‘Climate Change is the predominant
James Hansen, NASA climatologist
moral issue of the 21st Century’.
And yet: a recent (2020) survey shows that only 17% of Board of Directors serving on Sustainability committees have sustainability expertise. (Source, page 12).
To make matters worse: A 2020 Bloomberg article found the following as they analysed the past and present professional affiliations of more than 600 directors and executives of the world’s 20 largest banks: Only few individuals had experience in renewable or sustainable industries. Far more had ties to polluting industries: At least 73 individuals even have at one time or another held a position with one or more of the biggest corporate emitters of greenhouse gases, including 16 connected to oil or refining companies.
In other words: boards of directors lack skill and expertise.
But: certainly the asset owners and investors do see that point, and are worried about taking tangible action that would safeguard their assets?
This is precisely the question that ShareAction (a UK based charity who has been working for over a decade on building a movement for responsible investment) asked in their most recent report. Why?
The finance industry has been deemed as one of the most important levers to shift the needle in all things Doughnut Economics (SDGs, Planetary Boundaries, Paris Trajectory). And indeed it does hold that potential, because cash objectively can be a very good, very influential lever to control and direct corporate behaviour.
The report insights are tough both promising as well as very sobering at the same time:
Never have entities in the finance world, globally referred to for their recent and emerging outspoken commitment (notably ‘The Big Three’ in asset management: Blackrock, StateStreet, Vanguard), been exposed with so little effort as greenwashers. Simply because the respective information is public (for listed companies, that is), and easily accessible if one knows where to look.
Voting and Morals matter: in elections as much as in shareholder AGMs
Our political vote – during elections or referenda – is one of the most valuable goods we have as democracies. Not voting is a sign of resignation at best, one of marginalisation at worst.
But what about the votes in shareholder AGMs held every year for all publicly listed companies?
One would assume that one of the reasons to keep shares in a company is precisely the fact that this guarantees a seat at the shareholder table. Not just ‘on the menu’. Consequently, one would assume that shareholders either vote themselves, or else delegate the action of voting to their asset managers. But do these entities take the voting seriously? And if so – what does their vote actually say about how ‘future fit’ those asset managers are?
The long and the short of it: Asset managers need to be controlled by their clients much more extensively than is the case until now.
Looking at the list of analysed asset managers – the intermediaries who ‘action’ the everyday business on behalf of e.g. pension funds – it becomes very clear:
The ‘Big Three’ asset managers have become ‘systems relevant’ already individually, but certainly as a collective. And their weight alone can start or stop the buck: The number of shareholder resolutions on climate and social issues could have been doubled in the 2020 season if the Big Three had voted for them:
And yet, what can ALSO be seen from this example: These companies abstain frequently from casting their vote. And if they do, it is in tendency NOT in alignment with SDGs and Climate Goals.
It goes worse from there for Blackrock in particular: Climate Action 100+ (CA100+) is an investor initiative, which aims to engage with the world’s largest emitters of carbon. And Blackrock is a member of that initiative.
Only: The following graphic shows the real face of what is the most famous asset manager in the world …:
Not bad enough? Then check out the following graphic: There are still asset managers that vote always against shareholder resolutions that have the intent to uphold human rights … and many more that do the exact same thing at least sometime.
Now, what are the learnings of all of that?
- Evidently so, many large asset managers have not truly bought into the changes that are needed at this stage of human development, the state of our economy.
- They further clearly also infringe on the best interest of many of their customers. Large pension funds for a long time have been campaigning to use their weight in favour of climate 2030 strategies, human rights and diversity. To guarantee their assets o- and their ability to pay out pensions – over the long run. In fact, we can take it for granted that institutional investors will have made their point with the asset manager on their strategies.
And yet – the client’s desire does not necessarily trigger action accordingly. That should ring a warning bell …The asset managers do knowingly undermine the best possible long-term investment outcome for their clients. Even if instructed otherwise. - Once more the divorce between ‘finance industry’ and ‘real’ economy become palatable: such decisions, or absence thereof, must not benefit the investors. It is time regulation lifts the bar such that non-Doughnut compliant decisions impact the company’s profitability and as a consequence that also of the investor. And indirectly changes in this way the behaviour of the asset manager.
- Greenwashing is not always difficult to find. Sometimes it is as simple as looking at publicly filed information and compering against PR releases and equally public company policy.
- Lastly: companies do not have a moral compass. People have.
And that might be the saddest of all conclusions from the report: large asset managers are dominated by people checking their morals at the concierge when entering the building. …
