Environmental and social proposals increase to cover 40 percent of all shareholder actions
Shareholder support for environmental and social actions in proxy voting have more than doubled since 2005, while the number of shareholder proposals has increased by a third, according to a study by the Investor Responsibility Research Center (IRRC) Institute.
Investor support for environmental and social actions has risen to 21 percent in 2011 from 10 percent in 2005, according to the institute. At the same time, shareholder proposals relating to environmental and social matters have increased to include 40 percent of all shareholder actions, up from 30 percent.
‘The level of shareholder support and interest in environmental and social proposals may appear low compared with other shareholder-sponsored proposals, but support is growing,’ say the authors of the report, which was based on Ernst & Young data. The study analyzes all 1,273 environmental and social shareholder proposals that reached proxy ballots of Russell 3000 companies between 2005 and 2011.
The proposals that generally receive the highest levels of approval include those linked to current events or legislative and regulatory changes, the report explains. Also popular are those proposed by pension funds or institutes promoting socially responsible investment, which receive higher levels of approval than proposals by individuals.
Proposals aimed at targeting certain social and environmental changes in a company facing governance complaints are also likely to receive higher levels of support than other proposals, the study shows. Proposals receive greater support if they seek higher levels of disclosure, too, or if they are being submitted for a second time.
Investor actions tend to receive lower levels of support if the company’s current practices are already viewed as sufficient in general, if the proposal runs contrary to current trends in governance and sustainability practices, or if it is related to a broader social or environmental issue and not tailored specifically to the company, the report shows. It also notes that, despite growing support for environmental and social proposals, only 20 of the proposals analyzed won majority support.
Proposals related to energy extraction techniques or waste receive the highest average levels of support, at 31 percent. Next are those related to director qualifications in the area of social and environmental issues, at 26 percent, while proposals related to operational safety and those concerning diversity tie for fourth place, at an average of 24 percent support.
Tobacco risks-related actions receive the lowest level of support among the categories analyzed, at just 3 percent. Just above it on the list come those related to climate change science, at 5 percent, and those concerning animal welfare and testing, also with average support of 5 percent.