This year’s annual meetings of U.S. companies showed an overall decline in investor support for environmental and social initiatives, reflecting a reluctance toward prescriptive proposals and growing political pressure.
The decline in enthusiasm was evident at companies as diverse as Amazon, ExxonMobil and United Parcel Service.
Petitions calling on U.S. companies to do more on climate change received an average of 23% shareholder support through the end of May this year, down from 36.6% last year, according to the Sustainable Investment Institute, a nonprofit data provider. . Shareholder proposals on human rights accounted for 21.6% of the total votes cast, up from almost a third in 2022.
Shareholder proposals, which are typically non-binding in the United States, are increasingly being used as an advocacy tool by religious groups, environmentalists, and other socially engaged investors. A record number of applications are expected to be filed this year, according to data from the Conference Board and research group Esgage.
U.S. policy changes in 2021 allow more petitions to be put on the ballot. As a result, the proposal evolved from an anodyne disclosure requirement to a concrete action request for companies.
Although the number of petitions has increased, support has not increased accordingly. This year, just five U.S. shareholder resolutions on environmental or social issues received support from a majority of company shareholders, down from more than 35 in 2022 and 2021, according to the Sustainable Investment Association.
Benjamin Colton, director of stewardship at $3.6 trillion asset management firm State Street Global Advisors, said, “We are seeing an increase in overly prescriptive proposals being written about.” “We see these dynamics as reducing overall investor support for environmental and social shareholder proposals.”
Just 11% of Exxon shareholders supported a petition last week calling for the company to set emissions reduction targets in line with the Paris climate accord, down from 28% last year. At Amazon, less than a third of shareholders supported a resolution calling for more information about the risks of plastic packaging, down from nearly half last year.
But there were notable exceptions to the climate change policy votes of some of the largest U.S. banks. About 3 in 10 voting shareholders at Goldman Sachs, Wells Fargo and Bank of America support resolutions that require boards to develop climate change plans, and at JPMorgan Chase & Co. This number rose to 35%.
Plastic pollution is motivating a group of investors in Restaurant Brands International, which operates Burger King, and Yum Brands, the parent company of KFC, Pizza Hut and Taco Bell, with 37% asking how to reduce plastic pollution. We asked the company to report on whether it could do so. Uses out plastic.
However, support for diversity, equity and inclusion proposals at UPS Shipping is at 25% this year, down from 37% in 2022.
The business of shareholder voting has also been caught up in the political battle over the rise of environmental, social and governance (ESG) investing. Last month, Florida Governor and presidential candidate Ron DeSantis signed a law requiring the state’s pension funds to vote stocks only based on “monetary factors.” Senate Republicans in December accused asset managers BlackRock, Vanguard and State Street of using shareholder voting rights “to advance liberal social goals.”
Matteo Tonello, managing director of the Conference Board, said major asset managers have publicly said the political attacks have not changed their voting policies. But “I think their response to the backlash has made them a little more cautious and sensitive to the implications of this issue.” [voting] That’s the policy. ”
The situation is different outside the United States. According to data provider Diligent, average support for environmental and social proposals among European companies rose to 11.6% in 2023, up from 10.6% last year and 5.5% in 2021. There have been few shareholder proposals in Europe, with only eight of his environmental or social proposals having been voted on by May 31st.
Support for environmental and social solutions outside Europe and the United States was 17% this year, up from 11.3% last year, according to Diligent.
Conservative activists in the United States have also submitted a record number of shareholder proposals since the SEC changed its policy. Their issues also failed to gain support from institutional investors and asset managers.
BlackRock said shareholder votes have always focused on delivering “long-term financial value for customers.” The company’s support for shareholder petitions had declined over the past year. State Street’s Colton said the asset manager’s voting record has been “very consistent over the years.”
Vanguard declined to comment.
Abortion-related petitions filed after the U.S. Supreme Court struck down the federal right to abortion last year received more than 12 percent support among three companies: Tenet Healthcare, American Express, and Eli Lilly. I couldn’t do it. At insurance company Travelers, a proposal calling for the company to set a deadline to stop underwriting new fossil fuel projects received 8.8% support in May, down from 13% last year. Proxy advisory firm Institutional Shareholder Services said the company had disclosed most of the information requested in the shareholder petition.
Brian Bueno of consulting firm Farian Advisors said shareholder proposals are “becoming increasingly prescriptive.” For the organization that typically files the most petitions, “what we were doing this year clearly wasn’t working,” he said. “Ultimately we will see that their efforts were not as successful this year as in previous years.”
Additional reporting by Brooke Masters in New York
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