Vanguard’s ESG Support Half That of BlackRock, State Street

Investors who prefer to work with managers that support a majority of important environmental, social and governance resolutions would find BlackRock Inc. and State Street Corp.’s shareholder proxy voting decisions more favorable than those of the Vanguard Group Inc.’s, according to a new report by Morningstar Inc.

Morningstar’s research split 100 resolutions into six topics, both environmental and social. The research considered two environmental topics: climate change and “other” environment-related issues, such as water risk, use of plastics and deforestation. The four social topics were: civil rights and racial equity; human rights and ethical use of technology; political influence and activity; and workplace equity. Votes considered in the dataset occurred from March 2021 through March 2023.

According to the research, BlackRock and State Street supported a slight majority of 100 proposals, with 55 and 60 approvals, respectively. On the other hand, Vanguard opposed nearly three-quarters of the proposals, with 72 rejections.

Vanguard voted “Against” all 11 resolutions requesting civil rights audits or racial equity audits, as well as all against six environment-related resolutions addressing non-climate issues. Both BlackRock and State Street supported more than two-thirds of resolutions covering these topics.

Regarding human rights and the ethical use of technology, State Street demonstrated a significantly higher level of support, with 92% approval for the 13 resolutions. In comparison, BlackRock and Vanguard showed lower levels of support, at 31% and 7%, respectively.

BlackRock exhibited the highest support among the three firms for civil rights and racial equity resolutions, with a 73% approval rate, as well as for workplace equity resolutions, with 69% approval.

Morningstar noted that the reasons behind firms’ choices to support or reject specific resolutions are often more nuanced than a “For” or “Against” vote can convey.

“Although the [Vanguard’s] record of support for key ESG shareholder resolutions continues to be lower than comparable peers, its disclosure of the rationale behind such voting decisions is strong,” Mahi Roy, associate manager research analyst, said in a statement.

Vanguard frequently advocated for increased diversity at the board level and often supported shareholder requests for more detailed reporting on diversity, equity and inclusion efforts. On resolutions seeking racial equity and civil rights audits, Vanguard often expressed satisfaction with the ongoing efforts of the companies in question to reform DEI practices.

Overall, the voting practices of BlackRock, State Street and Vanguard on ESG resolutions exhibited varying degrees of support. Morningstar suggested investors should consider these differences and the firms’ rationales to align their investment preferences with managers that best reflect their ESG priorities.