Shareholder resolutions have their place

Letter to Financial Times 

BlackRock’s announcement that it is likely to support proportionately fewer shareholder resolutions on climate change makes good investing sense (“BlackRock to vote against climate resolutions”, Report, May 12).

Such resolutions should be assessed on their individual merits, recognising they can play an important role in promoting sustainability.

Shareholder resolutions are more prevalent than a few years ago. As Lex notes, this is partly because activists and NGOs, with no wider investment responsibilities, have identified resolutions as good campaign tools (Lex, May 12). Mainstream investors have become more attracted to supporting and proposing shareholder resolutions for a variety of reasons. In a fierce market for environmental, social and governance investors, supporting a resolution can help differentiate an asset manager from the competition. It can demonstrate an investor is not being passive about an issue.

More importantly, investors understand that no matter how much they engage with companies, it is a shareholder resolution that gets board attention. The negotiations between companies and investors that follow are usually good-natured and constructive. They often move companies to take more and faster action than originally planned. Engagement alone should achieve this, and does with the most enlightened companies, but often this is not the case. Shareholder resolutions, proposed by shareholders interested in sustainable profits, have their place.

First published in the Financial Times on 16 May 2022.