The Political Influence of Proxy Advisors in Campaigns for Ethical Investment: Guiding the Invisible Hand

Large, listed companies are under increasing pressure to respond to critical issues such as climate change, modern slavery, and the protection of First Nations' heritage. Much of this pressure is exerted by civil society actors through corporate governance mechanisms, including leveraging shareholder rights to lobby firms. At the heart of this process sit largely understudied actors, proxy advisors, who advise large institutional investors on whether to support civil society's claim‐making on companies. The proxy advising industry is an influential duopoly that advises almost all institutional investors globally. This article advances our understanding of how norms are formed to become established market practices. It maps the relational power structures that govern ethical investment and reveals the capacity of proxy advisors to contribute to the cascading of ethical investment norms. In doing so, we argue that markets are not solely guided by exogenous forces but are reflective of the web of social relations between actors. We conclude that despite historically being seen as neutral experts in their role in advising institutional investors, proxy advisors should be viewed as political actors with significant influence over the outcome of social movement campaigns.