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ESG backlash fails to shake up proxy season

By Jessica Tasman-Jones

This article is brought to you by Agenda, an FT Specialist publication that focuses on corporate boards

Shareholder support for ESG resolutions – particularly when it comes to the climate risk – has largely withstood backlash against the movement, as seen in parts of the US, during the 2023 AGM season so far.

As of early May, investors had filed 19 climate change-related resolutions that mention climate risk at S&P 500 companies including Alphabet, Berkshire Hathaway and Chevron. This is compared with 16 such investor-led proposals filed at companies in 2022, according to a review by public company intelligence provider MyLogIQ.

Investors are asking businesses to give a more detailed outline of their carbon reduction initiatives, share information about incentive plans that link pay to climate-related targets and describe efforts to mitigate the operational risk associated with the effects of global warming.

Vote counts are down slightly, but this is because resolutions are asking for more – including specifics and actions from companies that have ignored climate and justice risk – says Andrew Behar, chief executive of investor advocacy group As You Sow.

Board directors should anticipate that shareholders remain committed to requesting information from companies about their energy transition plans, experts say.

In Europe, shareholders are increasingly targeting directors over poor ESG policies or performance rather than pursuing shareholder resolutions, says Simon Rawson, deputy chief executive at ShareAction. "Perhaps this reflects a realisation that climate is a core strategy issue. It could be to do with the fact that shareholder proposals are hard to file [in Europe]," he says.

Norway's $1.4trn oil fund recently said it will step up demands for companies to set net-zero targets. Carine Smith Ihenacho, its chief corporate governance officer, told the FT that shareholder proposals are suited to US companies because it is easier to file a resolution there and because American companies tend to lag behind their European counterparts on ESG issues.

There are other examples of organisations being pushed further on ESG this year. Goldman Sachs was asked to give a more detailed outline of its climate risk transition plan. The resolution received support from 30 per cent of shareholders at the bank’s annual general meeting in April, according to the lead sponsor As You Sow.

Similar resolutions at Bank of America and Wells Fargo garnered 28.5 per cent and almost 31 per cent support from investors respectively. It was a similar situation at defence contractors Lockheed and Raytheon where the resolutions received 35 per cent and 37 per cent support respectively.

Such results are along similar lines to last year when climate risk and energy transition related proposals at S&P 1500 companies received 35 per cent support from shareholders on average, according to a report from EY.

"We do see that investors are not taking a step back on the climate piece. They’re still expecting companies to disclose how they’re going to manage the climate transition,” said Brian Bueno, ESG leader at Farient Advisors.

About 60 anti-ESG proposals have made it onto the ballot this year, according to Marcela Pinilla, director of sustainable investing at Zevin Asset Management.

However, on average anti-ESG resolutions attract just 4 per cent support or less, according to the 2023 ProxyPreview report, an annual publication by As You Sow, Proxy Impact and the Sustainable Investments Institute.

There is little evidence that those low levels of support have increased in 2023, adds Rawson.

This article is based on a story written for Agenda by Neanda Salvaterra.

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