In focus

Engaging with managers: a review of the 2022 AGM season

We believe that investment managers should be using their votes at annual company meetings to make their voices heard on social and environmental considerations. In effect, a manager’s vote is its "voice." In 2022, there were thousands of shareholder resolutions tabled at company AGMs providing managers with the opportunity to express their views on a wide range of sustainability topics.

Within wealth management, we often invest for clients using third-party funds, meaning that our exposure to companies is indirect. In these cases, we are entrusting voting of our shares to other managers and it is important for us to understand their views on key environmental and social resolutions. Many managers claim they engage with companies to achieve better outcomes for people and the planet: we want to see evidence of this in their voting behaviour.

A useful starting point for assessing how managers voted during the last AGM season is the list of 21 “resolutions to watch” released by ShareAction, a charity that promotes sustainable investment. Where managers had exposure to the companies in question, we asked them how they intended to vote on upcoming resolutions.

Schroders and Cazenove Capital do not always vote in accordance with the recommendations of ShareAction. As Schroders’ Global Head of Sustainable Investment has said: “The principles or intent of a resolution may be admirable and attractive, but the details may undermine that intent.” However, ShareAction is well known and respected in the UK market and managers we work with are likely to have considered some or many of the resolutions they highlight.

Resolutions for people and the planet

The list of shareholder resolutions to watch focuses on two key stakeholders – people and the planet. This encompasses a wide range of topics from workforce freedom of association to disclosure on alignment with the goals of the Paris Agreement.

What did the resolutions highlighted by ShareAction call for?

Some of the resolutions on people…

Activision Blizzard
Include non-management employees on the board

Alphabet
Explore public disclosure of government-mandated content removal requests

Amazon.com
Report on how the company protects freedom of association

Home Depot
Adopt paid sick leave policy

McDonald's Corp
Report on the health costs arising from the use of antibiotics in the supply chain

TJX Companies
Third-party assessment of the effectiveness of controls to prevent forced, child, and prison labour in the supply chain

Some of the resolutions relating to the planet…

Chubb Limited
Ensuring underwriting practices do not support new fossil fuel supplies

Citigroup
Ensuring financing does not support new fossil fuel supplies

Credit Suisse
Provide disclosure on financing alignment with the goals of the Paris Agreement

Dow Inc
Report on the impact of reduced plastic demand on the company's financial assumptions

Exxon Mobil Corporation
Report on the alignment of lobbying activities with the goals of the Paris Agreement

Kroger Co
Report on measurement of pesticide use in agricultural supply chains

Royal Dutch Shell
Set and publish greenhouse gas targets for scopes 1-3 that are consistent with the Paris Agreement

United Parcel Service
Set science-based emissions reduction targets to achieve net-zero emissions by 2050 or sooner

Numbers and outcomes

We contacted managers who owned shares in companies on the list of resolutions. Of the 39 fund managers we contacted, 41% were able to share their voting intentions ahead of the vote. This allowed us to gather data to inform our understanding of active ownership activities in relation to important social and environmental resolutions.

Of the resolutions that our managers were able to vote on, 71% of votes were in favour and 29% were against.

Interestingly, of the managers that responded, 100% voted in favour of the shareholder resolutions at Amazon and Exxon Mobil. At Alphabet, Citigroup and Credit Suisse the majority voted against. In the case of Credit Suisse, managers felt that the company has already disclosed sufficient information in its annual report and additional reporting.

Resolutions calling for the immediate cessation of new fossil fuel lending were broadly not supported by managers. The rationale given for voting against these prescriptive resolutions was that there is currently no affordable alternative in certain regions.

Manager engagement

We were disappointed that one of our managers voted against a shareholder resolution which simply asked for disclosure. In our opinion, this was inconsistent with the firm's position in sustainability within the market. We therefore met with their Head of Climate and Sustainability to understand further their ambitions and commitments to climate change. We discussed their coal policy in detail. Following this meeting, we were reassured that the manager has a strong ambition to transition their assets under management and had evidence of taking significant action in identifying and engaging with high-emitting assets. We reiterated, however, that we expected their voting to match this ambition, particularly on resolutions relating to disclosure. We will monitor their progress as part of our annual assessment of the firm's environmental, social and governance credentials.

Managers voted in favour of 71% of resolutions this year, up from 51% last year. We do not expect managers to always vote in favour of resolutions calling for environmental or social action. We expect that, like us, they will look at the detail of the specific resolution to understand its effectiveness and feasibility. However, we are encouraged by the trend of greater support for resolutions targeting improved outcomes for people and the planet.

Ideally, we would like to see a higher percentage of managers sharing their voting intentions with us beforehand so that we can engage with them and share our thoughts on the resolutions in question. Understanding voting intentions also provides valuable insight into managers’ approach to environmental and social issues, which is an increasingly important pillar in our sustainable fund selection process.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Registered Office at 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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James Brennan

James Brennan

Portfolio Director james.brennan@cazenovecapital.com