Mutual funds run by financial giants such as Goldman Sachs and BlackRock have lost “billions of dollars in shareholder returns” to comply with “awakened” environmental, social and governance (ESG), according to a free-market think tank.
The Committee To Unleash Prosperity’s new analysis looked at the funds’ ESG factors to see if proxy votes were cast in favor of shaken shareholder proposals – or rather in the best interest of their clients.
The report – titled “Politics Over Pensions: The First Annual Report Card on Investment Fund Managers and Proxy Voting Behavior” – argued that many shareholder requests did not add to the company’s earnings.
The “major investment houses routinely violate their legal obligation — known as ‘fiduciary duty’,” the report said.
“By putting their own political biases first, their clients are missing out on billions of dollars in shareholder returns,” the think tank said.
The report found that proxy votes on ESG initiatives are “cast by fund managers on behalf of shareholders – and not based on a survey of their clients’ wishes.”
According to the think tank, Goldman Sachs, BlackRock, JPMorgan Chase, BNY Mellon, State Street and Charles Schwab received averages and below for failing to avoid ESG-related shareholder “extreme” initiatives.
UBS, Deutsche Bank, First Trust Advisors and PNB Baribas received insufficient numbers.
The commission released the numbers after reviewing “4,814 non-branded ESG funds” to review the results of proxy votes cast on “50 of the most extreme ESG-oriented shareholder proposals from 2022.”
Those proposals include “racial equality audits” for Home Depot to see the “adverse impacts on nonwhite stakeholders and communities of color.”
Johnson & Johnson and McDonald’s got the same demand, while JPMorgan Chase, Pfizer, Verizon and Amazon agreed to the race equity audit rather than lose a shareholder vote.
Another shareholder proposal asked Disney to “report on gender and racial pay disparities,” which it resisted before BlackRock and State Street voted in favor of the audit, which subsequently passed.
Chipotle, Home Depot and Target faced the same proposal, while Costco was told to set climate targets for “Scope 3” emissions.
At least seven states — including Florida, Oklahoma, Texas and West Virginia — have enacted anti-ESG laws in the past two years that prohibit state funds from investing in companies that make decisions based on ESG-focused criteria.
Dimensional, Vanguard, T. Rowe Price, and Fidelity received A grades for cutting back on ESG-mandated initiatives that have swept the investment industry.
“Our research indicates that ESG investing does not have any advantage over broad investing,” Vanguard CEO Tim Buckley told the Financial Times.
Vanguard, the world’s second-largest asset manager, has pulled out of the Net Zero Asset Managers initiative, which includes some 300 companies committed to reducing greenhouse gas emissions.
“It would be overconfidence to assume we know the right strategy for the thousands of companies Vanguard invests in,” Buckley said.
“We just want to make sure that risks are properly disclosed and that every company is following the rules.”
