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Active Managers Using Shareholder Leverage to Be Heard

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Active management has become one of the fastest growing methods to push responsible investing. In fact, a majority of active managers today — 72% — are using proxy voting and/or engagement with their invested portfolio companies to influence change, finds a new study by Cerulli Associates. This is up from 54% in 2017.

The top reasons for this are the belief in the merits of considering environmental, social and governance factors (89%), desire to mitigate risk (75%) and client demand (75%).

Further, 90% of asset managers surveyed are at least voting proxies and 78% engage in dialogue with management.

Almost half of the managers (46%) of asset managers stated they are leveraging their stock ownership to promote ESG change through shareholder advocacy. Forty percent engaged in shareholder resolutions on the issue.

“These proposals facilitate formal communication between shareholders and management, calling for the company to take a specific action,” Michele Giuditta, a director of institutional research said in a statement. “While most of these proposals are nonbinding, an industry rule of thumb suggests that a vote of greater than 20% sends a clear signal to management.”

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Most important to the survey participants was climate change. In fact, 94% stated climate change was their top issue, which was second in 2017. Coming in second was Board issues/composition, with 90%, and bribery and corruption third with 82%.

One example of success provided was a shareholder resolution filed with BP, which agreed to develop a business strategy that was consistent with the goals of the Paris Agreement on climate change.

The survey also found that 68% of asset managers have staff members committed to active ownership responsibilities.

Finally, the survey showed that while almost all those surveyed — 92% — educate their clients on ESG issues, only 38% “educated clients on the opportunity cost of incorporating ESG into their portfolios.”

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