Proxy Voting and the Erosion of Investor Rights
January 21, 2025
Topic of the week:
By Ana Quintanal Bertoldi
Proxy voting is a mechanism by which shareholders delegate their voting rights to a representative, or “proxy”, who votes on their behalf. This practice is fundamental to ensure that the interests of all shareholders, regardless of their size, are considered in important decisions.
This essential tool for shareholders to influence corporate decisions is now weakened in its ability to promote sustainable objectives. Although it continues to be used, large fund managers and banks have reduced their commitment to sustainable proposals, largely due to a strategic shift in response to political and legal pressures. This shift limits the power of investors to align their values and long-term goals with corporate policies, challenging the fundamental fiduciary rights that proxy voting protected. Since 2021, large fund managers such as BlackRock and Vanguard used proxy voting to support proposals that promoted sustainability through practices such as board diversity and carbon emissions reductions. BlackRock backed 47% of these initiatives in 2021, while Vanguard reached a similar peak that same year. However, in 2024, this support dropped dramatically: BlackRock reduced its backing to 4%, and Vanguard did not support any of the more than 400 environmental or social proposals reviewed. The reasons behind this shift have to do with many of these proposals being considered too stringent or not providing a clear financial benefit. This setback not only calls into question the consistency of these institutions with the sustainability values they proclaimed, but also negatively impacts the confidence of shareholders who delegated their votes to them with the expectation of defending long-term interests.
The weakening of this tool is also reflected in the exit of large banks and financial institutions from key climate alliances, such as the Net Zero Asset Managers (NZAM) and the Net Zero Banking Alliance (NZBA). Since late 2024 and early 2025, banks such as JPMorgan Chase, Bank of America, Citigroup, Morgan Stanley, Goldman Sachs and Wells Fargo, as well as the aforementioned asset managers, exited these coalitions. These alliances, in addition to being a coordinating space to implement sustainable strategies, represented concrete commitments to align investments with global emissions reduction targets for 2050. The official reasons for leaving include legal and regulatory concerns and criticism from conservative sectors, which argue that these initiatives were designed to boycott fossil fuel industries. However, this move negatively impacts the collective efforts needed to address climate challenges on a global scale.
The impact of these decisions is very significant. Although the managers and banks insist that their disengagement from climate partnerships does not imply an abandonment of their sustainability goals, the loss of these collective commitments weakens investors’ ability to influence corporate performance. By exiting these frameworks, companies are reducing the systemic pressure to incentivize change towards more sustainable practices. This means that, although proxy voting continues, sustainable propositions are losing relevance within these companies’ priorities, leaving shareholders without an effective avenue to advocate for their sustainable objectives.
This shift comes hand-in-hand with the re-election of Donald Trump, who has pursued a critical discourse toward ESG policies, catalyzing a rollback of the gains made under previous administrations. Political pressures have incentivized institutions to prioritize immediate economic benefits, sacrificing their previous commitments to sustainability. This shift also reflects a cultural change within companies, as we saw with the recent speech by Mark Zuckerberg, founder of Meta, who defended “male power” in corporations and criticized the inclusion policies he himself had previously supported. Meta has eliminated its diversity goals and relaxed content moderation policies, aligning itself with the current political climate. In addition, companies such as Walmart and McDonald’s have also eliminated their previously stated diversity goals, reflecting a pattern of dismantling progressive policies.
The impact of these moves is not limited to the United States. Given the clout of the large management companies and banks in international markets, their decisions directly influence other companies and governments. The perception that climate and social commitments can easily be abandoned in the face of political pressure undermines global efforts to achieve a sustainable future. Abandoning these partnerships sends a worrying message to international markets: immediate gains can take precedence over long-term risks, even when these risks, such as climate change, have devastating implications for the economy and society at large.
In this context, investors are losing a key tool to protect their long-term interests. Proxy voting, designed to allow shareholders to influence corporate policies, is becoming an increasingly ineffective mechanism for promoting sustainable initiatives. Financial institutions must rethink their role and protect the rights of investors and their responsibility in creating a sustainable future. Otherwise, they risk further damaging confidence in the financial system and fostering an economic model that ignores fundamental risks for future generations.
The path to a responsible financial system needs a serious and firm commitment to investor rights and an approach that prioritizes sustainable practices. At a critical time for the planet and society, decisions made now will not only shape the direction of global markets, but also the impact we leave for future generations. With Trump’s return, it is time to reflect on how to balance immediate economic interests with building a more resilient and conscious future. It is a new chapter full of challenges and opportunities to demonstrate that sustainability can be compatible with growth and prosperity.
The beacon of the markets:
A week of significant rises in world stock markets supported by solid macroeconomic data and a promising start to the results season corresponding to the fourth quarter of 2024. In the United States, both the S&P 500 and the Nasdaq 100 fell just short of a 3% rise to close at 5,996.66 points and 21,441.15 points respectively. In Europe, the Euro Stoxx 50 was able to outperform those gains and ended up scoring +3.43% to end the week at 5,148.30 points. The laggard of the indices was the Ibex 35, which only improved by 1.67% and ended Friday’s session at 11,916.30 points.
Government bonds saw their respective yields decrease slightly as the probability of interest rate cuts by both the FED and the ECB gained strength once again. The 10-year Treasury was down 14 bps to a yield of 4.62% (it traded at 4.81%, a benchmark not seen in 2024). The Bund and the 10-year bond also mirrored the general market trend with yields down 7 and 10 bps to end at 2.50% and 3.16% respectively.
Alternative assets also saw investors’ interest in them, risk appetite has returned to the market, and they rose throughout the week. Gold rose by 1.24% to end at 2,748.70 USD/Onz and Brent gained 1.29% to end at 80.79 USD/b.
Several macroeconomic references were known throughout the week, but above all the ECB minutes in Europe stood out, which suggest that monetary policy will continue to be relaxed, and even left open the possibility of the next 50 bps cut, to help stimulate economic activity that continues to be very low at continental level. In the United States, the CPI figure came out practically in line with expectations, but the underlying CPI showed a slight positive surprise, falling by one tenth of a percentage point to 3.2% after being stuck at 3.3% for several months and without being able to show that it has the capacity to go below 3%. In addition, retail sales and wage growth, both below expectations, generated optimism for two reasons: the economy continues to grow at a good pace, but is not overheating, and this pace of growth is compatible with rate cuts by the Fed.
The current week will not bring us any important references that could alter the course of the markets. The United States will be closed on Monday to celebrate Martin Luther King Day, the leading indicator will be published on Wednesday, for which a slight decline is expected after the +0.3% rise in the previous month, and on Friday we will know the provisional PMI data. In Europe, we highlight the ZEW’s investment confidence data and the provisional PMI data, which could show a slight rise together, although some correction is expected in the services component.
It should also be noted that the start of the results season, especially in the financial sector, has been very solid, which augurs a very good fourth quarter at the corporate level and this certifies the good health of the U.S. economy. So far 42 companies have reported average EPS growth of 7.7% versus the initial estimate of 7.5%, with 83% of companies reporting results above expectations.
Geopolitics brings positive news and that is the truce reached between Hamas and Israel, which could favor the correction of commodity prices. However, Donald Trump took office on Monday, and we can expect a few weeks of continuous policy announcements that could dampen investor sentiment and alter the outlook for markets in 2025. In successive weekly notes, we will keep a close eye on how the different action fronts of the new US administration evolve.
The quote:
And we say goodbye with the following quote from Martin Luther King: “I am not hurt by the acts of bad people. I am hurt by the indifference of good people.”
Summary of the behavior of the main financial assets (20/1/2025)

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