Emma Harper

Emma Harper came to finance from a different world entirely. She had a career in retail management before going back to school for her MBA focused on finance. She landed at Sage Advisory, a firm managing about $20 billion in assets across institutional and smaller client relationships. Her focus has been research: everything from ETF due diligence to responsible investment and sustainable strategies. As a user of ETFs for client portfolios, Sage needs to understand what's happening underneath the hood, which is what led them to start producing the stewardship report six years ago.

On this episode of Behind the Ticker, Emma joins Brad to discuss Sage Advisory's 2024 Annual ETF Stewardship Report. It's a comprehensive survey of ETF provider practices around proxy voting, transparency, and corporate governance, and the findings have some uncomfortable implications for how the largest managers exercise their influence.

Why Stewardship Matters for ETF Investors

Here's the thing most ETF investors don't think about: when you buy an ETF, you're giving up your ownership rights to the ETF provider. They vote your shares. They decide whether to support or oppose management proposals, shareholder resolutions, and board elections. With the largest providers controlling trillions of dollars in assets, their voting behavior has real consequences for corporate governance. Sage's report exists because, as ETF users investing client money, they need to be comfortable with how those ownership rights are being exercised.

The report surveys ETF providers on their voting behavior, engagement practices, stewardship team composition, and governance policies. It examines whether providers have dedicated stewardship people doing this day in and day out, how they're engaging with companies on operational and strategic issues, their positions on climate risk, diversity and inclusion, corporate governance, and even political lobbying. "We're just trying to peel back the onion and look at providers from all these different aspects," Emma explained.

Big Managers Vote With Management

One of the report's key findings: larger managers are far more likely to support management than vote against it. Through self-reported data, large managers reported supporting management about 91% of the time, compared to 81-82% for medium and small managers. That 10-percentage-point gap matters enormously at scale. When the biggest asset managers, who collectively control the largest share of corporate voting power, consistently side with boards, the question becomes whether they're exercising independent judgment or just rubber-stamping management proposals.

Emma was direct about the stakes: "If ETF providers don't exercise their stewardship responsibilities diligently, there's a risk of harming long-term value and exacerbating broader market risks like corporate governance failures." The flip side is emerging: pass-through voting, where providers let individual investors vote their own shares. The largest providers have started rolling this out, though it's still early and comes with its own complications.

Declining Transparency

The report found a concerning trend over the past six years. In the early years, providers were becoming more aware that investors wanted stewardship information and were getting better at sharing it. But starting around 2022, there was a pullback. The language used to describe stewardship processes became much more legal in tone. Providers became more cautious about what they were willing to say they were or weren't doing regarding corporate influence. Emma attributed it to increased legal and political scrutiny, including regulatory backlash and political pressure around ESG-related voting.

In 2024 specifically, support for environmental shareholder proposals fell below social proposals for the first time, likely driven by scrutiny over asset managers' net-zero commitments. Proxy voting records are technically public through Form N-PX filings, but actually analyzing them is a challenge: you're looking at every decision for every vote for every fund. Some providers have built dashboards, but there's still significant work needed to make stewardship behavior genuinely accessible to investors and their advisors.

What's Next for Stewardship

Emma expects corporate governance to remain the primary focus area, as it's less politically contentious than environmental and social issues. Emerging topics like artificial intelligence's impact on portfolio companies and cybersecurity are becoming more important as governance issues. Regulatory and political pressures will continue to shape practices, but the core themes of transparency and accountability aren't going away. "Whether providers want to or not, I think there will be continued push," she said. The report is available at sageadvisory.com and is used not just by Sage but by advisors and institutions doing their own due diligence on ETF providers.

Key Takeaways

• Large ETF managers reported supporting management 91% of the time in proxy votes, compared to 81-82% for medium and small managers. That gap has real consequences for corporate governance.
• Transparency around stewardship practices has declined since 2022 as providers adopt more legal language and become cautious about disclosing their corporate engagement activities.
• Support for environmental shareholder proposals fell below social proposals for the first time in 2024, driven by scrutiny over net-zero commitments and anti-ESG political pressure.
• Sage Advisory manages about $20 billion and has produced the stewardship report annually for six years as part of their own ETF due diligence process.
• Emerging stewardship focus areas include AI's impact on portfolio companies, cybersecurity, and corporate governance. Pass-through voting is growing but still early stage.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.