US asset manager builds on pre-disclosure proxy voting initiative.
With asset owners increasingly calling for asset managers to provide more transparency around their voting decisions at corporates’ annual general meetings (AGMs), Neuberger Berman is ramping up its initiative to pre-disclose its voting intentions and justifications around specific governance and engagement principles.
The nine key engagement principles include risk management, board independence, and social and environment issues. If an AGM vote touches on one of these nine principles, Neuberger Berman will publish intention and rationale in advance.
The approach differs from asset managers’ traditional approaches to corporate engagement on ESG-related issues, giving asset owners the opportunity to interact with Neuberger Berman on their voting decisions before a vote takes place. It further allows asset owners to ensure an asset manager’s ESG priorities align with their own.
Last year, Neuberger Berman launched its advance proxy voting disclosure initiative, NB Votes, which outlined voting intentions in advance of 31 select shareholder meetings across the nine key areas of focus.
The employee-owned investment manager has disclosed its voting intentions across 14 meetings in 2021 so far. For example, Neuberger Berman will be voting in opposition to management at Berkshire Hathaway across three topics next month: climate risk disclosure, diversity and inclusion reporting and independent board leadership.
In cases where engagement hasn’t prompted corporate action, Neuberger Berman will escalate the issue through an “investment-driven” approach, Caitlin McSherry, Director of Investment Stewardship at Neuberger Berman, wrote in the firm’s 2020 annual report. Engagement escalation can include withholding support from directors, divestment or making concerns public.
This year, Neuberger Berman has said that corporate responses to the Covid-19 pandemic will play “a key role” in upcoming voting decisions.
Climate dominates corporate engagement
Other asset managers have been reacting to asset owner demand for increased transparency around climate-related issues.
Legal and General Investment Management (LGIM) increased its engagement with corporates on climate-related risk by 63% in 2020 compared to the previous year, bolstering a 21% overall engagement increase across ESG-related issues.
LGIM also has a vote disclosure webpage, providing public daily updates to its vote instructions and vote disclosures.
BMO Global Asset Management (BMO GAM) also publishes its full voting record on its website one day after a shareholder meeting has taken place. For example, the asset manager disclosed its reasoning for voting against Informa plc, noting that it was due to “a problematic change to the executive remuneration plan”, according to the firm’s 2020 Responsible Investment Review.
However, Neuberger Berman has noted that no other large investment manager (with over US$100 billion in AUM) is disclosing “a meaningful number of key votes this far in advance of shareholder meetings”. They are instead publishing after the fact.
Just six out of 60 of the world’s largest asset managers voted for at least 95% of investee corporate climate and social-themed resolutions in 2020, according to NGO ShareAction’s ‘Voting Matters’ report, highlighting that the majority of asset managers are “still not effectively using their proxy voting power when it comes to environmental and social issues”.
Asset managers that did provide rationales for not voting for a climate-focused resolution said that the corporate “was doing more on climate than its peers” and so they were reluctant to vote against it. This is “despite the inadequacy of these companies’ climate strategies”, ShareAction said.
Asset managers remain reluctant to vote against climate resolutions due to ongoing engagement with the company, the non-profit added.
“This is a disappointing trend, which considers voting to be a negative action, despite the impact of voting having been widely been demonstrated. ShareAction believes that voting should be used in conjunction with private engagement as a way to support conversations,” the report said.
The UN-convened Net-Zero Asset Owner Alliance recently published guidance for asset managers which outlines how asset managers can best demonstrate “the reasoning behind decisions on key climate votes that the asset manager finds representative or exceptionally important”.
Nonetheless, asset managers should aim to increase transparency across all ESG-related issues, not just climate, George Walker, CEO of Neuberger Berman said.
“As proxy voting becomes increasingly complex, we believe investment managers have an even greater opportunity to demonstrate research-driven judgements on a range of key ESG issues. We invite all other asset managers to join in disclosing their key votes so our voices can be heard and impact real, meaningful change,” he said.