Key Findings: Environmental & Social Issues in the 2023 U.S. Proxy Season
The spring 2023 U.S. proxy season saw 335 votes on shareholder proposals asking for disclosure and action on environmental, social, and related corporate governance (ESG) issues. More than two dozen proposals are still pending.
Results this year are mixed, with continued support for proposals on lobbying oversight and disclosure. There were solid votes on decent work (fair pay and worker treatment), and a strong showing of about 30% for new proposals about domestic labor rights. The overall average vote fell, and majority votes were down sharply–eight compared to about three dozen in the two previous years. But engagement resulting in withdrawn proposals continued. The number of climate change proposals rose steeply and focused largely on greenhouse gas emissions while also including new and more specific disclosure ideas, with varying results. Investors shrugged off a flood of 52 anti-ESG proposals and gave them just 2.4 percent average support, half what is needed for resubmission.
Proponents withdrew 223 proposals, mostly in exchange for company action, compared to 275 last year. The Securities and Exchange Commission (SEC) omitted a scant 44 proposals (compared to 39 last year) following “no-action” challenges.
Key Trends on the Issues
Political influence: Investor appetite for corporate oversight and disclosure about lobbying remains strong, with average support of about 32 percent—unchanged from last year—with a 50 percent majority vote at McDonald’s, 48 percent at IBM, and 42 percent at Yum! Brands.
In a related vein, proposals that asked companies to align their lobbying with climate change mitigation averaged 35 percent, with a 95 percent majority (supported by management) at NY Community Bancorp. Another high climate lobbying vote was 47 percent at commercial truck maker PACCAR.
Most large company boards now formally oversee election spending—the result of years of pressure that includes shareholder campaigns—and just six votes this year averaged about 30 percent, down from 44 percent in 2021, but two were above 40 percent (Amphenol and Caesar’s Entertainment).
Newer proposals asking for values congruency between corporate policies and political expenditures have blossomed; outcomes varied. They did best when focused on how election spending aligns with corporate policy (about 30 percent) and less well when asked about all influence spending efforts (about 18 percent). A groundbreaking withdrawal agreement means AT&T, which spends generously all over the country, will assess the extent to which its spending in elections aligns with corporate policy. At Leidos Holdings, an IT services firm, an election spending values congruency proposal received 41 percent.
Decent work: In a bright spot for proponents and workers, investor support for proposals about fair pay and workplace safety held steady, with little change over the last three years—26 percent on average this year, the same as in 2021, though down five points from 2022.
Ten proposals seeking information on race and gender pay disparities earned 34 percent on average. A proposal with Kroger earned a 52 percent majority and 47 percent at Boeing. The average was down from 43 percent last year but up from 2021’s 26 percent.
Fines and widespread worker safety violations at Dollar General appear to have prompted the 68 percent vote in favor of a health and safety audit. At Wells Fargo, investors also gave 55 percent support to report on workplace bias; the bank has inflated diversity recruitment statistics, and its problematic sales culture responsible for defrauding customers led to a $1 billion settlement this spring
Climate change: Climate change proposals surged in volume to 144 filings, this year’s biggest category. Looking just at proposals voted, there were 60 this year, up from only 20 in 2021. Most were about greenhouse gas emissions and related risk management, hewing to previous disclosure and target-setting ideas but with more about timeframes and net-zero aims. The new proposals were also fairly specific–both likely reasons for the drop in support.
Votes averaged 22 percent, down from an apex of more than 50 percent in 2021.
Results ranged widely, with high support for reports on methane emissions and targets at Texas oil and gas companies Coterra Energy (74 percent) and Targa Resources (41 percent).
Other climate proposals about cutting carbon also earned notable support at two restaurant companies (40 percent at Texas Roadhouse and 43 percent at Bloomin’ Brands) and the medical testing firm Quest Diagnostics (48 percent).
In the key area of climate finance, ten climate finance disclosure proposals performed relatively better (27 percent on average) than those about restrictions (only 8 percent on average for eight proposals). The highest vote was 35 percent at JPMorgan Chase, the world’s biggest carbon financier.
Proponents have expanded their campaigns to address the increasing economic damage from our warming world, adding to the list of heavy-emitting companies in the energy and utility sectors. The wider variety of firms that have a more indirect connection to emissions growth may be one reason for the reduction in support this year.
Even though the average vote fell, agreements that kept proposals off the ballot and produced company commitments to limit their climate impacts continued apace—with 69 withdrawals, about even with last year. Fifty-one of the withdrawn proposals were about adopting and reporting on GHG targets, while eight were on climate strategy and risk assessment.
Diversity: The number of proposals seeking diversity information has fallen since many more companies now routinely release data and explain their programs. This is at least partly because of shareholder encouragement over the years. Some proposals voted on this year were new and more specific, earning less support, with a category average of about 21 percent. The highest vote was 57 percent for a proposal to shipper Expeditors International of Washington seeking more information on its diversity programs, about which it currently provides almost no information. These proposals to explain diversity programs also prompted two dozen withdrawals; investors and companies increasingly believe that strong diversity management is a key competitive advantage in our increasingly diverse country.
Encouraging diversity disclosure on corporate boards remains another investor priority. Two proposals seeking information about board nominee attributes in a matrix format—as required now by NASDAQ—earned strong support. High votes were 49 percent at NextEra Energy and 44 percent at Capital One Financial. Eight more of these proposals were withdrawn after agreements.
Union organizing rights: A brand-new effort by the New York State and City Comptrollers stressed domestic trade union rights, in the face of corporate opposition to unionization. Investors gave 52 percent support at Starbucks and fairly strong support—about 30 percent—for requests to report on adherence to International Labor Organization standards. Five of six proposals that asked for adoption of ILO standards also earned support in the mid-30-percent range.
Racial justice: Many big companies have responded to calls for racial justice by agreeing to audit their operations and impacts and there were fewer proposals on the subject this year, but two votes were above 40 percent at the private prison company GEO Group and America Water Works, a water utility. There were 12 withdrawals, the result of more agreements.
Reproductive health: A dozen proposals went to votes asking how companies are navigating the new landscape of abortion restrictions and related maternal health problems, following the June 2022 Dobbs Supreme Court decision. But investor appetite for corporate action seems limited so far. The average vote for 12 proposals was about 11 percent, down from about twice that for three proposals last year. But another 12 withdrawals are testament to productive negotiations, in which firms explained their benefits and agreed to report on risks, with an emphasis on digital privacy. Reproductive rights advocates also filed many of the values congruency political influence proposals and promise to continue scrutiny of how company policies align with the views of politicians who receive company campaign contributions.
Anti-ESG: Despite much press attention to an expanded slate of proposals opposed to social and environmental action by companies, investors shrugged off these ideas, giving 52 proposals average support of only 2.4 percent—half what a proposal must earn to qualify for resubmission. While much of the funding for anti-ESG proposals comes from right-wing champions of the oil and gas sector, and their allies on the political right, the 2023 proxy season proposals focused almost exclusively on culture war social policy matters. Proposals inveighed against diversity programs, claimed various business partnerships violate fiduciary duty, and alleged the U.S. government has censored their views. (See Harvard Law Governance blog post for details.)
While investors in proxy season have never evinced any support for explicit anti-ESG ideas, the U.S. House Financial Services Committee nonetheless devoted July to expounding on the dangers of ESG. This year, a coordinated, nationwide campaign to restrict ESG considerations in state government financial affairs produced 165 bills and (as of late June) a dozen new laws, but more than 80 percent died when mainstream conservative players worried about costs and government restrictions on investment practices. Congressional House Republicans in the end focused mostly on longstanding efforts to limit the influence of proxy advisors, apparently backing off from the initial frontal attack on investment managers.
It remains to be seen what the ultimate impact of anti-ESG campaigns will be on future proxy seasons and on investment practice generally. Yet obvious and growing climate change impacts and clearly material human capital considerations are now baked into the capital markets, even if political attacks continue. ESG continues to feature in the campaigns of some presidential aspirants, though, and its opponents can draw on a deep funding pot to continue their efforts, including litigation.
What remains abundantly clear is that the capital markets will continue to consider environmental and social policy metrics and corporate governance arrangements in investment management and corporate policy. All players will continue to grapple with the complex interplay between what companies are doing, what investors want, what politicians seek, and emerging laws and regulations.
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Information is up to date as of July 24, 2023. Data was provided by Sustainable Investments Institute.
Proxy Preview is a unique collaboration between As You Sow®, Sustainable Investments Institute (Si2), and Proxy Impact. Proxy Preview is an annual publication that provides the most comprehensive free data on hundreds of ESG shareholder resolutions about the environment, corporate political influence, human rights, diversity, and sustainable governance.
As You Sow is the nation’s leading shareholder advocacy nonprofit, with a 30-year track record promoting environmental and social corporate responsibility and advancing values-aligned investing.
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Sustainable Investments Institute (Si2) gathers data and provides impartial analysis for institutional investors to make informed, independent choices on social and environmental shareholder proposals.