Republican attorneys claim asset managers are breaching fiduciary duties

September 6th, 2024

A group of 24 Republican attorneys has raised concerns about whether American asset managers are violating their fiduciary duties by outsourcing voting on environmental proposals to proxy advisors.

In a letter to America’s largest asset managers, the coalition, led by Montana Attorney General Austin Knudsen, said asset managers or their affiliates followed “for” recommendations on environmental proposals 75% of the time or more, despite their potentially negative financial impact.

Support for the shareholder proposals was more than double that of the overall market, which only backed them 37% of the time.

These recommendations included supporting six proposals to establish greenhouse gas (GHG) targets for lenders and underwriters based on their customers’ emissions, 13 proposals to set GHG targets for traditional energy products and related companies and ten proposals to limit company free speech to align with the Paris agreement and net zero by 2050 goals.

As part of their fiduciary duty of loyalty, asset managers are required to disclose any conflicts of interest, act in their clients' best interests and seek the best execution of their clients’ transactions.

The attorneys expressed concerns that proxy advisors were not conducting financial analyses of these proposals, instead they were merely defaulting to recommending in favour of them.

Additionally, they asked why asset managers are supporting shareholder proposals that are “so obviously contrary to the client’s financial interests”.

The attorneys said: "It is not clear why it would be in the financial interests of the asset managers’ clients as shareholders to support any such proposals, as forcing companies in the energy business to limit their or their customers’ emissions is equivalent to reducing the energy companies’ sales."

The letters requested a response from the asset managers by October 4.

Minerva’s blog focuses on the latest developments in ESG investing and stewardship. Minerva is a global provider of sustainable stewardship solutions with over 25 years of expertise. Minerva empowers investors by providing essential tools, including ESG research and data, enabling them to navigate the intricate landscape of stewardship and proxy voting, whilst ensuring their decisions are well-informed and aligned with sustainable principles.