Recommendations

Institutional investors have a responsibility to mitigate system-level risks to their portfolios, including from climate change, inequality, and unaccountable technology. Although the following recommendations focus mainly on stewardship—primarily proxy voting—the same principles also apply to investors’ allocation practices and public policy advocacy.

Within a given investment firm, fund managers should work with stewardship teams to ensure the system-level risks to their specific portfolios are being adequately addressed. 

1. Acknowledge the financial materiality of climate change, inequality, and unaccountable technology.

Ensure that relevant documents and communications explicitly acknowledge that:

• Climate change, inequality, and unaccountable development and use of technology pose idiosyncratic and system-level investment risks that are material to shareholder value

• The risks associated with inequality, climate change, and unaccountable technology should be mitigated through stewardship, consistent with fiduciary duty

2. Adopt a fund-level risk management approach to these system-level risks.

• Conduct a comprehensive fund-level analysis to determine broad-based equity index funds’ exposure to these risks, taking into account the breadth of the fund’s market holdings, its turnover ratio, buy-and-hold strategy, and its function as a long-term investment vehicle for many clients

• Identify portfolio companies most responsible for negative externalities, including those arising from carbon-intensive business strategies, harmful labor practices, exploitative technologies, and political rent-seeking

3. Set issuer expectations related to climate change, inequality, and unaccountable technology.

Ensure that relevant documents and communications explicitly set expectations for issuers to mitigate their contributions to inequality, climate change, and unaccountable technology. This should include:

• Mitigating climate change by:

• Committing to achieve net-zero greenhouse gas emissions by 2050 at the latest

• Setting medium-term targets consistent with cutting emissions in half by 2030 

• Aligning capital expenditures with net zero by 2050 and halving emissions by 2030

• Ensuring policy influence positions and activities consistent with net zero by 2050 and halving emissions by 2030

• Mitigating inequality by:

• Comprehensively disclosing political spending and lobbying activities

• Respecting workers’ rights to freedom of association, a safe and healthy workplace, and a living wage

• Mitigating intra-firm inequalities, including by addressing exorbitant CEO pay and investing in human capital development

• Eliminating workplace racial and gender discrimination

• Mitigating unaccountable technology by ensuring the development and use of data centers, artificial intelligence, and other technology does not contribute to externalities, including:

• Climate change and environmental impact 

• Workplace inequality

• Democratic backsliding  

4. Engage issuers.

Conduct sustained engagement with issuers that communicate the above expectations and consequences for not meeting those expectations.

5. Ensure proxy voting policies adequately address climate change, inequality, and unaccountable technology.

Proxy voting policies should:

• Acknowledge the financial and investment risks related to inequality, climate change, and unaccountable technology

• Explicitly link proxy voting to performance expectations for issuers

• Commit to vote for resolutions that guide issuers to better meet those performance expectations

• Commit to vote against responsible directors at issuers that are significantly misaligned with those performance expectations, or do not implement resolutions with substantial shareholder support

• Facilitate amplification of key proxy votes related to inequality, climate change, and unaccountable technology, including through pre-declaration, exempt solicitations, press engagement, and vote rationales

6. Cast proxy votes that align with proxy voting policies.

Vote for resolutions that guide issuers to better meet those performance expectations related to inequality (including say-on-pay proposals), climate change, and unaccountable technology. Vote against responsible directors at issuers that are significantly misaligned with those performance expectations, or do not respond to resolutions that received substantial shareholder support.

7. Amplify key proxy votes related to climate change, inequality, and unaccountable technology.

Amplify key votes by pre-declaring votes in advance of companies’ annual general meetings, filing exempt solicitations, publishing opinion editorials, publishing voting intentions online, and publishing voting rationales and communicating rationales to the boards of directors at issuers.

8. Adopt and utilize an escalation pathway.

Adopt and utilize an escalation pathway with key issuers that serially fail to meet expectations related to inequality, climate change, and unaccountable technology.

Additional Recommendations for Asset Owners

1. Establish explicit performance expectations related to climate change, inequality, and unaccountable technology.

Set out performance expectations for asset managers, proxy advisors, investment consultants, and other financial service providers, as well as explicit consequences for not meeting those expectations. Expectations should cover the entirety of providers’ proxy voting and other stewardship activities. For ETFs tracking a particular index, the consequence could be switching to an alternative ETF tracking the same index that better meets stewardship expectations.

2. Incorporate performance expectations related to climate change, inequality, and unaccountable technology into search and selection criteria.

Include performance expectations in search and selection criteria for asset managers, proxy advisors, investment consultants, and other financial service providers – for example, as an explicit element of due diligence questionnaires.

3. Engage service providers, including communicating about proxy voting.

Conduct sustained engagement with current asset managers, proxy advisors, and other financial service providers, including clearly communicating performance expectations related to inequality, climate change, and unaccountable technology, and consequences for not meeting expectations. This should include sharing proxy voting intentions, pre-declared votes, and rationales for votes related to inequality, climate change, and unaccountable technology with asset managers and other financial service providers.

4. Review the performance of service providers.

Regularly review the performance of asset managers, proxy advisors, investment consultants, and other financial service providers.

• Send a copy of Accountability in the Boardroom 2025 to asset managers and proxy advisors

• Send the link to Majority Action’s online dashboard to contracted asset managers if they are featured in this resource

5. Establish and follow through on accountability measures.

Follow through on established consequences for asset managers, proxy advisors, and other financial service providers that do not meet performance expectations related to inequality, climate change, and unaccountable technology.