When JP Morgan Asset Management announced in January that it was moving all of its proxy voting to its newly developed in-house AI-driven platform, Proxy IQ, it had two major implications. Firstly, it showed how AI technology continues to develop at pace. Secondly, it illustrated the threat to proxy advisers such as ISS and Glass Lewis.
But are proxy advisers genuinely facing an existential threat? Are asset managers going to adopt a 100% AI-based proxy voting strategy? And what is the best scenario for investors?
For decades, proxy voting was largely ignored and bundled away as a niche back-office chore best entrusted to third parties. The process was a prime example of inefficiency with too many intermediaries involved, a lack of visibility and a lack of reliability in whether votes were actually cast.
Thankfully technology has helped to bring proxy voting into the digital age while the rise of ESG and responsible investment highlighted the importance of stewardship and brought proxy voting somewhat nearer the front office.
According to the 2024 ProxyPulse report produced by fintech Broadridge, individual investor ownership was at its highest level in a decade at almost a third (31.7%) and more are exercising their right to vote – up from 29.6% to 29.8% in 2024.
However, the report also showed a disparity between how individual and institutional investors vote on boardroom recommendations, especially on environmental and social proposals, support for which fell to its lowest level in four years.
“As a result, many fund companies and institutional asset managers now provide their investors with a vote or a say on how matters at portfolio companies are voted,” says Chuck Callan, Broadridge SVP regulatory affairs and a co-author of the report.
But how easily are asset managers able to have a vote on their own portfolio companies or are some still reliant on third parties be they asset servicers or proxy advisers?
The rise of AI and proxy voting
JP Morgan’s decision to ditch the use of proxy advisers in the US was not surprising given that the firm’s chairman Jamie Dimon has previously questioned their role. In his letter to shareholders in early 2025, there was a whole section dedicated to the ‘undue influence of proxy advisers’.
And for good measure, Dimon highlighted the fact that ISS is owned by Deutsche Boerse and Glass Lewis is owned by Canadian private equity firm Peloton Capital.
There was also some political support for Dimon’s position. In December, president Donald Trump issued an executive order, the suitably subtly-titled Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors.
The order will place greater scrutiny on proxy advisers, for example, it proposes that they may be required to register as investment advisers, and provide more transparency on their recommendations, especially anything pertaining to ESG.
The SEC has also offered support for Trump’s executive order – a “seismic shift”, according to the division of investment management director Brian Daly – as well as the use of AI for proxy voting.
In a speech in January, Daly said: “Imagine an AI agent that can review dozens or hundreds of proxy statements, assess them against your expressed values, and efficiently generate a large quantity of principled voting recommendations. And, pretty much, for free. This isn’t science fiction – it’s a near-term reality.”
For their part, the two largest proxy advisers – Glass Lewis and Institutional Shareholder Services (ISS) – have rebutted the criticism while also introducing changes to their processes.
Glass Lewis is moving away from its house policy approach to a more customised and client-centric framework.
“The reality is that more than half of our clients already use client-driven custom or specific thematic voting policies,” says Diederik Timmer, president, Europe (pictured left). “They want voting frameworks and guidance that reflect their unique investment strategies and stewardship goals. We are working towards empowering all our voting clients to do the same by 2028.”
Part of this process will involve the introduction of four ‘perspectives’ from which investors can choose from to better reflect their own preferences.
So why now? According to Timmer, this approach is made possible now because of technology. “The use of ‘smart’ technology for data collection is empowering our analysts. Rather than spending their time manually collecting foundational data, they can focus on more complex issues and capturing the nuance.”
Diverging interests
The other reason for moving to a more client-focused approach is the divergence of investors’ voting preferences, especially between the US and Europe, in terms of fiduciary duty, sustainability commitments and engagement strategies.
According to Timmer, by offering a range of perspectives – spanning sustainability-focused to business fundamentals – clients can select one or more reference perspectives that best fit their needs. “The market is rapidly changing with a greater link between voting practices and engagement. Investors will be better served by a more holistic approach,” says Timmer.
Despite the political pressure on proxy advisers, Timmer states that Glass Lewis is making these changes from a “position of leadership” rather than being forced into them. He adds that most of its clients have been voting via their own policies for many years rather than relying solely on proxy advisers’ recommendations, especially within Europe.
Timmer says the new multi-perspective research will be in place by 2027, with the goal for all voting clients to use a custom policy by 2028. He adds that Glass Lewis will work with clients on fair pricing as they transition to these customised frameworks.
Meanwhile, an ISS spokesperson told Funds Europe “ISS provides voting recommendations, not dictates, to its sophisticated institutional investor clients who, in turn, control their voting decisions.”
In 2025, ISS recommended against roughly 12% of remuneration resolutions for the top 3,000 US companies but only 1% failed to pass. “These numbers clearly show that investors make up their own mind,” says ISS.
The company is also making changes to its policies. “We understand that investors are not monolithic in their views, and, consequently, provide numerous investment stewardship offerings across data, analytics, research, and operational tools to support their unique philosophies and those of their underlying beneficiaries.”
But will asset managers and investors have to spend more for the privilege of voting? Research has shown that many institutional investors are under-resourced when it comes to stewardship. A survey commissioned by the UN-backed Principles for Responsible Investment (PRI) in 2024 found that stewardship resources need to double if they are to align with the demands of investors.
The average resourcing level was around 5% of total investment management costs and covered internal staff time, reporting costs and also money spent on third party providers such as external proxy advisers as well as data and subscription costs.
The report called on investors to “pave the way for data-driven approaches to stewardship resourcing which foster accountability, transparency and ultimately impactful change”.
“The perceived efficiencies gained from new technologies can be positive but only where the tools used are scrutinised and have appropriate oversight,” says René Van Merrienboer, director of financial system strategy and analysis.
“Investors need to ensure they can understand, and communicate to companies, the rationale for why they voted the way they did. Targeted AI tools can help inform an investor’s opinion but cannot take the place of meaningful engagement and nuanced review.”
Demand driven
According to Mike Sleightholme, head of asset management and president of Broadridge International, there is pent-up demand for a more modern, accurate and timely approach to meeting the proxy voting needs of institutional investors.
“There has been little or no innovation in this space and we think that has left funds vulnerable to accusations that they are acting on incorrect data or driving policies coloured by the bias of proxy advisers,” says Sleightholme.
“AI enabled proxy voting services can meet that need by delivering draft vote outputs much faster than existing solutions, providing investors with greater transparency into how their policies translate into actual voting decisions,” says Sleightholme.
However, an entirely AI-driven proxy voting approach raises too many governance implications and challenges around oversight and accountability. Consequently, the hybrid model of AI plus subject matter expertise is likely to be the most effective way to ensure a firm’s policies are applied appropriately across tens of thousands of voting decisions, says Sleightholme.
He also expects proxy advisers to continue to have a role in the future. “Many large fund managers have developed individualised custom policies to guide their voting decisions and we do not expect that to change,” says Sleightholme.
“We expect that many of these investors will continue to use proxy advisers as sounding boards and/or to provide expertise in a given market. What we do see changing is the technology they use to implement those policies.”
A move to in-house systems may only be viable for the largest asset managers, such as JP Morgan AM. A move to a fully AI-based platform is fraught with governance and accountability issues. Some asset managers may choose to stick with their proxy advisers and their more customised approaches. Or they could opt for the likes of Broadridge and others such as Proxymity which offer a proxy voting platform but are not proxy advisers.
Ultimately, says Sleightholme, the best outcome for investors is that proxy voting decisions are made using accurate data and are based on the independent policy of those funds. “Confidence is key and the lack of that confidence today is driving demand for innovation.”
