State Street Expands Proxy Voting in ‘Minefield’ ESG Environment

State Street Global Advisors became the latest asset manager to decentralize voting, announcing on Monday it will expand its program to offer retail U.S. investors “a range of voting policies so they can choose to direct how shares owned by the funds are voted.” 

The change will allow investors in 82% of its eligible index equity assets to decide how shares held in the funds and separately managed accounts they own are voted, the company said. It plans to incorporate all equity U.S. SPDR ETFs and U.S. mutual funds by the end of 2024, according to the statement. 

“Now all of the Big Three [asset management companies] have announced programs to decentralize voting. I think this will be seen as [a] market solution to [the] concentration problem and no regulation needed,” Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, tweeted on Monday. “That said, studies show indiv investors tend to vote w mgmt so I'd expect a tilt away from ESG/activism.” 

The move comes as the entire industry is grappling with unprecedented criticism, challenges in implementation of ESG principles and their oversight. 

Greater Control 

Earlier this year, Vanguard also moved to give its investors more control. The company launched a pilot project in February for its investors in three Vanguard equity index funds to participate in the proxy voting process. These include the Vanguard S&P 500 Growth Index Fund, the Vanguard Russell 1000 Index Fund and the Vanguard ESG U.S. 

For many in the industry, the lack of consistent guidelines and these incremental changes from individual firms highlight the urgent need for change and evolution of the ESG methodology and implementation. 

Luke Oliver, head of climate investments and strategy at KraneShares, agreed the ESG field can be described as a “minefield” despite having a real investment thesis. 

“I believe regulation and economic incentives are the primary driver of change, and that dissecting and overengineering the proxy process can be a ‘smokescreen,’” Oliver told etf.com. “I 100% believe shareholder activism can drive real change, [but] let's not forget, most proxies are mundane and unrelated to climate or ESG issues, which is another reason I think we spend more time than necessary on this topic.” 

State Street declined to comment further on the announcement this week. 

Contact Daria Solovieva at [email protected]