Investors pull back support for green and social measures amid US political pressure

Investors’ support for environmental and social activism sank overall at this year’s annual meetings of US companies, reflecting hesitation over increasingly prescriptive proposals and mounting political pressures.

The waning enthusiasm was evident across an array of businesses including Amazon, ExxonMobil and United Parcel Service.

Petitions asking US companies for more action on climate change won an average of 23 per cent shareholder support in this year to the end of May, down from 36.6 per cent last year, according to the Sustainable Investments Institute, a non-profit data provider. Shareholder proposals on human rights took 21.6 per cent of votes cast, compared with almost a third in 2022.

Shareholder proposals, usually non-binding in the US, have increasingly become an activism tool for religious organisations, environmentalists and other socially engaged investors. A record number are expected to be filed this year, according to The Conference Board and data from Esgauge, a research group.

A US policy change in 2021 has allowed more petitions to go to a vote. As a result, proposals have evolved from anodyne disclosure requests to specific demands for action from companies.

While the number of petitions has increased, support has not grown correspondingly. Only five US shareholder resolutions on environmental and social issues have won majority support of company shareholders this year, down from more than 35 in 2022 and 2021, the Sustainable Investments Institute said.

“We have seen an increase in more transparent corporate disclosures, especially by larger companies, along with a rise in overly prescriptive proposals appearing on company ballots,” said Benjamin Colton, head of stewardship at State Street Global Advisors, the $3.6tn asset manager. “Our observation is that these dynamics have led to an overall decline in investor support for environment and social shareholder proposals.”

Only 11 per cent of Exxon shareholders last week backed a petition to set emissions reduction targets consistent with Paris climate agreement, down from 28 per cent last year. At Amazon, a resolution calling for more information about plastic packaging risks received less than one-third of shareholder support, down from nearly half last year.

There were notable exceptions, however, in voting at several big US banks over climate policies. About three in 10 voting shareholders at Goldman Sachs, Wells Fargo and Bank of America backed resolutions that called for the board to set out climate transition plans, with the figure rising to 35 per cent 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 per cent called for the company to report on how it could cut out plastic use.

But support for a proposal on diversity, equity, and inclusion at shipping business UPS was 25 per cent this year, down from 37 per cent in 2022.

The business of shareholder voting has also become engulfed in political fights over the rise of environmental, social and governance (ESG) investing. Florida governor and presidential candidate Ron DeSantis last month signed a law that requires the state’s pension funds to only vote shares on “pecuniary factors”. Senate Republicans in December accused asset managers BlackRock, Vanguard and State Street of using their shareholder voting power “to advance liberal social goals”.

Publicly, large asset managers have said the political attacks have not changed their voting policies, said Matteo Tonello, a managing director at The Conference Board. But, “I do think their response to the backlash has led them to be a little more cautious and sensitive to the implications that these [voting] policies have.”

The picture is different outside the US. Average support for environmental and social proposals at European companies inched up to 11.6 per cent in 2023 from 10.6 per cent last year and 5.5 per cent in 2021, according to data provider Diligent. Fewer shareholder proposals are filed in Europe — only eight environmental or social proposals went to a vote through May 31.

Support for environmental and social resolutions outside of Europe and the US stood at 17 per cent this year, up from 11.3 per cent last year, according to Diligent.

US conservative activists have also lodged record numbers of shareholder proposals since the SEC’s policy change. Their issues have also failed to garner support from institutional investors and asset managers.

BlackRock said its shareholder voting has always been focused on delivering “long-term financial value for our clients”. The company’s support for shareholder petitions had dropped last year. Colton of State Street said the asset manager’s voting record has remained “very consistent over the years”.

Vanguard declined to comment.

Abortion-related petitions, filed after the US Supreme Court struck down federal rights to an abortion last year, failed to win more than 12 per cent support at Tenet Healthcare, American Express and Eli Lilly. At the insurance company Travelers, a proposal asking the company to set a deadline to stop underwriting new fossil fuel projects won 8.8 per cent support in May, down from 13 per cent support last year. Proxy adviser Institutional Shareholder Services said the company has disclosed most of what the shareholder petition demanded.

Shareholder proposals are “becoming increasingly prescriptive”, said Brian Bueno of Farient Advisors, a consultancy. For the organisations that typically file the most petitions, “it clearly didn’t work what they were doing this year”, he said. “We will end up seeing that their efforts did not work as well this year as prior years.”

Additional reporting by Brooke Masters in New York

Climate Capital

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