Shareholder proposals show investors are pushing for more disclosure and enhanced sustainability reporting
New York, 16 April 2013
A review of shareholder-sponsored proposals reveals long-standing proponents of environmental and social topics continue to influence how companies address corporate sustainability. While some companies undertake these initiatives on their own, in many cases, investors are helping to frame the dialogue and drive change. In fact, as of early April, environmental and social proposals account for approximately 45% of all shareholder proposals submitted thus far in 2013. A new Ernst & Young LLP Corporate Governance Center report – How today’s investors are framing conversations on corporate sustainability – shows growing attention to environmental and social topics particularly on the part of institutional investors, with average support for proposals on these topics in 2012 reaching 19%, nearly double the 2005 level.
Three topics in particular comprise nearly 60% of environmental and social shareholder submissions in 2013. These proposals seek:
- Enhanced disclosure on and board oversight of corporate political spending / lobbying;
- Sustainability reports and reductions in greenhouse gas (GHG) emissions;
- Greater diversity at the board level and efforts to promote diversity within company ranks.
An additional 16% of the proposals submitted address labor/human rights, energy efficiency/recycling and energy extraction topics.
“A broader spectrum of companies is beginning to receive shareholder proposals on environmental and social topics, and this is expanding engagement, framing conversations and setting expectations around corporate sustainability,” said Allie Rutherford, Associate Director of the Corporate Governance Center at Ernst & Young LLP. “In certain areas, proponents and other institutional investors are working together to define standards and expected practices that may later be included in shareholder proposals or dialogue with companies.”
As these issues grow in importance, there are several emerging categories of environmental and social proposals to watch:
- GHG emissions: for the first time, a proposal seeking disclosure on the GHG emissions impact of a company’s lending portfolio, as well as on the company’s exposure to climate change risk in its lending, investing, and financing portfolio, will go to a vote.
- Energy extraction processes: in recent years, a number of proposals on risks related to energy extraction processes have appeared and they are continuing to ask for more enhanced disclosure. This year, some proposals on hydraulic fracturing are specifically asking for quantitative disclosure. Also a new proposal on “fugitive methane” emissions has emerged.
- Board composition: some proposals seek to enhance board oversight over environmental and social issues including asking companies to consider expertise in these areas when evaluating potential board candidates and requesting that companies link executive compensation to environmental and social measures.
“Companies and investors are increasingly recognizing the need to consider environmental and social risks and opportunities in business planning,” said Steve Starbuck, Americas Leader, Climate Change and Sustainability Services, for the global EY organization. “Similarly, stakeholders are looking for more transparent reporting on the impact of environmental and social issues when evaluating company performance. Leveraging opportunities through sustainable supply chain practices and issuing credible sustainability reports can create a competitive advantage in the marketplace.”
For more information and to access How today’s investors are framing conversations on corporate sustainability and other reports, visit http://www.ey.com/US/en/Issues/Governance-and-reporting.
About EY’s Corporate Governance Center
EY’s Corporate Governance Center (EYCGC or the Center) offers balanced insights and data-rich content and analysis that foster alignment and bridges gaps among management, boards of directors and investors – raising awareness, creating understanding and serving as a conduit of information. The Center’s insights and content are supported through its proprietary corporate governance database, relationships with outside governance organizations and ongoing conversations with members of the investor and governance community.
About EY’s Climate Change and Sustainability Services
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