The myth of shareholder democracy in climate votes

Progress in pass-through voting has been slow, but ultimately it depends on shareholders caring enough to vote

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(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)

CHAPEL HILL, N.C. (Callaway Climate Insights) — Pass-through voting has not lived up to the hope many climate-focused investors had that it could nudge corporations in the direction of carbon neutrality.

I’m referring to the programs that allow investors in a given fund to tell its managers how to vote on annual meeting resolutions at the companies the fund owns. When these programs were inaugurated with great fanfare several years ago, many hoped that they would release a groundswell of shareholder democracy — and, in particular, put pressure on firms to be more climate friendly.

This potential has been largely unrealized, however. And this was initially blamed in part on technological challenges in making voting choice available to all investors, especially smaller retail investors. When BlackRock, Vanguard and other firms launched their voting choice programs several years ago, they were limited to institutional investors in only a handful of funds. Because institutional investors are more predisposed than retail investors to vote in line with the wishes of corporate management, climate activists held out hope for the day when all retail fund investors would also become eligible to participate.