Proxy Voting on Sustainability: Growing Divergence Means It’s Decision Time

Lindsey Stewart, CFA, Director of Stewardship Research and Policy, Morningstar Sustainalytics

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Proxy Voting on Sustainability: Growing Divergence Means It’s Decision Time

Lindsey Stewart, CFA, Director of Stewardship Research and Policy, Morningstar Sustainalytics

The word “divergence” has come up a lot in sustainability circles lately. That’s especially true when it comes to the way institutional investors and regulators in the US are tackling environmental and social issues, compared with those on this side of the Atlantic.

On the whole, U.S. fiduciaries’ propensity to consider sustainability issues as a core part of the investment decision-making process is consistently lower than their European peers, and the gap is widening. The growing divergence poses some difficult decisions for sustainability-minded investors on how they would like their views to be represented.

The one thing everyone appears to agree on here is that proxy voting decisions matter. And looking at the way US asset managers vote on sustainability issues compared to their peers in the UK and continental Europe well illustrates that growing divergence.

Our latest research on this topic takes a five-year look back at how US and European asset managers have voted on the best-supported shareholder resolutions dealing with environmental and social topics.

We reviewed voting decisions on 598 significant E&S resolutions by 20 of the largest US asset managers, and 15 in Europe (including the UK) over the 2020 to 2024 proxy years. All these resolutions were supported by at least 30% of the relevant company’s independent shareholders.

Average Support for Significant Environmental and Social Shareholder Resolutions
Resolutions voted at US companies, last five proxy years

Source: Morningstar proxy-voting database, Morningstar Sustainalytics stewardship research. Data as of Jan. 15, 2025 covering proxy years ended June 30.

We note four key things on the chart above.

• • • European asset managers’ support for significant E&S resolutions has been consistently very high, averaging 96% over the last five years.
  • • In contrast, the US firms’ support for these proposals peaked at 54% in 2021 and fell steadily to 31% in 2024 – 65 percentage points lower than their European peers.
  • • On average, over 300 sustainable funds in the US showed consistently higher support for significant E&S resolutions by these funds than by the largest US firms generally. But their support still fell from a 78% peak in 2021 to 61% in 2023, although this stabilised in 2024.

These trends pose a conundrum for asset owners and fund selectors invested in the large US firms’ funds. The moderate-to-high support for sustainability-focused resolutions seen from these firms toward the start of the decade appears to be a thing of the past.

Coupled with recent US asset manager exits from collaborative engagement programmes like Climate Action 100+ and the Net Zero Asset Managers initiative, claims of fundamental misalignment with investors’ are likely to increase in volume. Some are openly considering selecting different asset managers better aligned with their sustainability objectives.