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BlackRock will give retail investors in its biggest exchange traded fund the chance to participate in proxy voting in 2024, as the $9.4tn asset manager moves to rebut Republican claims that it pursues a “woke agenda”.
The world’s biggest money manager has joined fellow index fund providers State Street and Vanguard in experimenting with ways to involve ordinary investors in voting on shareholder proposals at a time when their collective influence on US companies has come under fire from both left and right.
Investors in BlackRock’s iShares Core S&P 500 ETF will be asked to choose among seven different general policies ranging from voting generally with management to prioritising Catholic values or environmental, social and governance factors. Investors can also tell BlackRock to continue voting their shares. Customers will not be able to cast specific votes on individual companies.
The fund, known as IVV, has more than $342bn in assets, making this the largest retail proxy voting effort to date. Charles Schwab started polling retail investors in three funds last year, Vanguard ran a pilot project involving three funds this spring and State Street launched a larger programme in April.
Republican politicians at the state and federal level have accused big fund managers of putting social and environmental goals ahead of investors’ financial returns, which they all deny. Progressive social activists, meanwhile, are angry that the money managers have been supporting a smaller share of shareholder proposals on climate issues than they did in 2021. The fund managers contend that the proposals have become too prescriptive and are not in investors’ interest.
Both sides contend that the big providers have too much power because they hold as much as 20 per cent of the shares of many US companies.
BlackRock and the other asset managers argue that they simply provide what their clients want, whether it is ESG-influenced investing or a pure focus on profits. Pushing the decisions on proxy voting down to clients helps make that claim more credible. It also could take some of the heat off on particular votes, because the shares will no longer be voted as a single bloc.
BlackRock already gives institutional customers controlling $2.1tn in index assets the option of choosing how their shares are voted, and $555bn had done so by the end of March. In the retail pilot, IVV’s holdings will be voted in proportion to the share of investors who select each policy.
“BlackRock is committed to a future where every investor can have the choice to participate in the shareholder voting process,” said Joud Abdel Majeid, global head of investment stewardship.
The money manager is also working on a UK programme that will allow retail asset owners to vote, but it has not yet been rolled out to customers.
Vanguard’s pilot, which concluded last month, gave retail investors in three of its funds the chance to chose among four different options — vote with management, abstain, ESG or let Vanguard choose. It said in a statement: “We plan to build on the success of our pilot by expanding it for next proxy season so we can further test and validate our approach.”
State Street’s programme, which allows investors to chose among seven options ranging from pro-labour to pro-management, aims to include 82 per cent of all of its eligible equity assets by the end of the year. It is starting with 57 index ETFs and mutual funds. Its flagship S&P 500 fund, SPY, the world’s largest with $431bn in assets, is not eligible because of rules surrounding its structure as a unit trust.