Vanguard Lagged BlackRock, State Street on ESG Proposals

BlackRock and State Street have lapped Vanguard on support for environmental, social and governance  resolutions, new Morningstar data shows.  

BlackRock Inc. and State Street Corp.’s shareholder proxy voting decisions were found more favorable on sustainable investing proposals than those of the Vanguard Group Inc.’s, according to an article posted by Morningstar, featuring data based on the Morningstar report ESG Proxy Voting: 2022 in Review. 

Morningstar’s research split 100 resolutions—over a two-year period ending on March 31, 2023—into six topics, both environmental and social. The proxy voting research examined two environmental topics: climate change and “other” environment-related issues, including water risk, use of plastics and deforestation. The four social topics were: civil rights and racial equity; human rights and ethical use of technology; political influence and activity; and workplace equity.

BlackRock and State Street supported a slight majority of 100 proposals, with 55 and 60 approvals, respectively, whereas Vanguard opposed nearly three-quarters of the proposals, with 72 rejections, the research finds.

Voting by proxy is one method available for investors in and shareholders of public companies to influence how a company is managed. Sustainable investment proposals—ESG resolutions—that are favored by ESG investors may compel boards of directors to make changes based on the proposals

Vanguard voted “Against” all 11 resolutions requesting civil rights audits or racial equity audits, as well as nixed six environment-related resolutions addressing non-climate issues, found Morningstar. BlackRock and State Street supported more than two-thirds of resolutions covering these topics.

Regarding human rights and the ethical use of technology, State Street demonstrated a significantly higher level of support, with 92% approval for the 13 resolutions, the research shows. Comparatively, BlackRock and Vanguard showed lower levels of support, at 31% and 7%.

BlackRock exhibited the highest support among the three firms for civil rights and racial equity resolutions, with a 73% approval rate, as well as for workplace equity resolutions, with 69% approval, the research shows.

Morningstar noted that the reasons behind supporting or rejecting specific resolutions are often more nuanced than a “For” or “Against” vote can convey.

“Although [Vanguard’s] record of support for key ESG shareholder resolutions continues to be lower than comparable peers, its disclosure of the rationale behind such voting decisions is strong,” states Mahi Roy, associate manager and research analyst, in the article

Morningstar defined a “key” resolution as one that is supported by at least 40% of a company’s independent shareholders, research shows.  

Vanguard frequently advocated for increased diversity at the board of directors level and supported shareholder requests for more detailed reporting on diversity, equity and inclusion efforts, research shows. On resolutions seeking racial equity and civil rights audits, Vanguard often expressed satisfaction with the ongoing efforts of the companies in question to reform DEI practices.

Overall, the voting practices of BlackRock, State Street and Vanguard on ESG resolutions exhibited varying degrees of support. Morningstar suggested investors should consider these differences and the firms’ rationales to align their investment preferences with managers that best reflect their ESG priorities.

Lindsey Stewart, director of investment stewardship research, at Morningstar global manager research authored the posted article.

The full proxy voting report is available to download.