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Investor support for ESG waning

Investor support for Environmental, Social, and Governance (ESG) resolutions is decreasing, with the number of board resolutions relating to ESG passed on a steady decline since 2021.

This is according to investment firm Schroders which invests its funds worldwide, including South Africa, and manages over £700 billion.

Schroders revealed the information during a week-long webinar on activist shareholding and shareholder voting trends during companies’ Annual General Meetings (AGM).

The firm noted that the volume of environmental and social resolutions presented to shareholders is increasing.

However, the support for these resolutions is declining, with fewer and fewer resolutions passing.

Across the companies in which Schroders is a shareholder, resolutions related to environmental and social concerns rose to over 400 in 2022.

This is set to be surpassed comfortably in 2023, with Schroders already being involved in 350 such resolutions.

The support for these resolutions peaked in 2021, with 15% passing in that financial year.

In 2022 and 2023, support for environmental and social resolutions declined markedly, with less than 10% passing in 2022 and less than 5% passing in 2023.

ESG has come under increasing scrutiny over recent years, with some saying it is merely a ploy for asset managers to increase fees.

Some have even begun withdrawing funds from asset managers who are seen as supportive of ESG. For instance, the state of Florida divested $2 billion from BlackRock due to the company’s pro-ESG stance.

Other critiques accuse asset managers of hostility towards oil and gas companies which has prevented them from expanding the supply of those commodities, which results in higher prices.

However, the discussion has generally focused on how to measure and implement it better amid rampant greenwashing and dodgy metrics.

This comes at a time when Schroders sees asset managers committing much more to renewable energy transition.

There is a significant gap between how much investment is required for the renewable transition and how much is currently invested.

Aside from it being good for the environment, the investment firm sees the transition as a lasting trend that will provide outsized returns to investors.

Schroders believes we are only at the beginning of a multi-decade cycle driven by economic incentives for renewables, more conscious consumers, and increased government regulation.

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