Disclaimer
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
Earlier this year, I wrote about the evolving relationship between investors and sustainability. Notably, one of the challenges faced by both investors and investment groups aiming to provide sustainable solutions was defining sustainability (and broader ethical principles) in the first place. One person’s moral right was another’s absolute wrong.
News this week suggests that one area of difficulty is starting to be addressed. Shareholder voting procedures have long been a flashpoint, with the influence of large retail investment houses coming under scrutiny as they vote for their shareholders as one. According to the FT, in the US at least this has led to some investors draining away in more conservative states as they consider big investors out-of-step with their values.
The solution that BlackRock has announced is to offer a ‘menu’ of voting strategies that align with different investor principles, such as the principles of the UN or the papally-proscribed values of the Catholic church. This customizability does address some of the concern over retail investors’ effective ownership over their end investments when holding mutual funds.
The announcement also shines a light on the issue of shareholder voting in the first place. A direct route to expressing one’s views on corporate strategy, the ability to vote and engage with a company’s board is oft-touted as one of the benefits of investment trust ownership.
Yet, it is an underused one among retail investors.
While, according to Interactive Investor, the number of investors voting at AGMs via its platform rose 30% between 2021 and 2022 (albeit from a low base) that number then fell by 16% to the end of H1 2023. This decline has spurred the platform to introduce in-app voting for shareholders in a bid to make the process more straightforward. Earlier this year, Hargreaves Lansdown also introduced an online share voting service. The AIC provides a comprehensive list on how to vote your shares across various platforms on its website.
These innovations mark a welcome shift from the days when investors were expected to travel to central London – or Dundee – to engage with their companies. With the opportunity to vote on issues from dividend policies through to wind-up arrangements, significant power can lie in the hands of shareholders – but only if they choose to use it.
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