CLS Blue Sky Blog

Environmental and Social Voting at the Big Three

Caleb Griffin at Belmont University in Nashville, Tennessee, August 6, 2019.

Environmental and social (E&S) issues are an increasingly publicized component of investment management. Large fund families, including the “Big Three” of Vanguard, BlackRock, and State Street, market themselves as advocates for the environment, women, workers in developing countries, and other non-shareholder constituencies. Funds make such claims not only for their designated socially responsible investment (SRI) funds, but also for their mass-market, plain-vanilla index funds. Based on funds’ marketing materials, stewardship reports, and public statements from fund executives, reasonable investors may well expect high levels of support for shareholder proposals relating to E&S issues. Have these statements  translated into meaningful changes in voting outcomes, or are they largely self-promotional puffery?

Overall, support for ESG proposals is low among the largest investors. In the 2018-2019 proxy season, the largest of the Big Three — Vanguard and BlackRock — supported unique shareholder E&S proposals at rates of 7.5 percent and 7.1 percent, respectively. State Street explicitly markets itself as supporting progressive environmental and social issues and supported E&S proposals at the somewhat higher rate of 22.7 percent. Although these rates are low in an absolute sense, a comparison with other funds reveals support for E&S proposals at far higher rates (e.g., Deutsche Bank at 77.9 percent) and lower rates (e.g., Dimensional at 0 percent).

Given the Big Three’s low rates, it is possible that their public statements mislead investors.

Comparing these statements with levels of support for relevant shareholder proposals is instructive. For instance, given State Street’s numerous statements in support of gender diversity[1] and “diversity of views”[2] on boards, investors and potential investors might be surprised by State Street’s actual 2018-2019 proxy voting record on these issues. In particular, such statements may have led investors to expect that State Street’s largest funds would support more than 0 percent of proposals related to board diversity reporting, more than 24 percent of proposals related to gender pay gap disclosures, and more than 0 percent of proposals relating to board diversity policies.[3] Likewise, State Street’s verbal support for increased climate reporting[4] and GHG emissions targets[5] might lead investors to expect greater support for climate change and GHG proposals than the 40.9 percent observed for State Street’s largest funds.[6] Additionally, State Street’s posture towards supply chain management and human rights in its marketing materials[7] might lead investors to be surprised that State Street’s largest funds supported only 8.3 percent of human rights proposals.[8]

BlackRock’s expressions of support for both board diversity[9] and workforce diversity[10] might lead investors to believe that its largest index funds would support more than 0 percent of proposals for board diversity disclosures, more than 0 percent of proposals to establish policies on board diversity, and more than 0 percent of disclosures on diversity in company workforces.[11] Similarly, BlackRock’s efforts to highlight votes cast in favor of gender pay disparity proposals in their marketing materials[12] might give an investor the impression that BlackRock’s largest funds supported more than 9.6 percent of such proposals.[13] More generally, BlackRock’s inclusion of E&S topics in its stewardship themes and its statement that fiduciary duties require taking into account E&S issues[14] might lead an investor to expect BlackRock’s largest funds to support more than 7.1 percent of unique E&S shareholder proposals.[15]

Although generally more circumspect towards E&S issues than its fellow Big Three members, Vanguard’s statements also have some potential to mislead investors. For instance, Vanguard’s statement that “[a]n effective board should be independent and reflect both diversity of personal characteristics (such as gender, race, and ethnicity) and diversity of skill, experience, and opinion” might lead a reasonable investor to believe that Vanguard would likely support proxy ballot items requesting that companies adopt a board diversity policy or those seeking increased reporting of board diversity.[16] Such assumptions would be partially met for the 2018-2019 proxy season, as Vanguard’s largest index funds voted in favor of 64.3 percent of proposals seeking a policy on board diversity but 0 percent of proposals seeking board diversity reporting.[17] The reasons behind the moderate support for policies but total opposition to reporting on an identical issue (board diversity) are not entirely clear to investors, even in retrospect. Similarly, Vanguard’s statements in support of climate risk disclosures and criticizing boards’ lack of action on climate disclosures[18] might seem to imply that Vanguard would support more than 30 percent of proposals related to climate change and GHG emissions.[19] Finally, Vanguard’s assertion that “[i]f a company’s business practices or products put people’s health, safety, or dignity at risk, they present long-term financial risks to investors”[20] could lead an investor to expect Vanguard to support more than 6.3 percent of unique shareholder proposals related to human rights.[21]

None of the Big Three appears to have broken any explicit promises with its voting behavior. In non-marketing materials and legal disclosures, each member of the Big Three much more carefully circumscribes its commitment to supporting E&S initiatives. State Street’s overall policy towards E&S proposals is to make an individual analysis of each such proposal and to support only those that would “promote long-term shareholder value in the context of the company’s existing practices and disclosures as well as existing market practice.”[22] BlackRock’s voting patterns, too, are consistent with its stated proxy voting policy, in which BlackRock only promises that it may support a shareholder proposal on E&S topics “where there seems to be either a significant potential threat or realized harm to shareholders’ interests caused by poor management of material E&S factors.”[23] Likewise, Vanguard’s voting guidelines are clear that it makes no binding commitment to vote a certain way on E&S issues and that all decisions on E&S proposals will be made on a case-by-case basis.[24] Overall, these statements commit the Big Three to no particular course of action, meaning that their voting patterns from 2018-2019 are not a violation of their proxy voting policies.

Yet transparency and accountability in the Big Three’s voting behavior is particularly important because they likely have the power to determine the outcome of the majority of shareholder proposals, including roughly half of all E&S proposals.[25] An analysis of the Big Three’s ownership and voting control over Fortune 250 companies reveals that they have the power to determine the outcome of as many as 49.1 percent of environmental proposals, that Vanguard and BlackRock combined (the “Big Two”) have sufficient voting control to determine the outcome of up to 35.1 percent of such proposals, and that Vanguard alone has sufficient voting control to determine the outcome of up to 15.8 percent of such proposals.[26] Numbers are similar for social proposals, with the Big Three together in a position to determine the outcome of as many as 49.0 percent of such proposals, the Big Two combined able to determine 34.2 percent of such proposals, and Vanguard alone determining the fate of up to 12.3 percent of such proposals.[27] Given this considerable influence, and the contested nature of many social and environmental proposals, it is incumbent upon the Big Three to strive for greater precision, transparency, and accountability in all information communicated to investors.


[1] State Street 2019 Investment Stewardship Report, supra note 24, at 16.

[2] State Street Global Advisors’ Guidance on Enhancing Gender Diversity on Boards, supra note 70, at 1.

[3]  Caleb N. Griffin, Environmental & Social Voting at Index Funds, Working Paper 1, 18 (2020).

[4] SSGA’s Perspectives on Effective Climate Change Disclosure, supra note 72, at 1.

[5] Id.

[6] Griffin, supra note 3, at 24.

[7] Stewardship Report 2018-2019, State Street Global Advisors (2019) at 25.

[8] See supra Griffin at 19.

[9] BlackRock Investment Stewardship 2019 Annual Report, BlackRock (2019) at 9.

[10] Id.

[11]Griffin, supra note 3, at 18.

[12] BlackRock Investment Stewardship 2019 Annual Report, BlackRock (2019) at 19.

[13] Griffin, supra note 3, at 18.

[14] Sustainable Investing, BlackRock,

[15] Griffin, supra note 3, at 25.

[16] Investment Stewardship Annual Report, Vanguard Investment Group (2019) at 16.

[17] Griffin, supra note 3, at 18.

[18] Investment Stewardship Annual Report, Vanguard Investment Group (2019) at 22.

[19] Griffin, supra note 3, at 24.

[20] Vanguard’s Voice on Societal Risks, Vanguard Investment Group,

[21] Griffin, supra note 3, at 19.

[22] Proxy Voting and Engagement Guidelines North America (United States & Canada), State Street 8 (2019),

[23] Proxy Voting Guidelines for U.S. Securities, BlackRock 12 (Jan. 2019) at 13,

[24] Vanguard’s Proxy Voting Guidelines, Vanguard Investment Group,

[25] Caleb N. Griffin, Margins: Estimating the Influence of the Big Three on Shareholder Proposals, Working Paper 1, 4 (2020).

[26] Id. at 16.

[27] Id. at 18.

This post comes to us from Professor Caleb N. Griffin at Belmont University College of Law. It is based on his recent article, “Environmental & Social Voting at Index Funds,” available here.

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