Pensions ahead of ESG funds on proxy votes

Defined-benefit programs have been more likely to support ESG resolutions

Public pensions are significantly more progressive when it comes to supporting shareholder resolutions that ESG-themed funds, according to analysis by Morningstar.

Last year, there was a record 34% support for ESG resolutions at US public companies. Public pensions voted in favor of ESG resolutions 90% of the time, while the ESG-focused mutual funds and ETFs supported those resolutions 85% of the time, on average, Morningstar found.

The report found six fund providers with higher rates of support for ESG votes than pensions: Amundi US (100%), Xtrackers (100%), Northern Funds (100%), Calvert (99%), American Century (99%) and TIAA/Nuveen (92%). Meanwhile, the report identified several big fund firms that lagged the ESG-focused funds average: BlackRock/iShares (74%), State Street (66%), Vanguard (51%) and Dimensional Fund Advisors (43%).

Compared with general shareholder votes, public pensions were much more likely to support resolutions around ESG governance (93% versus 43%) and worker protection (92% versus 51%), excluding vote results from company insider shareholders. The differences were less pronounced on diversity and inclusion (94% versus 73%) and climate change (86% versus 65%).

The report analyzed data from 72 ESG shareholder resolutions in 2021, with results from a sample of the biggest public pensions in the country, representing about $3.4trn in assets, according to Morningstar. The report used 2021 data, rather than from the current proxy season, as pension plans often have a lag time in reporting how they voted.