"wall street sign" by nakashi is licensed under CC BY-SA 2.0

On January 19, The Hill published an op-ed by ATR Federal Affairs Manager Bryan Bashur. The op-ed discusses how activist investors will be pressuring companies to adopt environmental, social, and governance (ESG) standards during this proxy season.  

The piece begins by explaining that, during this proxy season, activist investors will be pressuring public companies to pursue political agendas. It references how some companies, like Coca-Cola and Lowe’s, have already been pressured on hot-button issues such as abortion, and it reminds that it is Congress’s duty to ensure that asset management firms are complying with proper disclosures so that beneficial owners of the assets being managed, such as retirees, are aware of the ESG engagement being conducted with board directors.  

The article next notes how this pressure, combined with the SEC’s recent rulemaking on shareholder proposals, adds up to the Biden Administration working in tandem with certain asset managers to push a political agenda.  

“Rule 14a-8 under the Securities Exchange Act of 1934 was errantly revised by the SEC to make it harder for public companies to exclude extraneous shareholder proposals knowing full well that about 80 percent of all stock in the S&P 500 is owned by institutional investors, not individuals. The SEC’s proposed amendments have empowered asset managers and ignored individuals.”  

The op-ed next explains how the three largest asset managers, BlackRock, Vanguard, and State Street, could be violating Schedule 13D under the Securities Exchange Act due to their increased board engagement and activism. According to a report by the Senate Banking Committee, the asset managers have been using “abbreviated” Schedule 13G disclosures, which can only be used if there is no intent to control a company. 

“Today, asset managers are not required to disclose their engagement with public companies on ESG topics unless they file under 13D. However, SEC Commissioner Mark Uyeda has observed that ‘nearly all’ of the asset managers with the largest funds use the truncated 13G forms instead of the full disclosures required in 13D. Uyeda points out in his speech that ‘this dichotomy in disclosure obligations between a company and an asset manager seems at odds with a disclosure regime aimed at providing material information to all shareholders.’” 

The piece concludes by pointing out how these asset managers are all involved in political groups and initiatives affiliated with ESG objectives. This is more than enough evidence to compel Congress to seek bipartisan solutions to ensure that consumers, companies and individual investors understand how their money is being used by asset managers to pursue political agendas versus engaging to enhance financial performance and pecuniary returns. 

 Click here to read the full op-ed.