ANALYSIS: Proxy Season Saw More ESG Proposals but Little Success

It’s been a busy proxy season for ESG shareholder proposals: US companies have included 93 environmental and 210 social shareholder proposals in their definitive proxy statements year to date.

Despite this strong shareholder activity, only about 1% of environmental proposals (1) and 3% of social proposals (6) have mustered enough support to pass. While some proposals remain pending, and the results of some votes have yet to be disclosed, the bulk of proxy season activity has already taken place—meaning that substantial upward movement in approval rates is unlikely.

One Successful Environmental Proposal YTD

Environmental shareholder proposals are slightly up from 2022, when there were 80 such proposals.

Of the 93 from this season, only one has been approved by shareholders: a proposal to Coterra Energy Inc. for a report on the reliability of methane emissions disclosures, which garnered 74.4% approval at the company’s annual meeting in May.

The lack of support for environmental proposals is more pronounced than in recent proxy seasons. In 2022, for example, 16 of the 80 (20%) environmental shareholder proposals included in definitive proxy statements were approved by shareholders. Seven of those approved proposals were on topics related to methane and greenhouse gas emissions. The remainder of 2023 would need to see the approval of 15 more environmental proposals just to meet 2022’s numbers.

So far this year, methane and greenhouse gas emissions has been the leading proposal topic, followed by climate change risk. These two issues have been the most popular proposal topics since at least 2020, according to Bloomberg data.

The lack of support this proxy season for these issues (only one methane/greenhouse gas proposal has been approved and no climate change proposals have been approved) may reflect the uncertainty surrounding the SEC’s proposed climate rule. If that’s the cause of this lower approval rate, shareholders may enjoy higher approval rates after the rule is finalized, which is anticipated to happen this fall.

Social Proposals: Familiar Topics, Less Success

Social proposals are generally more plentiful than environmental proposals, as they encompass a broader scope of topics. Year to date, 210 shareholder proposals on social topics have been included in definitive proxy statements—just behind 2022’s 223 proposals on these issues. With just 13 proposals needed to catch up, off-proxy season activity will likely push social proposal counts above 2022 levels.

Late activity, however, may not be enough to remedy the lower approval ratings.

Only six proposals year to date (about 3%) have been approved by shareholders. While this number is relatively modest compared to 2022’s 9% support, the approval rate of social proposals doesn’t appear to be falling as short as that of environmental proposals is so far this year.

Proposal types that have typically prevailed don’t appear to be having the same degree of success as they have had in recent years, despite shareholders focusing on familiar issues.

In 2022, political issues dominated social shareholder proposals. The top five issues in these proposals (omitting other social) were racial equity/civil rights (40), lobbying (34), political contributions (23), human rights (17), and public health (15).

To date, 2023 appears to be shaping up to have a similar top five—political contributions and lobbying are tied with 28 each for the most popular issues for social proposals, and human rights issues take third with 27. Racial equity/civil rights and public health proposals are in the fourth spot with 20 proposals each.

In 2022, these top five social issues accounted for 65% of the approvals. So far this year, these five issues account for half of the approvals.

While it has been a busy proxy season, shareholder efforts are falling short, especially compared to prior years.

Bloomberg Law subscribers can find related content on our ESG Practice page, as well as our Practical Guidance: Shareholders page. Data accessible at BI PROXY <GO>.

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