How the 3 Largest Shareholders in the World Voted at Canadian Banks

State Street, Vanguard, and Blackrock voted against all shareholder proposals, but Vanguard’s sub-advisors showed support on some issues.  

Ruth Saldanha 5 September, 2023 | 4:36AM
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Three of the largest exchange traded fund providers – BlackRock, State Street, and Vanguard – are also among the largest shareholders in the world. All three asset managers have trillions of dollars in assets under management, most of them passive fund assets.  

These institutions also own significant stakes (between 5-8% at each) in the Big six Canadian banks – Canadian Imperial Bank of Commerce (CM), The Toronto Dominion Bank (TD), Bank of Nova Scotia (BNS), Royal Bank of Canada (RY), Bank of Montreal (BMO) and National Bank of Canada (NA).  According to Morningstar Research, Vanguard accounts for more than half of three firms’ aggregate stake at each bank. But together, the three firms are the largest shareholders in Canadian banks, other than those banks’ own asset management divisions.

Proxy voting has emerged as a key tool of engagement between shareholders and companies. Being among the largest independent owners of Canadian banks, how these firms vote on issues such as climate change, net zero target reporting, greenhouse gas emissions reduction, workers’ rights, and say on pay, among others, is important. The firms’ decisions should also be of interest to any Canadian investors that care about these issues – especially because these firms exert considerable influence over how Canadian banks approach matters.  

What Was on the Ballot at the Canadian Banks?

Apart from issues such as the election of the boards of directors, appointing auditors, and voting on executive compensation, shareholders can also vote on various shareholder proposals at the banks. This year, issues on the ballots included climate change, housing, environmental audits, racial equity audits, and a proposal asking that banks commit to funding fossil fuels

There were some proposals filed across multiple banks. For instance, by Mouvement d’éducation et de défense des actionnaires (MEDAC) filed a proposal at all six banks, asking that the banks adopt an annual advisory voting policy regarding its environmental and climate objectives and action plan.

MEDAC’s was not the only climate and environment focused ask. All in all, there were three such proposals filed at the banks. The other two were on greenhouse gas emission reductions, and phasing out fossil fuel financing. In a direct contrast to the latter, a proposal by Gina Pappano of InvestNow made it on to the ballot at BMO, TD and CIBC asking that the banks commit to continue investing in and financing the Canadian oil and gas sector. It further asks that the banks conduct a review of its policies to ensure none have the effect of encouraging divestment from the sector.

Vancity Investment Management has filed a proposal at three banks, asking that the boards undertake a review of executive compensation levels in relation to the entire workforce and publicly disclose the CEO compensation to median worker pay ratio on an annual basis.

We looked at how the big three firms voted at the Canadian banks in 2023. Here’s what we found.

How Did the Big 3 Asset Managers Vote at the Canadian Banks? 

As Morningstar’s director of stewardship Lindsey Stewart points out, the firms are currently rolling out “pass-through voting,” which will enable more investors to have greater choice over how their funds are voted. However, many—probably most—investors will continue to rely on their asset manager to make these decisions. 

So, many investors will take note that all three firms voted ‘Against’ all presented shareholder proposals. This level of rejection reflects wider trends in asset managers’ voting record on environmental and social shareholder resolutions.

For example, Morningstar data on proxy-voting results in the United States (where support for shareholder proposals tends to be higher than in other markets) indicates that support for environmental and social resolutions there fell to 20% in the 2023 proxy year from 30% in 2022. BlackRock recently reported that it supported only 7% of such proposals globally in the 2023 proxy year compared with 22% last year. Similarly, Vanguard—a consistently low supporter of environmental and social proposals—is reported to have backed only 2% of such resolutions in the 2023 proxy season, down from 12% last year.

How Did the Sub Advised Funds Vote?  

However, the situation changed when we looked at the votes by sub-advised funds. Information was available for Vanguard funds that were sub advised by Wellington Management, Sprucegrove Investment Management, and Schroder Investment Management.  

All three subadvisors showed support for at least some of the shareholder proposals.

On the shareholder proposals at the Royal Bank of Canada (RY), the Vanguard funds subadvised by Wellington Management supported three of the eight shareholder proposals on its ballot: One on a racial equity audit, one on greenhouse gas emission reduction, and one on its CEO’s pay ratio.

Vanguard subadvisors Wellington Management and Sprucegrove Investment Management both voted in favour of shareholder proposals at Bank of Nova Scotia (BNS) for the funds that they manage:

Morningstar recently boosted its "ESG Commitment Level" rating on Wellington Management, citing its growing sustainable-investment team and improved disclosure levels.

“It’s interesting to note that Wellington voted 'For' the proposal for an advisory vote on environmental policies at the Bank of Nova Scotia on the Vanguard Global ESG Select Stock Fund. The firm decided to vote 'Against' that same proposal in the other three non-ESG Vanguard funds it sub-advises that also voted at this meeting,” Stewart pointed out. “This illustrates how proxy-voting decision makers at some firms are making split voting decisions, considering how the voting expectations of investors in an 'ESG' or 'sustainable' labelled fund would differ from those in a fund with no sustainability intentions,” he added.

Schroder Investment Management also supported some of the shareholder proposals at Toronto-Dominion Bank (TD) for the Vanguard funds it manages.  

Toronto-Dominion (TD) had six shareholder proposals on its ballot, of which Schroders supported the ones around TCFD disclosures, a climate-risk disclosure framework, and greenhouse gas emission reduction targets. 

What Do These Votes Mean for Investors? 

If you are a direct shareholder in the banks, you are a business owner and participant in the market and have a right and a responsibility to have your say. It’s worthwhile to evaluate the shareholder proposals and the concerns they raise about the sustainability of the banks’ operations, and then vote in accordance with your beliefs and desires. 

Although fund investors don’t get a direct say in these matters, there’s still plenty to consider, especially with pass-through voting on the horizon. As Stewart explains, “The reasons why the firms chose to support or reject certain resolutions is often more nuanced than a simple 'For' or 'Against' vote can tell us.” He says that there are two key lessons here for the millions of investors who hold the Big Three’s funds. 

  • It’s important to determine whether a manager’s proxy-voting stance on ESG issues reflects your own priorities and values. If not, it’s worth considering whether a different firm might be a better fit (particularly for products like index-tracking funds that have similar characteristics between one firm and another). Alternatively, it may also be a good opportunity to consider which type of voting policy would be the best fit when pass-through voting becomes available. 
  • There’s much more to a voting decision than just the vote itself. If you really want to know what a manager is thinking about a key ESG topic, it’s important to understand the policy and rationale behind the voting decisions they’re making. The Morningstar team will continue publishing research to help investors gain a better understanding of these issues. 


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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Bank of Montreal119.15 CAD-1.14Rating
Bank of Nova Scotia63.19 CAD-0.58Rating
Canadian Imperial Bank of Commerce69.26 CAD-0.77Rating
National Bank of Canada113.13 CAD0.15Rating
Royal Bank of Canada152.21 CAD-0.03Rating

About Author

Ruth Saldanha

Ruth Saldanha  is Editorial Manager at Follow her on Twitter @KarishmaRuth.


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