ‘against’ and ‘abstain’.
Comparing votes across the largest five, the largest 10, and the remainder of the fund groups in our
analysis shows that support has increased for each group over the past five years. However, funds
offered by the largest asset managers continue to lag those of their smaller peers by a wide margin. As a
group, the largest of the asset managers are the least likely to support ESG shareholder-sponsored ballot
initiatives.
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Exhibit 6 Five-Year Vote Trend: Average Fund Family Support for ESG Shareholder Resolutions:
2015-2019
Source: Morningstar’s Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2014 to 30 June 2019. AUM based on Morningstar Fund Family 150 ranking as of 07/01/2019
American Funds, BlackRock, DFA, T. Rowe Price, and Vanguard are all among the 10 largest fund
managers in Morningstar’s Fund Family 150 ranking, and all but DFA also ranked in the largest 15 asset
managers in IPE’s 2019 global ranking. Each supported fewer than 12% of ESG resolutions voted in
2019, bringing average support across the largest five and largest 10 asset managers to below that of
the remainder of the fund groups in the study.
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Exhibit 7 Five of the Largest 10 Fund Groups Supporting Less Than 12% of Resolutions in 2019
Source: Morningstar’s Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2014 to 30 June 2019.
In almost all cases, a vote in support of a shareholder resolution is opposed to management’s
recommended vote, as corporate boards typically recommend that shareholders vote down the measure
proposed. As a group, large asset managers have historically been reluctant to vote against
management both on shareholder- and management-sponsored ballot items. The upward trend in asset-
manager support for shareholder-initiated ESG resolutions reflects rapidly changing investor attitudes
toward the materiality of the sustainability issues that these resolutions address. It shows that asset
managers, as a group, are becoming increasingly willing to use their proxy votes to support transparency
and better governance of sustainability concerns.
A Close-Up Look at Asset-Manager Voting in 2019
Turning to 2019 proxy votes, we explore asset managers’ votes on the spectrum of ESG issues and
provide deeper context for each issue. Some issues receive more support than others. Some asset
managers support one issue but not another. Differences in voting profiles point to differences in voting
strategy. Proxy voting guidelines articulate asset managers’ voting strategies, but most of the time these
are too vague to be instructive. For fund investors, an issue-by-issue breakdown of fund providers’ votes
can help to align values with investments. For asset owners, voting breakdowns can help with the
selection of managers that offer value-adding stewardship services.
Because the very largest asset managers have been among the least likely to support shareholder
resolutions addressing ESG risks, actual vote outcomes may understate broader investor concerns about
the issues that the resolutions address. To illustrate this, in the second part of this section we will
explore the impact of the two largest asset managers’ votes on whether a subset of resolutions pass or
fail.
For our in-depth analysis of 2019 fund-group votes, we identified 12 broad ESG issues and examine how
fund groups voted across each. Exhibit 9 provides a general description of the issue types into which we
grouped the 2019 ESG resolutions.
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Exhibit 8 2019 ESG Resolutions in 12 Broad Issue Types
Source: Morningstar’s Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2014 to 30 June 2019.
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Exhibit 8 2019 ESG Resolutions in 12 Broad Issue Types (Continued)
Source: Morningstar’s Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2014 to 30 June 2019.
An issue-by-issue breakdown of each fund group’s voting support on 2019 ESG-shareholder resolutions
can be found in Appendix C. Exhibit 10 shows this breakdown for the 11 fund groups comprising the
largest 10 fund families.
Exhibit 9 Largest 10 Fund Families Support for 2019 ESG Issue Types
Source: Morningstar’s Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2018 to 30 June 2019.
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Some issue types consist of a more homogenous set of resolutions than others. For example, political-
spending resolutions mostly follow a model-resolution template, whereas requests for disclosures
relating to environmental stewardship or human rights raise a variety of concerns within each of those
broad categories.
While each resolution was assigned to only one of 12 issue types, the issue types may show similarities
with respect to the voting decisions of individual asset managers. These similarities reveal overlap in the
underlying issues addressed by resolutions. For example, the environmental stewardship category
addresses water stewardship and the human right to water of those living in water-stressed regions
where a company operates. Two resolutions assigned to the political-spending category call for
disclosure of both political campaign spending as well as spending on lobbying by trade associations.
Resolutions in the sustainable-governance category call on boards to nominate director candidates who
have climate expertise, to establish committees to oversee human rights, or to link executive pay to
sustainability metrics. They address ESG issues by recommending a governance strategy. Resolutions
addressing the governance of online-search censorship or surveillance technologies share features with
resolutions asking for human rights reports on the implications of doing business in conflict-affected
regions or of contracting to governments.
To describe asset-manager votes across the 12 issues, we first computed an issue-by-issue correlation
matrix. The matrix shows the correlation in voting support between each issue type pair across the 52
fund groups. As expected, this indicates that some issue type pairs are more closely related than others.
In the discussion that follows we use the revealed clusters of issues to discuss 2019 asset-manager
voting patterns.
Exhibit 10 Correlation Matrix Showing Strength of Relationship Between ESG Issue Types in Fund-Group
Voting Patterns
Source: Morningstar’s Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2018 to 30 June 2019.
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Harmful Products Create Reputational and Financial Risks
The four shareholder proposals bearing on the reputational risks of products attracted the unanimous
support of most of the fund groups that voted on them. Three addressed risks related to the opioid
epidemic and one addressed gun safety. All called for tighter governance of products causing harm to
society, citing the significant reputational and liability risks for companies that manufacture, market, and
sell these products. All four companies targeted with these resolutions have been named in class-action
lawsuits, which focuses investors’ attention on the link between reputational and financial risk.17
Thirty-four of the 48 fund groups voting on one or more of these issues supported all resolutions voted.
Diversity and Gender Pay Equity Voted as Two Distinct Issues
The 11 diversity-related resolutions also stood relatively independently as a group and were also strongly
supported by asset managers. On average, fund families supported these 72% of the time. Fourteen fund
groups supported all 11 and only TCW failed to support any resolutions in this issue category. Five
resolutions addressed board diversity, one asked for details of senior management diversity, and five
asked for disclosure of companies’ workforce diversity, referencing EEOC job categories. Of the largest
fund families, PIMCO supported all seven resolutions it voted in this category, while Fidelity, Fidelity-
Geode, and Franklin Templeton each supported more than 85% of the diversity resolutions on which they
voted.
Resolutions requesting companies to disclose their global median gender pay gaps and steps taken to
reduce gender-based pay differences earned an average 48% support from asset managers. Of the 10
largest fund groups, PIMCO voted almost unanimously for gender-pay equity resolutions—but for one
vote cast against pay-equity disclosure at TJX Companies TJX by the PIMCO Global Core Asset
Allocation Fund. Two other PIMCO funds voting on this resolution supported it. Of all fund groups, only
Allianz Global Investors and Blackstone supported gender-pay equity resolutions with 100% of votes
cast. Five failed to support any of the resolutions: DFA, Hartford (Wellington), Northern Trust, TCW, and
Vanguard.
Given that gender-pay equity resolutions share an emphasis on gender and inclusivity with diversity
resolutions, it is surprising to note that they are less strongly correlated with diversity than with several
other issue types. Equitable pay considerations likely underpin the correspondence in voting between
gender pay equity and ESG governance arrangements—three of which addressed the link between
senior executive pay and sustainability metrics, and two specifically focused on workplace and senior
management diversity as a sustainability metric.
17 See the following articles for more information on the opioid crisis, litigation, and Investors for Opioid Accountability, as well as litigation of a large gun manufacturer:
Cook, J. 2019. “Investors Pressure Firms on Opioid Crisis.” May 2, 2019. https://www.morningstar.com/articles/925563/investors-pressure-firms-on-opioid-crisis.
2019. “Supreme Court Won't Hear Gun Maker Challenge to Lawsuit by Sandy Hook Families.” The Wall Street Journal. Nov. 12, 2019. https://www.wsj.com/articles/supreme-court-won-t-hear-gun-maker-challenge-to-lawsuit-by-sandy-hook-families-11573569589
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Emerging Concerns: Workplace Sexual Harassment Complaints, Online Content, and
Tech Governance
In 2019, 10 resolutions that came to vote addressed how companies manage workplace sexual
harassment complaints. Funds run by MFS and Allianz supported all resolutions voted in this category.
Three resolutions were directed at tech giants—two at Google parent Alphabet (GOOGL) and one at
Amazon.com (AMZN). Others were directed at companies in hospitality property management, and
retail. On average, fund groups supported these 10 resolutions 41% of the time.
The governance of allegations of workplace sexual harassment and discrimination at tech companies
has become an important reputational concern for investors, as it emerges that nondisclosure and
settlement agreements prevent employees from talking about their cases.
Overlap in companies at which resolutions were voted seems to underlie the strong correlation in fund-
family proxy voting between this category and an issue category addressing cyber, online content, and
privacy concerns directed mostly at companies commonly referred to in the business media as the
‘FANG’ stocks—a collective acronym for tech giants Facebook (FB), Amazon.com, Netflix (NFLX) and
Google, and sometimes extended to Apple (APPL), with the variation FAANG.
Social media companies and telecom giant Verizon were targeted with resolutions addressing concerns
over online content, citing election interference; fake news; online child sexual exploitation; and hate
speech. Companies developing cutting-edge facial-recognition technology were targeted with
resolutions addressing privacy concerns and the potential for government abuse. One resolution asked
for an assessment of the board’s oversight of cybersecurity and protection of customer data.
While this category received an average of 37% support from funds in the large fund families surveyed,
new high-profile content scandals or cybersecurity breaches could significantly increase the perceived
investment risk, especially in the context of an upcoming presidential election. Nine fund groups failed
to support a single resolution voted in this issue category. Five of these—BlackRock, DFA, Fidelity, T.
Rowe Price, and Vanguard—are among the largest 10 fund families and each voted against all nine
resolutions in the cyber, online content, and tech-governance category.
Resolutions in this category also share some commonality with resolutions in the human rights category
requesting reports from companies doing business in conflict-affected regions or with governments that
might abuse surveillance technologies or that fail to enforce antislavery measures (more on this below).
Support for Corporate Political Accountability Divides Fund Families
Political-spending resolutions received a surge in support from shareholders in 2019 and were
supported, on average, 53% of the time by the fund groups surveyed. Eleven fund groups, however,
failed to support a single political-spending resolution, including six that also did not support any of the
lobbying-related resolutions.
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Overall, support for political spending and lobbying disclosures were the most correlated of all issue type
pairs, suggesting that asset managers are generally voting on the transparency and accountability of
companies’ political influence when voting across the combined 62 resolutions in these two issue types.
Vanguard was one of the six fund groups voting against all 62 political influence resolutions. The others
are American Century, Federated, Lord Abbett, Northern Trust, and Russell Investments. American
Century otherwise supported more than 80% of ESG resolutions voted.
By contrast, eight fund groups supported more than 90% of resolutions in each category. A notable
exception is TIAA Funds, which supported 56% of resolutions overall, and 79% of the political-spending
resolutions it voted, while opposing every one of the 24 lobbying resolutions it voted. TIAA/Nuveen’s
proxy voting guidelines state that “[w]e would generally not support shareholder resolutions seeking
disclosure of a company’s lobbying expenditures.”18 This contrasts with proxy votes cast by Nuveen
funds, owned by TIAA, which supported 89% of political-spending resolutions and all but one of the
lobbying resolutions it voted.
For more than three decades, large and politically influential trade associations, such as the American
Petroleum Institute, American Fuel and Petrochemical Manufacturers, the U.S. Chamber of Commerce
and the National Association of Manufacturers have lobbied against climate policy at both federal and
state levels. Strategies include setting up lobbying front groups, funding climate-denial commentary,
writing model legislation that preempts or rolls back state-level climate policies, and attacking state-led
climate liability lawsuits.19 Climate-policy inaction threatens trillions of dollars in investments by 2050.
Lobbying transparency is, therefore, becoming an increasingly important part of the investor agenda to
push companies to reduce their carbon footprints and plan for low-carbon-policy scenarios.
Climate, Environmental Stewardship, and Human Rights Share the Vote
Climate-action failure, biodiversity loss, and extreme weather are among the top five most likely and
most impactful risks in this year’s WEF Global Risks Report, released on 15 January 2020.20 Overall,
climate-action failure is seen as the most significant risk facing humankind—sitting squarely at the
center of the nexus of global environmental, geopolitical, technological, societal, and economic risks—
water crises, food crises, social instability, and global governance failure, to name a few.21
Across the 52 fund groups, votes on climate risk, environmental stewardship, and human rights were
strongly correlated, averaging 51%, 42%, and 41% average support, respectively, across the 52 fund
groups.
The investor case for addressing climate change overlaps with the case for protecting natural capital
and human rights. Climate change impacts on ecosystems are compounded by environmental
contamination and depletion. Ecosystems degradation impacts local communities and exploitation of
18 TIAA policy statement on responsible investing: https://www.tiaa.org/public/pdf/ri_policy.pdf
19 Savage, K. 2019. “Battling for Big Oil: Manufacturing Trade Group Leads Assault on Climate Suits.” Climate Liability News. Feb. 26, 2019. https://www.climateliabilitynews.org/2019/02/26/national-association-manufacturers-oil-climate-liability/
20 World Economic Forum. 2020. The Global Risks Report 2020. Jan. 15, 2020. (Page 2) https://www.weforum.org/reports/the-global-risks-report-2020
21 World Economic Forum. 2020. The Global Risks Report 2020. Jan. 15, 2020. (Page 5) https://www.weforum.org/reports/the-global-risks-report-2020
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natural resources and vulnerable communities often go hand in hand. For example, two environmental
stewardship resolutions requesting supply chain deforestation transparency noted that deforestation
“…contributes to climate change, biodiversity loss, soil erosion, disrupted rainfall patterns, community
land conflicts and forced labor.”
A resolution voted at Chevron’s 2019 AGM requests the company to report on the “human right to
water” with respect to company-owned operations and its value chain, as enshrined in the UN Guiding
Principles on Business and Human Rights, which extends the United Nations’ declaration on the human
right to water. It asks Chevron to share “plans to track effectiveness of measures to assess, prevent,
mitigate, and remedy adverse impacts on the human right to water.”
Nine of 16 climate-change resolutions ask companies to set goals for GHG emissions reduction, with a
typical request for the company to “…adopt company-wide goals for the reduction of greenhouse gas
(GHG) emissions, in light of the goals of the Paris Climate Agreement, and issue a report… [on] …plans
to achieve these goals.” At least five similar resolutions were omitted from company ballots after target
companies sought and received a no-action assurance from the SEC on the grounds that the proposal
was an effort by shareholders to micromanage the company.22
Four climate resolutions asked for an assessment of the public health consequences of climate change,
given the company’s continued involvement in either petrochemical operations or in coal-fired power
generation. Two others requested a two-degree climate-policy-impact report and one resolution
requested company-wide renewable energy-sourcing targets.
Allianz Global Investors, Blackstone, BMO, PIMCO, and UBS each supported 100% of the climate-related
resolutions on which they voted. Sixteen of the 52 fund groups supported at least 75% of resolutions
voted in this category and 25 of the fund groups supported at least half. DFA and JP Morgan’s funds
supported none.
BlackRock and Vanguard each supported four of the 16 climate disclosure-related resolutions. BlackRock
supported GHG emission-reduction goals disclosure at Ross Stores and Flowserve; physical climate
change public health-risk disclosure filed at Exxon; and two-degree climate-policy-impact reporting at
Continental Resources. These resolutions earned 41%, 28%, 25%, and 14%, respectively. BlackRock’s
proxy voting guidelines endorse the TCFD and the Sustainable Accounting Standards Board, or SASB, as
reporting frameworks and, where companies are highly exposed to climate risk, boards are expected to
have demonstrable climate fluency:
“We believe that climate presents significant investment risks and opportunities to many
companies….Where a company receives a shareholder proposal related to climate risk, in
22 For further discussion see Hale, J. and Cook, J. 2019. “Proxy Process Opens Door to Constructive Engagement on Climate.” Morningstar.com. Sept. 5, 2019. https://www.morningstar.com/articles/945007/proxy-process-opens-door-to-constructive-engagement-on-climate. For an example of a favorable SEC response to no-action a petition by Devon Energy see: https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2019/georgegundrecon040119-14a8.pdf
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addition to the factors laid out above, our assessment will take into account the robustness of
the company’s existing disclosures as well as our understanding of its management of the issues
as revealed through our engagements with the company and board members over time.”23
Resolutions addressing human rights and environmental stewardship also were strongly correlated with
each other. Eighteen of the 27 resolutions across these two issue types request companies to address
concerns in their supply chains—whether deforestation, nonmedical antibiotic use, pesticide use, or
forced labor.
Both in the U.S. and around the world, legal requirements that companies disclose efforts to eliminate
modern slavery in their operations and supply chains, or that require supply chain due diligence, have
proliferated24 alongside international standards and guidance25 and the UN commitment to SDG 8.26 The
U.K.’s Modern Slavery Act, 2015, lists forced prison labor as a form of modern slavery. Four of the supply
chain human rights resolutions call for assessments of how prisoner and detainee labor is used in supply
chains.
The highest supported of all ESG resolutions that came to vote in 2019 called on GEO Group, a private
operator of prisons and correctional facilities, to report annually on how it implements its own human
rights policy; in particular, the portion of it addressing “Respect for Our Inmates and Detainees.” Filed by
a group of faith-based funds and the Service Employees International Union Pension Plan, the
supporting text cites official investigations finding security breaches at facilities as well as forced labor,
improper treatment, and inhumane living conditions of immigrant detainees.27
GEO’s board initially recommended a vote against the resolution. However, in a special amended proxy
filing two weeks prior to the AGM, GEO Group management changed their recommended vote from
“against” to “for,” citing ongoing engagement efforts with shareholders.28
Resolutions in the sustainable-governance category request that boards adopt specific governance
measures to ensure that sustainability is part of board oversight and senior management incentive
arrangements. For instance, two resolutions in 2019 asked that the board set up a committee with
climate change oversight. One requested a board committee on human rights. Another requested that,
23 BlackRock’s Proxy Voting Guidelines for U.S. Securities. (Page 13) January 2019. https://www.BlackRock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-us.pdf
24 Business & Human Rights Resource Centre. 2017. “Modern Slavery in Company Operation and Supply Chains: Mandatory transparency, mandatory due diligence and public procurement due diligence.” (Pages 4-5) September 2017. https://www.business-humanrights.org/sites/default/files/documents/Modern%2520slavery%2520in%2520company%2520operation%2520and%2520supply%2520chain_FINAL.pdf
25 Such as the 2014 ILO Protocol to the Forced Labour Convention.
26 Sustainable Development Goal 8: “Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.” See Target 8.7: “Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, including recruitment and use of child soldiers, and by 2025 end child labour in all its forms.” https://sustainabledevelopment.un.org/sdg8
27 The GEO Group, Inc.’s proxy circular. March 28, 2019. https://www.sec.gov/Archives/edgar/data/923796/000119312519090420/d691911ddef14a.htm#toc691911_26
28 The GEO Group, Inc.’s amended proxy circular. April 25, 2019. https://www.sec.gov/Archives/edgar/data/923796/000119312519119626/d718922ddefa14a.htm
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at the company’s next AGM, the board put forward a candidate with human rights expertise. Because
these resolutions request governance interventions, as opposed to transparency, many asset managers
have been less likely to support them. Average fund-group support of 27% for resolutions in this
category is lower than the other categories, yet strongly correlated with votes on environmental
stewardship, human rights, and climate change resolutions.
Large Fund-Group Opposition Damps Impact of Surging Overall Support for ESG Resolutions
PIMCO and Allianz registered the highest support across all ESG resolutions in 2019 out of the 52 fund
groups. Of the largest 10 fund families—analyzed in 11 distinct fund groupings—only PIMCO and
Fidelity-Geode supported more than 50% of the ESG resolutions they voted in 2019.
Unweighted average asset-manager support for ESG resolutions across the 52 fund groups offers strong
evidence of changing investor attitudes. However, the overall impact on actual vote outcomes of this
growing asset-manager support is tempered somewhat by the less-supportive voting of the largest asset
managers.
The largest asset managers are generally far less inclined to vote for sustainability resolutions and yet
they have many times the impact on the vote than their smaller peers—and their impact is growing. The
25 largest fund groups in Morningstar’s Fund Family 150 ranking accounted for 82% of investors’ assets
in U.S. funds mid-way through 2019, which was up from 79% one year earlier. The largest five—
Vanguard, BlackRock, Fidelity, American Funds, and State Street—controlled 56% of fund assets, or
$10.7 trillion in assets.
Of fund families surveyed, fund company giants Vanguard, BlackRock, American Funds, T. Rowe Price,
DFA, and JP Morgan supported between 1% and 11% of ESG resolutions. Despite the growing and
widespread asset-manager support for ESG resolutions, opposition by some of the largest asset
managers keeps overall voted totals low; in some cases, holding resolution support below 50% of shares
voted.
In a significant number of cases a vote by just one large asset manager would have tipped the vote
outcome on a resolution to a majority vote for the motion. For many public companies, a large fund
group may hold (on behalf of fundholders) 10% or more of shares outstanding. In 13 out of the 23 cases
where an ESG resolution failed by 10% or less in 2019, Vanguard held a stake in the company of more
than 10%. For BlackRock, this was true in four instances.
Of the 23 ESG resolutions that achieved between 40% and 50% support, 19 would have passed if
supported by Vanguard, and 15 would have passed if supported by BlackRock. Four would have passed
if supported by T. Rowe Price, and one would have passed if supported by JP Morgan. In at least three
cases where Fidelity controlled more than a five percent stake, Geode voted Fidelity’s index funds ‘for’
the resolution, whereas Fidelity’s actively managed funds voted ‘against’.
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In the many other cases where a resolution failed to win a majority by more than 10 percentage points,
most of the shares cast by managers other than BlackRock and Vanguard were cast “for” the proposal.
For example, had BlackRock and Vanguard voted their stakes in support of lobbying transparency at
Exxon’s annual meeting in May 2019, that proposal, which earned 37% support, would have passed.
Thirty one of 46 other fund families with a consensus vote on this item supported it.
Similarly, had the two largest fund providers supported a resolution calling for a workforce diversity
report at Charles Schwab, it would have passed with three percentage points to spare. As it is, the
motion received just short of 40% of the votes yet 30 out of 40 fund groups with a consensus vote on
this resolution, supported it.
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Exhibit 11 Votes and Significant Beneficial Holdings by BlackRock and Vanguard on
Resolutions Failing by 10% or Less
Source: Morningstar Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2018 to 30 June 2019. Holdings data sourced from beneficial holding disclosures in proxy statements.
Shareholder resolutions are almost always advisory, which means that company management is not
legally obliged to act on a resolution that earns majority support. However, strong or trending
shareholder support often induces management to provide the requested disclosure or address an ESG
risk identified in a shareholder proposal and very often encourages more-committed engagement
between proponents and management or board members. Where resolutions earn majority support,
company management is under significantly increased pressure to respond to shareholder concerns. It
therefore matters a great deal how the largest asset managers cast their votes on resolutions that most
other investors have supported.
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Conclusion
Shareholder-vote outcomes point to growing investor concern about material ESG risks and the need for
transparency and governance strategies to address them. Heightened investor interest in sustainable
business practices in general, and the urgency of addressing climate risk in particular, are driving a
global investor stewardship movement—the gathering pace at which investors are organizing into
coalitions, undertaking engagements with companies, and supporting shareholder resolutions that
address how companies are governing environmental and social risks.
As investment fiduciaries, asset managers are using their voting power and other stewardship strategies
to advance sustainable business practices at investee companies. They are doing this to enhance long-
term shareholder value while also responding to growing pressure from clients, peers, and regulators.
We find that, across 50 fund families analyzed in 52 fund groupings, average support for ESG
shareholder resolutions rose from 27% in 2015 to 46% in 2019.
Much of the pressure for more active voting is coming from the world’s largest asset owners, who are
growing increasingly assertive in calling on asset managers to address climate risk and related
sustainability concerns. They are also filing shareholder resolutions and joining forces with other
investors in coalitions focused on shared concerns.
Yet, because the largest asset managers have been reluctant to vote against management on
sustainability issues, only a few sustainability-focused resolutions pass with majority support each year.
This number reached a record of 14 in the 2019 proxy year but represents less than 10% of resolutions
that came to vote. Of the 10 largest U.S. fund families, five supported ESG resolutions less than 12% of
the time. The largest and second largest fund providers in the U.S., Vanguard and BlackRock,
respectively, each only supported 7% of ESG resolutions that came to vote.
The analysis of fund-family votes across issue types shows a wide variation in voting patterns. For
instance, the distribution of fund-family support for resolutions on political spending and lobbying is
quite polarized—a large proportion of fund managers either strongly supported or strongly opposed
these measures. Based on their voting patterns, asset managers have different assessments of what
factors constitute material ESG risks. While less polarized, votes on climate risk, human rights,
environmental stewardship and ESG governance arrangements are strongly correlated—potentially tied
together via concerns about supply chain risk, potential liability, and suitability of business models to the
low-carbon economy. Future class-action litigation could lead to a reassessment of the materiality of
emerging ESG risks like online-content governance and data privacy.
BlackRock’s recent commitment to using proxy voting to advance TCFD- and SASB-aligned financial
disclosures and to an unprecedented standard of proxy voting transparency, will very likely create new
energy in the “stewardship ecosystem.”29 Votes by BlackRock in support of sustainability measures
29 BlackRock’s CEO, Larry Fink’s, letter to CEOs: “A Fundamental Reshaping of Finance.” Jan. 15, 2020. https://www.BlackRock.com/corporate/investor-relations/larry-fink-ceo-letter
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would amplify the impact of others’ votes and potentially cause more resolutions to pass. Other large
asset managers who, in the past, have routinely sided with management may realize that the time has
come to take a more active approach to proxy voting.
BlackRock’s signaled willingness to vote against management would give engagements on sustainability
issues more teeth, particularly engagements conducted via the CA100+. This is likely to lead to a larger
number of ESG resolutions being withdrawn as corporate management becomes more open to engaging
with shareholder proponents.
Furthermore, setting a precedent by being the first large U.S asset manager to offer quarterly disclosure
of full vote records and timely disclosure of key votes and vote rationales would challenge the SEC to
update the 17-year-old proxy voting disclosure rule to meet rising expectations for proxy voting
transparency.30
More transparency in proxy voting and engagement disclosure will afford better insight into how well
investment fiduciaries are fulfilling their stewardship responsibilities, stimulating a new kind of
competition in the provision of fund-management services.
BlackRock’s Global Executive Committee letter to clients: “Sustainability as BlackRock’s New Standard for Investing.” Jan. 15, 2020. https://www.BlackRock.com/corporate/investor-relations/BlackRock-client-letter
30 U.S. Securities and Exchange Commission. 2003. Final Rule: Disclosure of Proxy Voting Policies and Proxy Voting Records by Registered Management Investment Companies. Jan. 31, 2003. https://www.sec.gov/rules/final/33-8188.htm
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Appendix A: Calculation of Vote Summaries
Within a family of funds offered by an asset manager, the same set of ballot items may be voted
multiple times where individual funds hold the same stock. While, typically, there is a high degree of
voting consensus, it is not necessarily the case that all funds within a group of funds offered by the
same fund company vote uniformly across all ballot items. Where individual fund managers or
subadvisors within a suite of funds have voting discretion, votes may be cast at odds on the same ballot
item.
For the purpose of calculating summary votes at the level of fund provider, or asset manager, this report
computes the percent of funds voting “for” out of all votes cast “for,” “against,” or “abstain” with
respect to each ballot item for each fund group. Where voting is centrally administered, the vote with
respect to an individual ballot item is either 0% (against) or 100% (for). If, however, three out of four
funds cast votes ‘for’ with respect to a single ballot item and the other votes “against” or “abstain,” the
support for this ballot item across the fund group is calculated at 75%.
Support across a category of ballot items—for instance, political spending transparency shareholder
resolutions—by an individual fund provider is calculated by computing the average of the support for
each ballot item voted across the funds within a fund family.
The vote averages shown in charts depicting voting trends (see Appendix B) and votes by issue type (see
Appendix C) are not weighted by assets under management and are therefore indicative of shifting
sentiment or relative priority assigned to ESG issues, but do not depict the relative impact of asset-
manager votes on the shareholder-vote outcomes on specific resolutions.
Where we represent an asset manager’s voting profile by individual ballot item (see Exhibit 12), the vote
assigned at the fund-provider level is the 75% consensus vote. So, if seven funds within a family of
funds offered by an asset-manager vote on an item, and at least six of those funds vote “against,” then
the consensus vote assigned is “against.” However, if five or fewer funds vote against that ballot item,
the vote assigned is a “mixed vote.”
For example, 22 Eaton Vance funds voted on each of the three resolutions that came to vote at
Amazon.com. Each voted “for.” So, Eaton Vance’s effective vote for each of these three resolutions is
“for” and the average support for each is 100%. Perfect agreement across a suite of funds with respect
to each ballot item is not always the case. Across the 17 T. Rowe Price funds that voted on the methane
disclosure resolution at Atmos Energy, five voted “against” and 12 voted “for.” The average support for
this ballot item is therefore 70.6% across T. Rowe Price’s funds. Since this does not reach the threshold
for a consensus vote of “for,” it is considered a “mixed vote.”
We identified mutually exclusive voting blocs of funds for two of the 50 fund families, where a fund’s
subadvisor or subsidiary asset manager within a fund family votes distinctly and uniformly, and where a
minimum of 25 votes per proxy year is voted within each bloc. In the case of Fidelity and TIAA we
disaggregate fund-family level votes into two blocs (Fidelity/Geode and TIAA Funds/Nuveen,
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respectively). Where no meaningful, mutually exclusive blocs can be discerned from the voting patterns,
we retain the fund-family level aggregation.
Of the 52 fund groups, 10 fund groups’ votes were calculated to be “mixed votes” on 10% or more of the
resolutions voted. These are: AMG (Affiliated Managers Group), Eaton Vance, Jackson National, Janus
Henderson, John Hancock, Legg Mason, Natixis, Macquarie (Delaware Funds), Principal Funds, and
PGIM Funds.
Appendix B Fund-Family Support—5-Year Voting Record
Source: Morningstar Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2018 to 30 June 2019. Holdings data sourced from beneficial holding disclosures in proxy statements.
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Appendix B Fund-Family Support—5-Year Voting Record (Continued)
Source: Morningstar Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2018 to 30 June 2019. Holdings data sourced from beneficial holding disclosures in proxy statements.
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Appendix C Fund-Family Support—2019 ESG Category Breakdown
Source: Morningstar Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2018 to 30 June 2019. Holdings data sourced from beneficial holding disclosures in proxy statements.
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Appendix C Fund-Family Support—2019 ESG Category Breakdown (Continued)
Source: Morningstar Proxy Data. Data as of 11/07/19. Based on all environmental and social resolutions, voted 1 July 2018 to 30 June 2019. Holdings data sourced from beneficial holding disclosures in proxy statements.
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