US companies face less pressure for climate and social reforms .Analysts reported a sharp decline in shareholder support for proxy motions this spring on issues including climate change and workplace diversity as a result of activists’ harsh demands colliding with escalating political pressure on fund firms’ voting.
According to shareholder engagement firm Georgeson, through mid-May, the average support for voted resolutions on environmental issues was 25% for the shareholder annual meetings of Russell 3000 companies. This is down from 38% for the entire prior proxy season that ended on June 30, 2022, and 43% for the entire prior year.
According to Georgeson, support for social issue resolutions has decreased from 33% in 2021 and 26% in 2022 to 20% so far this year.
Georgeson Strategist Kilian Moote said, “We have observed a dampening effect,” as the decrease in support often represents resolutions that investors consider too burdensome.
Moote declined to discuss specific companies, but his description aligns with outcomes seen at major U.S. banks, which successfully opposed calls to cease financing significant fossil fuel projects. However, compromises with ESG advocates demonstrate that corporate executives still prioritize sustainability matters.
For example, US companies like Ford and eBay agreed to disclose more workforce details, including recruitment and retention rates. As a result, shareholder activist group As You Sow withdrew its resolutions before they were voted upon, according to CEO Andrew Behar.
“Resolutions with limited support may gain traction in the future”
Behar also noted that resolutions with limited support may gain traction in the future, such as the call for Exxon to account for divested assets in emissions reporting, which garnered 18% support. He further mentioned that Republican attacks on ESG likely influenced fund firms’ decreased support for various items.
“Their attorneys and compliance people would be saying, ‘let’s be a little more cautious this year’,” Behar explained.
Exxon did not respond to requests for comment.
Benjamin Colton, State Street Global Advisors’ global head of asset stewardship, stated via email that while companies have become more transparent, there has been an increase in what he referred to as “overly prescriptive proposals.”
“These dynamics have contributed to an overall decline in investor support for environment and social shareholder proposals,” Colton noted.
BlackRock and Vanguard, two prominent asset managers, did not provide comments for this story.
Both firms have previously stated that they evaluate proposals on a case-by-case basis and have observed a growing number of resolutions impacting support rates.
The average support for resolutions filed by investors opposing ESG initiatives dropped from 9% to 6%. For instance, a resolution from the free-market National Center for Public Policy Research, urging IBM to review its ESG record in China, received 7% support.
IBM declined to comment.
Scott Shepard, a director at the National Center, highlighted that their resolutions still serve to demonstrate the “partisanship” of top asset managers. He added that many now recognize the need to consider risks associated with pushing for decarbonization before new technologies are fully prepared.
“We’re seeing these trends reflected in this year’s voting results,” Shepard concluded.