ESG Shareholder Proposals Spike in 2022—but Garner ‘Muted’ Support

Shareholders have pushed a record-breaking number of proposals on environmental, social, and corporate governance (ESG) matters so far this year, but support for certain types of ESG-related issues appears to be “muted,” according to a new study.  

This year’s early proxy season saw shareholders put forward 924 ESG-related proposals at annual meetings of companies in the Russell 3000 index, compared with 837 and 754 ESG proposals during the same period of 2021 and 2020, respectively. 

However, the report released Wednesday from shareholder advisory services firm Georgeson also shows that backing for proposals specifically related to environmental and social issues seems to be simmering down.

Six of the 30 environmental proposals passed this year, for a success rate of about 20 percent, down from 35 percent last year, while 10 of the 107 social proposals passed this year, for a success rate of 9 percent, down from 18 percent in 2021. 

The report suggests that this year’s proxy season “so far is characterized by increased scrutiny toward ESG matters” and notes that the number of “conservative” proposals, which are “often critical of the evolving ESG landscape,” doubled year-over-year from 26 during the early proxy season in 2021 to 52 this year. 

“This tension may be a driver behind some of the recent pullback in support of proposals from asset managers like BlackRock, who characterized many of this year’s climate-related proposals as overly prescriptive and questioned whether certain proposals would promote long-term shareholder value,” the report states. 

Hannah Orowitz, U.S. head of ESG at Georgeson in New York, notes in the report that “early signs of muted support for proposals on E&S [environmental and social] matters do not necessarily indicate decreased investor focus on these issues, and more likely reflect the response of investors to a shift in emphasis in some proposals and heightened demand among others.” 

The study found that 206 of the proposals that were withdrawn so far this year had focused on environmental and social areas, which “suggests that companies were particularly engaged with their shareholders on these topics to garner support or understanding this year.” 

On the diversity, equity, and inclusion (DEI) front, shareholders submitted 50 DEI proposals this year, which has seen an increase in proposals asking for more transparency on workforce diversity data, such as recruitment, retention, and promotions. 

So far, 25 of the DEI proposals have been withdrawn, six have gone to a vote and one has passed, according to the Georgeson report, which notes that 17 other DEI proposals were pending at the time of the study. The report also stated that this year marks the first time shareholders have successfully pushed a proposal requiring a company to report on pay discrepancies for its minority and women employees. The study did not identify the proposal in question. 

In March, shareholders of the Walt Disney Co. voted in favor of a proposal to require the media and entertainment giant to publish reports detailing race and gender pay gaps affecting its nearly 200,000 employees. 

Disney had opposed the effort, contending that reporting on pay equity is not a “necessary and effective use of company resources given the policies, practices, and reporting that the company already has in place to achieve that end.”

See also:

• The Virtue Bubble Is About to Burst. Good Riddance.
• The Days When ESG Meant ‘Warm and Fuzzy’ Are Over
• Why 2022 Will Be a Banner Year for Climate Litigation in Europe
• Companies Worried About Cost of SEC’s Climate Disclosure Rules

From:  Corporate Counsel