For what feels like the hundredth time, the Judiciary Committee in the U.S. House of Representatives is holding a hearing today over environmental, social and governance (ESG) spending in the private sector, seeking to review whether “current antitrust laws are sufficient to deter anticompetitive collusion to promote ESG-related goals in the investment industry.”
ESG remains a buzzword for some politicians despite the visible retreat from many in the industry—particularly asset managers. Though asset managers have not been called before the committee this time, they were subpoenaed late last year and have been the topic of major scrutiny from legislators nationally and in various states.
Ironically, all of the “Big Three” asset managers—BlackRock, State Street, and Vanguard—have taken huge steps to ensure clients know they offer a choice when it comes to ESG and other factors.
Proxy advisors have largely stayed the course. Two firms, Glass Lewis and Institutional Shareholder Services (ISS), control over 90 percent of the proxy advisory market and most of the votes for major public corporations. They both advise asset managers and fund managers on how to vote their proxies, and factor in whatever material they deem relevant, including ESG. This is especially problematic now as the SEC revoked the ability for companies to respond to proxy advisor recommendations. Asset managers’ review of proxy advisors’ recommendations and their choice of advisors is now even more critical.
In the past few years, all the major asset management companies began offering programs allowing certain clients to be able to delegate their proxy votes or cast them themselves (BlackRock’s is called Voting Choice). However, a lot of these options still rely on proxy advisors.
But BlackRock just announced it will add expand its Voting Choice program by adding Egan-Jones as the third proxy advisor on their platform. Individual investors will now control their proxy voting choices. Egan-Jones’ offers a Wealth-Focused Policy voting guidance option, which focuses exclusively on building wealth.
HLF’s president previously wrote about proxy advisors being the true catalysts of the ESG agenda, criticizing advisor policies that replace sound financial strategies with political preferences, and thus hurt everyday Americans’ financial security
Asset managers’ shift further highlights proxy advisors’ dogmatic adherence to causes other than the best interests of investors. Advancing the well-being of clients is a more productive alternative. Perhaps policymakers will now focus on the source of the problem.
