U.S. Markets closed

State Street Tells Companies That ESG Moves Are No Longer Optional

Emily Chasan

(Bloomberg) -- State Street Corp. said three out of four companies haven’t made meaningful progress on environmental, social and governance issues, and the asset manager is putting them on notice.

State Street Global Advisors is prepared to take voting action against board members at companies in the major stock-market indexes that have been “consistently underperforming” peers in the asset manager’s ESG performance scoring system. That’s according to a letter released Tuesday by Cyrus Taraporevala, chief executive officer of the unit that oversees $3.1 trillion in assets.

“We see that shareholder value is increasingly being driven by issues such as climate change, labor practices, and consumer product safety,” Taraporevala wrote. “Ultimately, we have a fiduciary responsibility to our clients to maximize the probability of attractive long-term returns.”

Taraporevala’s announcement echoes plans by rival BlackRock Inc. CEO Larry Fink to put sustainability at the center of its strategy. The $7 trillion asset manager also joined a Climate Action 100+ coalition to pressure big carbon emitters.

Boston-based State Street said it will vote against ESG laggards in the S&P 500, FTSE 350, ASX 100, TOPIX 100, DAC 30, and CAC 40 indexes. It plans to expand the campaign to focus on companies that have lagged for multiple years in 2022.

“State Street’s announcement marks a pivotal moment for boards that are failing to manage ESG issues and the material risks they pose to shareholders,” Eli Kasargod-Staub, executive director of nonprofit shareholder advocacy group Majority Action, said in a statement. BlackRock, State Street and Vanguard represent about 25% of shares voted at S&P 500 companies, he said.

(Updates assets under managment for State Street Global Advisors in second paragraph of story published yesterday.)

To contact the reporter on this story: Emily Chasan in New York at echasan1@bloomberg.net

To contact the editors responsible for this story: Tim Quinson at tquinson@bloomberg.net, Dan Reichl, Josh Friedman

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.