Environmental sustainability shareholder proposal withdrawal rates top 40%, indicating corporate disposition towards dialogue and action
New York, 12 September 2013
Ernst & Young LLP releases 2013 review of environmental and social shareholder proposals
Investors and companies are signaling a rising interest in environmental sustainability. While shareholder proposal submissions overall grew in 2013, environmental and social (E&S) continued to represent the largest category of shareholder proposals submitted, and had the highest percentage of proposals withdrawn in connection with engagement at 30% compared to less than one-quarter for all shareholder proposals. Ernst & Young LLP’s new report – Taking flight: Environmental sustainability proposals gain more attention – identifies the specific requests investors are making in the environmental sustainability proposals, company practices referenced by shareholder proponents in their supporting statements and examples of company actions that have led to withdrawals.
In 2013, E&S topics comprised just under 40% of all shareholder proposals filed. The top five E&S proposal topic areas were:
- Political spending / lobbying – 36%
- Environmental sustainability – 35%
- Corporate diversity / EEO – 8%
- Labor / human rights – 7%
- Animal testing / animal welfare – 4%
Three groups of environmental sustainability proposal topics (sub-category #2 above) were prominent:
A. Climate change / sustainability: these proposals accounted for nearly half of the environmental proposals submitted;
B. Energy efficiency / recycling: these proposals accounted for 14% of proposals submitted;
C. Energy extraction-related risks: these proposals accounted for 12% of proposals submitted.
A further breakdown shows that within climate change / sustainability specific proposals, investors most commonly requested cuts in GHG emissions, greater supply chain transparency and enhanced sustainability disclosure. It is these proposals that drive the relatively high rate of withdrawals connected to dialogue or action.
“Companies are using engagement to respond to investor concerns,” said Allie Rutherford, Director of the Corporate Governance Center at Ernst & Young LLP. “Constructive dialogue on environmental and social topics often leads to increased disclosure, accountability and ultimately withdrawal agreements.”
In addition to encouraging dialogue and action, environmental sustainability shareholder proposals are being used for another purpose. In the supporting statement of a shareholder proposal, it is common for the proponent to reference what other companies are doing to create a point of comparison. This practice not only shares information but it also creates a baseline point for companies to use for their own E&S programs.
“Shareholder proposals are highlighting sustainability best practices to show results are achievable,” said Steve Starbuck, Leader Climate Change and Sustainability Services, Ernst & Young LLP. “For example, leading companies are incorporating environmental risk into their planning and reporting. Companies that identify and manage these types of risks are appropriately planning for their future.”
For more information and to access to this and other reports, visit http://www.ey.com/US/en/Issues/Governance-and-reporting.
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