BlackRock has supported the best practice principles from European regulators for proxy advisors who make voting recommendations but said investors should provide more information on how they are used.

BlackRock, which managed €4.25 trillion of assets at the end of June, responded to the European Securities and Markets Authority’s consultation on the impact of the best practice principles for providers of shareholder voting research and analysis. The principles were published in March last year and were in effect during the 2015 proxy season.

The fund manager said in its letter to Esma: “Although we do not believe there to be any significant issues with the functioning of any areas of the proxy advisory industry, we would welcome greater transparency on research methodology, quality control and conflicts management.”

The response from BlackRock gave an overview of the operation of its team for corporate governance and responsible investment. The team of 22 are based in the US, UK, Japan, Hong Kong and Australia and undertake analysis, engagement and proxy voting in relation to the companies in their regions. Each year BlackRock submits votes at more than 15,000 shareholder meetings in more than 90 markets using a range of research from proxy advisory firms, company materials, broker research and other public news.

The letter said: “BlackRock does not, however, follow the recommendations of any of these providers. Rather, we make our voting decision based on what we consider to be in the best long-term economic interests of our clients.”

As a result BlackRock does not benchmark its votes against proxy adviser recommendations. However BlackRock said proxy advisors provide an essential service as most of the 15,000+ annual general meetings at which it votes each year are held between March and June.

“Proxy advisory firms enhance our efficiency by providing the relevant information in company documents in a consistent format and by highlighting potential issues of concern where we might want to undertake additional analysis or to engage with the company,” BlackRock added.

In addition proxy advisors can identify market and issuer-specific restrictions, voting requirements, and translate meeting materials for international investors. BlackRock said it subscribes to a number of research providers in order to make informed voting decisions, and it uses the electronic voting platform of a single proxy advisory firm for efficient global execution of voting instructions.

“We believe that investors should be transparent not only on their use of proxy advisors, but also on what resources they themselves devote to voting and stewardship more broadly,” added BlackRock.

Aviva Investors, which manages approximately £246bn and is a subsidiary of UK insurer Aviva Group, agreed that investors should provide more disclosure on their use of proxy advisors.

“We think that investors should be more accountable in respect of how they use proxy advisory firms i.e. whether they follow the recommended voting actions religiously or whether the investor makes up their own mind,” said Aviva. “Responsible use of proxy adviser recommendations should counter the fear that proxy adviser’s monopoly over voting decisions will determine the future of companies.”

Last year Aviva Investors voted at more than 4,000 company meetings on over 44,000 resolutions. As a result it subscribes to a number of research services and proxy advisory services, including EIRIS, ISS, Manifest, and the Investment Association’s IVIS service.

“The BPP generally provide sufficient detail on what proxy advisory firms need to do to articulate their engagement policy and process and how this should be communicated in reports,” added Aviva. “However, perhaps there should be more emphasis on what falls within the scope of engagement expectations such as whether the proxy provider should have an active role in company remuneration consultations.”

Aviva also said proxy advisory firms could make it clear in their research whether any shareholders have been consulted on proposals and should summarise these views and their guidelines could be clearer on the deadlines for views on company consultations.

In addition the Aviva wanted issuers to inform investors if they have concerns with the accuracy or conduct of the proxy advisory firms as the pay significant amounts for their research.

Schroders, which manages more €440bn, said in its response that the code has made a difference in the areas of concern to Esma such as conflicts of interest but there is benefit in focusing on ongoing governance given the small number of large players in this sector. The UK firm said it votes at more than 5,600 meetings annually and the cost and the ease of using a single platform mean it has historically used one provider.

“We now have a greater understanding of the proxy advisors’ process and this provides us with evidence that their engagement with companies can effect change,” added Schroders. “We particularly welcome the proxy advisors’ methodologies being transparent on websites, the data consistency checks that are undertaken and the fact that research is being reviewed by a second person before publication.”