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Good News and Bad on ESG

The second edition of our CTUP report card on investment firm proxy voting was released today. Here’s the good news, summarized in the lead editorial by the WSJ:

In the murky world of shareholder proxy voting, a little media scrutiny goes a long way. Asset managers hoped investors wouldn’t notice how their shares were being voted, but many have curbed their ESG enthusiasm now that word is getting out. Even BlackRock has turned a new leaf.

These are the findings of “Putting Politics Over Pensions,” a new report by the Committee to Unleash Prosperity, which tracks big firms’ records on shareholder votes. Last year’s report broke the bad news that portfolio managers were following the progressive political herd on environmental, social and corporate-governance proposals. Most funds backed political resolutions unrelated to enhancing shareholder value, such as forcing companies to divest from fossil fuels or adopt racial equity audits.

The latest report finds that support for ESG resolutions dropped 25% in 2023 from 2022, including a 30% drop among the 25 most active fund families. Progressive shareholders—often with only a few shares—are putting forward more proposals than ever, trying to pressure executives into adopting their causes as corporate policy. But non-ESG-branded funds aren’t backing them like they were a year ago.

The bad news is that many of America’s major money management firms are still consistently voting for ESG/DEI shareholder resolutions that are pursued by left-wing pressure groups and shareholder activists. These votes are a violation of their fiduciary duty to their clients.

The worst actors of all are the two major proxy voting advisory firms – ISS and Glass-Lewis. These advisory firms – which are employed by most major money managers – almost always recommend “yes” votes on the most egregious ESG resolutions. ISS received an implied grade of F for their recommendations and Glass Lewis an implied grade of D.

CTUP graded more than 600 investment firms, based on their level of support for 50 extreme shareholder proposals, focused on objectives such as mandating divestment from oil and gas firms, imposing hiring quotas based on race/ethnicity and gender, and conducting internal “racial equity” audits. The average grade earned by the 40 largest firms was a C. More than a dozen of these firms received an F.

The following fund families earned an F:

Click here or below to read the full report:

You can go to the report and look up whether your money manager is playing politics with your dollars.

We will keep watchdogging these proxy votes by the big multitrillion-dollar investment firms until ESG is Extinguished-Slayed-Gone.

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