ESG Takes Centre Stage in 2024 Proxy Season
Investors push for climate action, nature protection, and social responsibility as the anti-ESG pushback fails to turn the tide.
The 2024 proxy season has shed light on the growing number of complexities and challenges facing investors as they navigate the shifting ESG landscape, according to the UN-convened Principles for Responsible Investment (PRI).
In a webinar this week, the PRI drew on its resolution database to summarise ESG-related shareholder resolutions, management proposals and voting trends across companies’ annual general meetings (AGM) this season – up to 16 July.
The investor body logged 800 ESG-related shareholder resolutions, director votes and management proposals, which averaged 21.56% in shareholder support when excluding anti-ESG resolutions. Twelve resolutions achieved a majority.
“The 2024 proxy season underlined the fact that shareholder resolutions remain a key lever within the stewardship toolkit, allowing investors to move towards clear outcomes and supporting investors’ wider responsible investing goals,” Bonnie Groves, Senior Specialist at the PRI, told ESG Investor.
Withdrawal rates were high, with around 33% of proposals having been either withdrawn or omitted. Many were the consequence of successful engagement – where companies agreed to commitments in exchange for a withdrawal. This trend echoes research published by US-based Ceres last month.
Majority votes included one at US-based transportation and logistics company Ryder System. Investors called on the board of directors to disclose how it is addressing the impact of its climate strategy on relevant stakeholders – consistent with the core priorities of ensuring a just transition. The proposal received support from 40.4% of shareholders.
“We have [also] seen investors using tactics such as pre-declaring their voting intentions or voting against management, particularly in markets where it is harder to file a shareholder resolution,” Groves said. “This has allowed investors to frame this engagement as a continuation of their engagement plans with management, thereby supporting their overarching stewardship approach.”
E, S and G
Climate-focused shareholder resolutions continued to dominate the ballot this proxy season, with over 90 proposals focused on emissions reduction goals across Scopes 1-3, net zero, or alignment with the Paris Agreement. But investors also explored emerging themes, such as linking CEO remuneration with climate goals.
In addition, 29 resolutions concerned greater disclosure on fossil-fuel financing from banks and insurance firms, and 12 addressed climate-related lobbying.
In the realm of nature and biodiversity, the number of shareholder resolutions reached 236. Of those, 135 were voted on, with an average support of 16.04%.
“The backdrop to all these [environmental] resolutions is the unprecedented scale of biodiversity loss currently occurring – this is a systemic risk,” said Luca Riganelli, Nature Specialist at the PRI, during the webinar.
A total 31 waste and pollution-themed resolutions achieved 14.35% in average shareholder support. “These can be broken down into three focus areas – circular economy, pesticides use and plastics waste,” Riganelli added.
In addition, four resolutions this season concerned water and oceans, with a 28.7% average in shareholder support.
“Animal welfare as a focus for investors has increased year-on-year, from 13 shareholder resolutions last year to 23 this year,” added Jude Otaibi, Senior Associate for Climate Action 100+ and Collaboration at the PRI. “Average support for this topic has remained relatively stable, gaining 14.5% votes in favour last year, compared to just over 15% this year.”
Riganelli attributed the increase in nature and biodiversity resolutions to progress achieved through related regulations – prompted by an international agreement on the Global Biodiversity Framework (GBF) – and the emergence of guidelines produced by the Taskforce on Nature-related Financial Disclosures (TNFD).
Meanwhile, the season saw 249 social-focused shareholder resolutions. The 163 that went to vote averaged 13.57% in shareholder support.
“Investors are often asking themselves questions such as how they should evaluate and respond to the systemic risk of rising economic inequality, or how to manage the inherent supply chain risks of the low-carbon transition,” said Ayla Prentice, Human Rights and Social Issues Specialist at the PRI. “We can see how such questions have translated into resolutions this proxy season.”
Four resolutions were focused on local communities and Indigenous rights, achieving a 27.09% average in shareholder support. The PRI also identified emerging social issues on the ballot – from the use of AI, to worker health and safety.
The majority of anti-ESG resolutions – 39 out of 249 – were filed across social themes, such as diversity, equity and inclusion (DEI). This was closely followed by governance-focused anti-ESG proposals, with 29 out of 310 shareholder resolutions covering governance themes filed by known anti-ESG groups, the PRI said.
Around 220 of the governance proposals went to vote, achieving 24.3% in average support and spanning topics including lobbying and political contributions, as well as executive remuneration and dual class share structures.
Fine-tuning stewardship
Overall, this year’s proxy season has demonstrated that investors are willing to use their shareholder rights to hold companies accountable on a wide range of ESG issues, the PRI noted.
Alongside filing resolutions, investors used public discourse such as AGM statements and questions to acknowledge companies’ progress, while also highlighting areas for further improvement.
As regulations and frameworks around sustainability continue to evolve, these trends will likely persist, with investors seeking ever-greater transparency and action from companies on their ESG-related impacts.
In preparation for the 2025 proxy season, the PRI encouraged investors to agree on their internal position regarding ESG-related proposal areas – including their approach to systemic risks.
“For investors, integrating considerations on their intentions to vote against company management into their voting policies may [also] be a valuable exercise,” said Groves. “[This would allow them] to feel confident and provide clarity on how the tactic can be used to communicate their asks, affirm a company’s progress, and highlight areas where ESG risks can be further managed.”
More scrutiny should also be placed on the wider stewardship environment to ensure voting results reflect asset owners’ priorities as long-term fiduciaries, Groves argued.
“Already, asset managers are being scrutinised for their voting decisions via asset owner engagement and through the proxy ballot,” she added. “Managers may also consider reviewing their asset owners’ voting policies and align their voting decisions to focus on addressing undiversifiable, systemic risks, in line with their fiduciary duties. Likewise, ahead of the next proxy season, asset owners have the opportunity now to engage with their managers and underscore their expectations.”
The post ESG Takes Centre Stage in 2024 Proxy Season appeared first on ESG Investor.