Companies are also disclosing more information about their environmental and social initiatives, related progress and board oversight, which investors appreciate. In their proxy statements, 84% of Fortune 100 companies this year voluntarily included a section on corporate sustainability initiatives, and 95% disclosed which committees are tasked with ESG oversight responsibilities (most often the nominating/governance committee or a stand-alone sustainability committee having primary oversight, with other committees overseeing areas related to their purview). These numbers are even more significant considering that sustainability reports, not proxy statements, are the primary vehicle companies use for external communication about environmental and social matters.
Additionally, companies and investors alike are balancing opposing pressures and increased scrutiny from different stakeholders related to their approach to business-relevant environmental and social matters, including investors’ proxy voting. This may be contributing to a more cautious approach from investors on which proposals to support.
In particular, in some states, certain asset managers are facing political pushback (and in some cases are barred from managing state funds) for being perceived as furthering an ideological agenda through the integration of ESG into their investment and stewardship approaches. However, against this backdrop of anti-ESG legislative activity and related media attention, so-called anti-ESG shareholder proposals, which push against company efforts related to environmental and social matters, have been among the least supported in 2023, averaging just 2% of investor votes in favor.
These developments may make navigating the evolving shareholder proposal landscape more challenging and complex for companies and investors alike as business-relevant environmental and social risks – including political polarization, state legislative activities and campaigns against individual companies – potentially escalate. For companies, transparency and constructive engagement with stakeholders (including employees, customers and investors) will remain paramount to understanding expectations, building trust and securing proxy voting support.
Key environmental and social shareholder proposal topics
1. Diversity, equity and inclusion – DEI represented the largest category of proposals submitted this year. Fifty-two percent were withdrawn before going to a vote, reflecting successful company-shareholder engagements. Taking a closer look at the subcategories of DEI proposals, the most prominent DEI proposals called for racial equity or civil rights audits. These proposals gained significant attention in 2022 when they doubled in number and their support jumped to an average of 44%. This year, however, these proposals lost steam, with support falling to 22% on average. Women’s reproductive rights is another high-profile DEI proposal topic that lost traction this year, with related proposals averaging 12% support, down from 25% in 2022. Other top DEI-themed proposals topics include pay equity across gender and race (which averaged 32% support, in line with the 31% in 2022) and reporting on the effectiveness of corporate DEI efforts (most of which were withdrawn as companies and investors reached agreements).
2. Climate risk and the energy transition – Climate-related proposals, such as those addressing greenhouse gas emissions and climate transition plans, were the second-most-submitted category this year. Around 100 such proposals were submitted to companies across a range of sectors, but predominantly focused on the financial, energy and industrials sectors. Thirty-eight percent were withdrawn, reflecting successful company-investor engagement, and those that went to a vote averaged 22% support, down from 34% last year. The most successful proposals sought reporting on company plans to reduce emissions across the supply chain (or, in some cases, financing activities). The least successful – and more prescriptive – proposals called for a time-bound phaseout of financing activities related to fossil fuel projects.
3. Corporate political responsibility – The third-largest category of proposals relates to corporate political and lobbying expenditures. This year a growing subset of these proposals focused on the alignment of political and lobbying spending with the company’s stated values and public policy positions, but they lost voting momentum, averaging 24% support, down from 40% in 2022. However, proposals focused solely on how corporate lobbying aligns with climate commitments fared better this year, with 10 voted proposals averaging 35% support, compared with four averaging 32% in 2022.