The Conservative Groups Behind Soaring ‘Anti-woke’ Proposals
Two US right-wing think tanks responsible for 75% of this year’s anti-ESG shareholder resolutions say they are just getting started.
At Walt Disney’s annual shareholder meeting in April this year, 19-year-old California-native Chloe Cole told a harrowing story.
Born female, Cole began gender transition treatment at the age of 12. This included taking puberty blockers at age 13, and undergoing a double mastectomy at 15.
But not long after her sixteenth birthday, she had a dramatic change of heart and decided she wanted, in her words, to “come back to reality”.
“But it was too late,” she told shareholders. “My body had been irreversibly damaged and years later my chest is still in bandages. My doctors have abandoned me. New doctors look and shrug.”
Cole then addressed Disney’s CEO Bob Iger directly.
“The lawsuits are coming, sir,” she said. “It’s only a matter of time before current and past employees whose bodies and lives have been irreversibly harmed will show up at your door looking for justice and restitution.”
Hers was an undeniably traumatic story. But why target Disney in this way, when the media giant had played no obvious part in her ordeal?
The answer is that a small US-based conservative think tank called the National Legal and Policy Centre (NLPC) had invited Cole, now a prominent campaigner against what she calls “gender ideology”, to be the face of a shareholder proposal it had sponsored.
The proposal accused Disney of discriminating on the basis of gender because, as the NLPC claimed, the company offered gender transitioning treatment to employees and their families under its healthcare benefits, but did not provide de-transitioning treatment for those that changed their mind, as Cole had done.
“She was the perfect person to deliver this cautionary tale,” Paul Chesser, Director of the NLPC’s Corporate Integrity Project, tells ESG Investor.
Transgender issues – one of the most sensitive and polarising topics in the US culture wars – is a major focus for the NLPC, and this proxy season the group filed similar resolutions with US pharmaceutical group Johnson & Johnson and global payments company Visa.
“These companies are so extreme in their healthcare benefits, that even employee dependents who are children can get gender transition care,” Chesser says. “But if they change their mind … there’s no remedial care for them. So it’s therefore a discriminatory policy.”
Neither Cole nor Disney responded to ESG Investor’s request for comment. In its proxy statement, Disney denied discriminating against any groups in its health benefits. Academic studies have found regrets following gender transition treatment of the sort experienced by Cole to be “extremely rare”.
Cole tells her story in more detail here.
The rise of anti-ESG proposals
Cole’s address at the Disney annual meeting was one of the more dramatic moments in a US proxy season thick with proposals that have flipped the narrative on shareholder activism.
Previously a tool favoured by socially liberal and environmentally conscious investors and campaigners, ESG-related resolutions are increasingly being used by the political right.
This year, proposals filed by conservative groups on broadly “anti-woke” themes hit a record number of 86, up from 66 the year before, according to Morningstar Sustainalytics. Those were responsible for all the growth in shareholder proposals in the US, with pro-ESG resolutions staying flat at 558.
The majority of anti-ESG proposals focused either on climate-related topics or on social issues such as race, gender, and sexuality.
One notable feature is how little support they have received – on average around 2%, according Morningstar Sustainalytics, compared to an average of 23% across all types of proposals. The NLPC’s Disney resolution was no exception, garnering just over 2% backing.
Critics say this low level of support demonstrates that such proposals are political stunts and have little to do with business performance. Disney’s board took this view in its recommendation that shareholders reject the NLPC’s proposal, calling it “an attempt to generate attention from a proponent with a narrow focus seeking to advance a limited agenda”.
But the conservative groups argue they are fighting a tide of corporate ‘wokeness’ that has led groups like Disney to become cheerleaders for a political ideology that has nothing to do with business interests, and which they say alienates customers and harms sales.
The catalysts
A striking fact about anti-ESG proposals is that the vast majority – around three quarters – were filed by one of two relatively small conservative US think tanks: the National Centre for Public Policy Research (NCPPR), and the NLPC.
The NLPC has been doing shareholder activism since it was founded in 1991, and had occasionally filed shareholder resolutions. But it began to do so systematically around four years ago, at the peak of the pro-ESG tide.
“Our Chairman Pete Flaherty came to the conclusion that [shareholder voting] is a cloaked battlefield,” says Chesser. “Just like academia, or the media … he felt this was something that the political left had totally taken over. As a consequence, corporate America has shifted leftwards in their political positions.”
Flaherty saw that the NCPPR was the only other conservative group using shareholder proposals to counter this shift. Because the NLPC already held shares in major companies, it was in a good position to follow suit, Chesser says. And so it began filing proposals on a cluster of core issues including gender and race, censorship, human rights in China, and the environment.
Climate change has been a top focus. This season, the think tank sponsored resolutions at Bank of America and JP Morgan Chase, calling on them to assess the impact of their green energy on emerging economies. Another resolution called on agricultural machinery maker Deere & Company to provide a cost-benefit analysis of its emissions reduction policies.
The NLPC also called on ExxonMobil to stop linking executive pay to ESG metrics, and requested General Motors to eliminate electric vehicle (EV) production goals from its compensation inducements. All of these were opposed by the companies’ boards and voted down by shareholders.
At the heart of these resolutions is a scepticism that climate change is predominantly caused by human activity.
“I don’t agree that CO2 is a significant or primary driver of whatever effect there is on climate,” Chesser tells ESG Investor – a position that contradicts overwhelming scientific consensus as expressed by groups such as the Intergovernmental Panel on Climate Change, which warns a failure to reduce anthropogenic greenhouse gas emissions to net zero will have catastrophic climate impacts.
“I’m not saying [CO2] can’t have any effect,” Chesser add. “But it does not have a significant-enough effect to subsidise wind farms, solar farms and EVs to the tune of trillions of dollars globally, to cause inflation, and to harm our energy system.”
All about fiduciary duty
Where Chesser is forthright about his views on climate science and social issues, the NCPPR is more circumspect.
The think tank – whose top donors include the Carthage Foundation, The Lynde and Harry Bradley Foundation, Sarah Scaife Foundation and ExxonMobil according to non-profit DeSmog – almost exclusively champions conservative positions in its proposals, which accounted for around half of all the so-called anti-ESG proposals voted on this year. But it says it is motivated not by ideology, but by a desire to hold companies to their core duties to shareholders.
“We are recalling corporations to their fiduciary duty,” says Scott Shepard, Director of the group’s Free Enterprise Project.
“If they were to spend a lot of shareholder assets to jump in on the right-wing side of abortion legislation or to do the politically reverse of what [Disney CEO Bob] Iger has done down in Florida, we would oppose that in the same way,” he adds.
On environmental issues, Shepard does not accept allegations that the think tank denies climate change, but says companies should “consider fully the flaws in the models they explicitly rely on”.
As with the NLPC, the NCPPR’s resolutions have garnered very limited support. Shepard puts part of the blame for this on the companies themselves, whose willingness to engage is “somewhere between ghosting and condescension”, he says.
He also blames the ‘big three’ US asset managers, BlackRock, State Street and Vanguard, who, in his words, “have never once, even accidentally, supported environmental or social proposals that haven’t come from lefty organisations”.
But Shepard saves his most vociferous criticism for the world’s two largest proxy advisors, Glass Lewis and Institutional Shareholder Services (ISS), which have opposed almost all anti-ESG proposals. “No sense can be made of their universal business practice, except by their devotion to left partisan positions,” he says.
Right of reply
Marc Goldstein, Head of US Research at ISS, rejects the claim that lack of support for conservative proposals shows investors are ideologically left-wing.
“If it were just a matter of institutional investors leaning to the left and voting accordingly, then the recent proposals on abortion/reproductive healthcare benefits for employees would have garnered far more support than they did,” he tells ESG Investor.
Proposals of a purely political nature, Goldstein argues, are unlikely to succeed – but he adds not all anti-ESG proposals fall into this category.
“Some are serious attempts to identify risks to companies,” he says, adding these may have failed because they didn’t manage to adequately demonstrate widespread or systemic problems that would harm shareholder value.
Looking ahead, Goldstein predicts there will be more anti-ESG proposals next proxy season. “It’s possible that over time, some of the conservative ESG proposal topics will … gain traction,” he says.
Although at this stage anti-ESG sentiment is strongest in the US, the movement may spread beyond the country’s borders, he says.
“It’s possible we may see a few anti-ESG proposals in the UK or Australia, [but] the volume of such resolutions will almost certainly be dwarfed by those in the US,” says Goldstein.
The political context in the US, where the ESG backlash has been stronger than elsewhere, is one factor explaining why the country is leading the way on anti-ESG proposals. Another factor could be that European, UK and Australian rules set a much higher threshold for filing a resolution. In the UK and Australia, for example, a proposal must be backed by 100 shareholders or investors representing at least 5% of the stock.
“This threshold is difficult to meet and filing requires substantial work, so proposals generally don’t come forward from fringe actors,” says Brynn O’Brien, Executive Director of the Australasian Centre for Corporate Responsibility – a group that has led many pro-ESG resolutions around the world. A spokesperson for the Investor Group on Climate Change echoed this point.
Still, given the US share market represents as much as 60% of the world’s listed equities by value, and US stocks are held and voted on by institutional investors around the world, this is very much a global issue.
A wide range of global asset owners and managers contacted by ESG Investor on the anti-ESG proposal movement declined to comment, with several explaining they did not wish to weigh in on such a polarising debate.
But those that did respond – including two of the US’s biggest pension funds, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS), and Australian pension giant UniSuper – signalled they would not be budging on their commitment to core ESG issues such as climate risk.
“CalSTRS believes climate change is one of the greatest threats to our future, with undeniable links to business and financial investments,” Aeisha Mastagni, senior portfolio manager at CalSTRS’ Sustainable Investment and Stewardship Strategies team said. “This is why CalSTRS has pledged to achieve a net zero portfolio by 2050, or sooner.”
Paul Chandler, Director of Stewardship at the UN Principles for Responsible Investment, rejects claims that voting for pro-ESG proposals demonstrates political partisanship.
“ESG factors often have a material impact on business performance, and using voting powers is entirely consistent with investors’ fiduciary duty,” he says. “There is nothing partisan about investors doing their job by seeking to maximise returns on behalf of their clients, and suggesting otherwise is a position not supported by the facts.”
“Wind at our backs”
But this line of argument is unlikely to persuade either the NCPPR or the NLPC – which both insist the pro-ESG movement is ideologically motivated, and vow to continue filing resolutions to counter it.
“We expect to see heightened support,” says Shepard. “I suspect big changes are ahead.”
Chesser also expects support to pick up, arguing a decade ago pro-ESG proposals got very little traction and were called “fringe”, as today’s conservative proposals are.
But even if they don’t gain traction, he believes the conservative side has “the wind at its back” and is winning in its fight against corporate ‘wokeness’, pointing out BlackRock CEO Larry Fink – once among the industry’s most vocal proponents of climate-related issues – has decided to stop using the term ‘ESG’.
“What more do you need than that?” Chesser says.
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