Majority support for E&S proposals almost doubles in US
Thirty-three environmental and social proposals won the backing of most voting shareholders this year, compared with 18 in 2020, according to analysis by Georgeson.
‘The results of the 2021 proxy season highlight the monumental change in investor focus toward ESG risks and opportunities, particularly climate change and workforce diversity,’ says Hannah Orowitz, Georgeson’s US head of ESG, in a statement.
More than a third – 13 out of 36 – of environmental shareholder proposals passed, with average support exceeding 39 percent. This is nearly triple the number passed in 2020 (five), while average support for social proposals also rose from 27 percent to 33 percent.
Support for social proposals rising
Georgeson’s report highlights the fast-growing appetite among shareholders and companies for ESG-friendly policies.
Nearly 35 percent of the 122 socially focused proposals that went to a vote were related to political spending, with votes on workforce diversity, racial equity and human rights each accounting for approximately 10 percent.
This month shareholders at sports clothing brand Nike rallied significant support for four social proposals, although none of the resolutions passed. Of the four, a request that Nike publish annual reports assessing the company’s diversity and inclusion efforts garnered the highest level of support, at 35.6 percent of votes.
Overall, there has been a dramatic increase in average support for workforce diversity proposals, from 35 percent in 2020 to more than 55 percent this year. The number of submitted proposals on the subject also increased significantly to 90 in 2021, compared with 15 in 2019, while the total number of governance proposals that went to a vote increased for the second consecutive year.
Directors and executive compensation plans
The number of director nominees who failed to receive at least 50 percent shareholder support increased from 19 in 2020 to 28 in 2021.
This year has also seen a rise in the number of S&P 500 companies that failed to receive majority support for their say-on-pay proposals – with 10 companies facing majority opposition in 2020 and 17 companies facing the same result in 2021.
The report uncovers a high level of shareholder proposal submissions compared with previous years (787), but also an increase in withdrawn proposals – 249 – compared with 109 in 2020. Moreover, the number of environmental proposals that were withdrawn nearly doubled in 2021 to 72, compared with 41 in 2020.
‘The notably large number of negotiated settlements or withdrawn proposals in advance of 2021 annual meetings, especially those focused on environmental topics, is indicative of the high level of shareholder engagement that occurs during the off-season before proxy statements are filed,’ Orowitz says.
The Chevedden Group, well known for shareholder activism, was behind the bulk of the proposals, with 226 of their 252 submissions relating to governance.
This year brought the mainstreaming of ESG-focused activism and active ownership, according to Orowitz, who points out that shareholders are using their proxy votes more frequently against individual directors of companies where ESG practices fall short of their expectations.
Changes to 401k plans on the horizon
It’s not just shareholders making proposals with an ESG focus – legislators are making them, too. On October 14, the US Department of Labor (DoL) issued a proposed rule that would allow retirement savings plans to choose investments using analyses that incorporate climate change risks and other ESG criteria.
The proposal, if adopted, would amend the DoL rule Financial Factors in Selecting Plan Investments, which was published in November last year.
Regulatory measures relating to non-financial reporting standards as well as ESG data and ratings are also under discussion at federal level.