Proxy voting enthusiasts have witnessed a thrilling shareholder campaign this year in the UK investment trust sector.
In a high-profile campaign, US activist hedge fund Saba Capital sought to convert seven UK-based investment trusts into open-ended funds. It also wanted to replace the investment trust directors with Saba appointees.
An organised shareholder campaign saw the hedge fund’s proposals voted down by shareholders of all seven investment trusts. The saga highlights the power and potential of organised proxy voting.
“It’s tremendous to see shareholders come out and vote in such numbers and it’s testament to how much they value their investment trust,” said Richard Stone, chief executive of the Association of Investment Companies, after Edinburgh Worldwide Investment Trust shareholders delivered Saba its seventh defeat.
The battle between Saba Capital and investment trust shareholders pitched retail investors against a hedge fund. But institutional investors can also wield proxy voting to influence companies, even if most shareholder proposals are unlikely to win majority backing.
Asset owners should be well-informed
The UN-backed Principles for Responsible Investment defines stewardship as “the use of influence by institutional investors to maximise overall long-term value including the value of common economic, social and environmental assets, on which returns and clients’ and beneficiaries’ interests depend.”
Shareholder proposals experience varying levels of support, largely depending on where investors are based. US asset managers are typically less inclined to back proposals, with an analysis of 279 ESG shareholder resolutions by ShareAction finding that US managers back just a fifth of resolutions on average. This level of support rises to 81 per cent among European managers.
Some of the largest US managers, including BlackRock and Vanguard have been critical of the quality of shareholder resolutions filed over the past few years.
In its 2024 investment stewardship report, Vanguard reasoned its low support for ESG resolutions on the basis that “proposals did not address financially material risks to shareholders at the companies in question or were overly prescriptive in their requests”.
While BlackRock has objected to resolutions on similar grounds, its chief executive officer Larry Fink remains supportive of shareholder voting.
“I believe that more asset owners can participate in this important process effectively if they are well-informed,” he wrote in his 2024 letter to investors.Not all ESG shareholder resolutions are doomed to failure. In the 2024 proxy season, shareholder advocacy group The Accountability Board filed climate resolutions at three companies and received at least 50 per cent backing.
Leverage automation and real-time insights for Voting:
Technology and data are fundamental to informing shareholders and using proxy voting for long-term value creation.
Large asset managers like BlackRock have vast internal resources to build proxy voting platforms. In 2022, it launched Voting Choice, which allows institutional investors to take part in the proxy voting process.
But asset managers and owners without BlackRock’s resources can still make themselves heard with shareholder votes. External technological solutions offer efficiencies to stewardship teams faced with wading through hundreds of shareholder votes.
Stewardship professionals can leverage tools like the Maanch Engagement Tracker to escalate their stewardship efforts, moving teams away from spreadsheets, which are time-consuming and vulnerable to errors.
Through automation and real-time insights, investors can respond to moving events efficiently and effectively. Voting frameworks and engagement tracking tools can help investors to monitor engagement history, pick out escalation triggers, and execute data-backed voting strategies.
We enter the 2025 proxy season facing unprecedented levels of polarisation between ESG proponents and critics in the US. But beneath the headlines, asset managers and owners are getting on with the business of shareholder democracy, and using technology to achieve their objectives.
If you would like a demonstration of the Maanch Engagement Tracker, please book an introduction with our founder and chief executive officer Darshita Gillies via this link.
