Dive Brief:
- A record number of shareholder proposals aimed at improving environmental, social and governance performance went to a vote this proxy season, with initiatives focused on climate change gaining a comparatively high approval rate, according to Diligent Market Intelligence.
- As of June 30, 83 shareholders proposals focused on the environment were voted on compared with 69 for all of 2022, and 199 proposals concerning social issues went to a vote, the same number as in all of last year, Diligent said.
- At the same time, the approval rate for environmental proposals fell to 21.7% from 34.2% last year, Diligent said. Similarly, only 17.7% of social proposals gained shareholder support compared with 24.5% in 2022.
Dive Insight:
Shareholder proposals reflecting the extreme views of both advocates and opponents of tougher ESG standards increased this year and gained comparatively low support, eroding overall approval rates, Diligent Market Intelligence Editor-in-Chief Josh Black said.
Also, companies in 2023 have shown a higher tendency to accept proposals prior to a vote, he said in an email response to questions.
“The more extreme proposals, both pro- and anti-ESG, are dragging down the average support, while more companies are reaching agreements for the withdrawal of proposals that are acceptable or might go on to have high support,” Black said.
Debate has intensified during the past year over whether the Securities and Exchange Commission should require publicly-traded companies to release detailed reports on their ESG performance, including workforce composition and their approach toward climate change.
The controversy has not undermined shareholder pressure for more information on the ways companies approach sustainability, according to Black.
“The fundamental desire of institutional investors to have access to better data from companies on their environmental and social impacts and policies remains consistent despite the noise,” he said.
The SEC has indicated that it plans this year to release a final rule mandating that companies describe on Form 10-K their strategy toward climate risk, including plans to achieve any targets they have set for reducing such risk.
Companies would need to disclose data on their greenhouse gas emissions, either from their facilities (so-called Scope 1 emissions) or through their energy purchases (Scope 2). They would also need to obtain independent attestation of their data.
In some of more than 15,000 comment letters on its proposed rule, the SEC has come under fire for planning to require companies to disclose so-called Scope 3 carbon emissions by suppliers and vendors across their supply chains.
The number of proposals focused on executive remuneration that went to a vote rose to 46 as of June 30 compared with 38 for all of last year, Diligent Market Intelligence said. Average support for the proposals fell to 26% from 35% in 2022.
“There is significant shareholder support for greater reporting on gender pay gaps within organizations and for long-term holding targets for equity-based incentives, as well as for tightening clawback policies,” Black said.
Also, “there has been a big increase in the number of proposals regarding severance pay for executives, with three proposals receiving more than 50% support in 2023 but many others receiving much lower support,” he said.
