BlackRock, Vanguard, State Street Forced Into the Abortion Debate

Shareholders placed abortion rights proposals on authorization at three major retailers this spring: Walmart Inc.

WMT -0.43%

; Lowe’s LOW -0.33%

Cos.; and TJX TJX -1.29%

Cos., owner of discount chains including TJ Maxx. More may follow next year.

That development is putting pressure on asset managers like BlackRock Inc.,

BLK -0.71%

Vanguard Group and State Street STT -1.96%

Global Advisors face this problem because they hold substantial stakes in those and other companies on behalf of millions of other investors.

Active investors submitted shareholder proposals in December. In general, they require each company to compile a report assessing the risks and costs of restricted reproductive rights, including hiring and retaining employees. In early May, a leaked Supreme Court draft opinion suggested that the court could overturn Roe v. Wade, the 1973 decision establishing the constitutional right to abortion.

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Trillium Asset Management submitted a shareholder proposal to TJX, while Clean Yield Asset Management did so to Walmart. Both financial firms focus on environmental, social and corporate governance concerns. Education America, a private foundation that funds nonprofits and invests with social and environmental impacts in mind, submitted a proposal to Lowe’s.

Asset management companies such as BlackRock, Vanguard and State Street have grown rapidly in recent years. Investors flocked to them in the hope that passive, index-tracking funds could help them generate steady returns at low costs.

As a result, companies have accumulated voting rights in thousands of public companies. They can influence the company’s decision making on a number of issues, including some that they may want to avoid.

Abortion rights are a polarizing issue across the country. In a new Wall Street Journal poll, conducted with the nonpartisan research organization NORC at the University of Chicago, 68 percent of respondents said they don’t want to see the court overturn Roe altogether. when 30% supported such a move.

Urska Velikonja, a law professor at Georgetown University who focuses on securities regulation and enforcement, predicts that if Roe sues Wade to be disqualified, there could be hundreds of abortion-related proposals to her authorization. company next year.

“We expect these major asset managers to look at abortion in the same way they consider other social policy issues like climate change and diversity audits,” she said. “This question seems more focused on a business issue because it affects a significant portion of employees.”

Financial firms have at times initiated their own campaigns to pressure companies to pursue social changes. In 2017, State Street publicly identified more than 1,500 companies with all-male boards as part of the Fearless Girls campaign. Since then, 60% of those companies have added at least one female director. In 2018, following the deadly school shooting in Parkland, Fla., BlackRock stripped gun retailers from several exchange-traded funds focused on the environment, society, and corporate governance. BlackRock has said that their positions are about long-term profits, not politics.

Leaked manuscript of an opinion overturning Roe and Wade may change. The WSJ explains how the Supreme Court made the decision and what might happen if abortion rights are revoked. Illustration: Jacob Reynolds

Shareholders’ proposals often fail to pass, and activists say their aim is to get companies’ attention. As proposals gain more support, companies often compromise with sponsors and make changes outside of the authorization process.

At their respective shareholder meetings over the past week, the proposals received 13% support at Walmart and 32% support at Lowe’s.

The Securities and Exchange Commission asked BlackRock, Vanguard and State Street to detail how they voted. They have until the end of August to release that information. This week, the companies declined to say how they voted.

Ben Colton, global head of wealth management at State Street, said the company approached abortion proposals “with our shared framework of social and environmental shareholder proposals.” . The company evaluates social proposals that are “focused on creating value and fulfilling our fiduciary duty,” he said.

Vanguard and BlackRock declined to comment. Together, the three companies own 20% of Lowe, 18% of TJX, and 10% of Walmart.

The shareholder groups asked the companies to address whether they plan to close or expand operations in states that enacted anti-allocation laws.

Trillium’s chief advocacy officer, Jonas Kron, said that Trillium Asset Management, which led the shareholder proposal at TJX, has been in contact with all three asset management firms.

“Generally speaking, asset managers tend to keep their cards pretty close to their chests,” said Kron. “We’ve seen a lot of nods in these meetings, but they’re not going to give a weather report on how they’re going to vote.”

David Stocks, chief executive officer of Education Foundation of America, which submitted the proposal at Lowe’s, said the retailer was chosen strategically because it operates across the country with a large number of female employees. “These big companies are the ones deciding the health care benefits for all of these people because that’s how America works,” he said. “These companies are pushing this right now whether they like it or not.”

Management at the three retailers recommended that investors vote “no” on the proposals, and they highlighted the company’s benefits and programs for female employees. Lowe’s and Walmart say the proposal is too broad. “It would be extremely difficult for any company operating in all 50 states to produce a document that would be useful to our shareholders, associates and other stakeholders,” Lowe’s said. know in response to shareholder proposals.

TJX, with 77% of its workforce being women, says it doesn’t need to report when its current health care coverage offers many fertility benefits, including abortions.

Write letter for Angel Au-Yeung at angel.au-yeung@wsj.com

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Edmund DeMarche

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