Investor support for environmental and social activism has fallen overall at U.S. corporate annual meetings this year, reflecting hesitation over increasingly prescriptive proposals and mounting political pressures.
Diminishing enthusiasm was evident across a range of companies, including Amazon, ExxonMobil and United Parcel Service.
According to the Sustainable Investments Institute, a nonprofit data provider, petitions asking US companies to do more on climate change averaged 23% shareholder support this year through the end of May, up from 36. .6% last year. Shareholder proposals on human rights won 21.6% of votes cast, up from almost a third in 2022.
Shareholder proposals, generally non-binding in the United States, have increasingly become a tool of activism for religious organizations, environmentalists and other socially engaged investors. A record number is expected to be filed this year, according to the Conference Board and data from Esgauge, a research group.
A US policy change in 2021 allowed more petitions to go to vote. As a result, the proposals have evolved from innocuous requests for disclosure to specific demands for corporate action.
While the number of petitions has increased, support has not increased accordingly. Only five U.S. shareholder resolutions on environmental and social issues have won majority support from company shareholders this year, compared to more than 35 in 2022 and 2021, the Sustainable Investments Institute said.
“We’ve seen an increase in more transparent corporate disclosures, particularly by larger companies, as well as an increase in overly prescriptive proposals appearing on corporate ballots,” said Benjamin Colton, chief steward at State Street Global Advisors, the $3.6 billion asset manager. “Our finding is that these dynamics have led to an overall decline in investor support for environmental and social shareholder proposals.”
Only 11 percent of Exxon shareholders backed a petition last week to set emissions reduction targets in line with the Paris climate accord, up from 28% last year. At Amazon, a resolution calling for more information about the risks of plastic packaging received less than a third of shareholder support, down from nearly half last year.
There were, however, notable exceptions in the voting of several major US banks on climate policies. About three in 10 shareholders with voting rights at Goldman Sachs, Wells Fargo and Bank of America supported resolutions who called on the board to set out climate transition plans, with that figure rising to 35% at JPMorgan Chase.
Plastic pollution motivated a cohort of investors in Restaurant Brands International, the company behind Burger King, and Yum Brands, the parent company of KFC, Pizza Hut and Taco Bell, where 37% called on the company to report on the way it could cut off plastic usage.
But support for a proposal on diversity, equity and inclusion in the UPS transportation business was 25% this year, up from 37% in 2022.
Shareholder voting activity has also become bogged down in political fights over the rise of environmental, social and governance (ESG) investing. Florida Governor and presidential candidate Ron DeSantis signed legislation last month that requires state pension funds to vote solely on “monetary factors.” In December, Senate Republicans accused asset managers BlackRock, Vanguard and State Street of using their shareholders’ voting power “to advance liberal social goals.”
Publicly, major asset managers have said the political attacks have not changed their voting policies, said Conference Board chief executive Matteo Tonello. But, “I think their response to the backlash has caused them to be a bit more cautious and sensitive to the implications of these (voting) policies.”
The picture is different outside the United States. Average support for environmental and social proposals across European businesses rose to 11.6% in 2023, from 10.6% last year and 5.5% in 2021, according to data provider Diligent. Fewer shareholder proposals are being filed in Europe – only eight environmental or social proposals have been put to the vote through May 31.
According to Diligent, support for environmental and social resolutions outside of Europe and the United States was 17% this year, up from 11.3% last year.
American conservative activists have also filed registration numbers of shareholder proposals since the change in SEC policy. Their shows also failed to garner support from institutional investors and asset managers.
BlackRock said its shareholder vote has always been focused on delivering “long-term financial value for our customers.” The company’s support for shareholder petitions had dropped out last year. State Street’s Colton said the asset manager’s voting record has remained “very consistent over the years”.
Vanguard declined to comment.
Abortion-related petitions, filed after the U.S. Supreme Court struck down federal abortion rights last year, failed to win more than 12% support from Tenet Healthcare, American Express and Eli Lilly. At insurance company Travelers, a proposal asking the company to set a deadline to stop underwriting new fossil fuel projects won 8.8% support in May, down from 13% last year. Proxy advisor Institutional Shareholder Services said the company disclosed most of what the shareholder petition required.
Shareholder proposals are “getting more and more prescriptive,” said Brian Bueno of Farient Advisors, an advisory firm. For the organizations that typically file the most petitions, “what they were doing this year clearly didn’t work,” he said. “We will eventually see that their efforts have not worked as well this year as in previous years.”
Additional reporting by Brooke Masters in New York