August 9, 2021
You could see it coming. The signs were there heading into the 2021 proxy season that investors would have a heightened focus on environmental, social and governance (ESG) issues. Now, we know it was a record-breaking year.
Just take a look at these facts and figures so far:
According to Georgeson’s early proxy season analysis of Russell 3000 companies, 30 environmental and social proposals have already passed, the highest number on record and a 50% increase compared to the total number of such proposals receiving majority support during the 2020 proxy season. More than one-third of environmental shareholder proposals voted on to date have passed. And there has been previously unmatched support for shareholder proposals focused on plastic pollution, political contributions and board diversity.
There was also the high-profile proxy fight for Exxon Mobil, which ultimately lost three board seats, giving an activist fund control of one-fourth of the company’s Board of Directors. The activist fund was able to gain the support of shareholders who pushed back on the company’s climate-related plans, disclosures and governance. Large investors BlackRock and Vanguard were among the investors who supported the activists’ Board nominees.
In March, BlackRock previewed what was to come, stating: “In 2021, we see voting on shareholder proposals playing an increasingly important role in our stewardship efforts, particularly on sustainability issues.”
The company has since released its Investment Stewardship: A look into the 2020-2021 proxy voting year with these notable points: BlackRock supported 35% of shareholder proposals, compared to 17% the previous year, and on ESG-related topics, supported 64% of environmental proposals, 35% of social proposals and 32% of governance proposals. They voted against 255 directors and against 319 companies for climate-related concerns that could negatively affect long-term shareholder value.
Proxy Preview (a collaboration among As You Sow, Sustainable Investments Institute (Si2), and Proxy Impact) recently released its highlights of the unprecedented 2021 proxy season – showcasing a historic increase in shareholder support with nearly three dozen majority votes for disclosure and action on ESG shareholder resolutions. The group boasted, “To date, there have been 34 majority votes for ESG proposals, shattering last year’s record of 21. More are likely by year’s end. Last year, only two votes broke 70%, while this year 17 did. Eight were in the 80s and six saw more than 90% support. Four of the six that received more than 90% were supported by management — a first for U.S. environmental and social resolutions. More importantly, other high-scoring proposals were opposed by management but still earned huge support.”
So now what? The 2021 results have no doubt emboldened the activists and made many more public companies keenly aware of the growing attention to ESG disclosures and Board oversight of ESG.
Next steps for companies run the gamut of possibilities – from being prepared to respond and react to the heightened attention all the way up to implementing a highly proactive approach intended to make ESG a value-creating, competitive-advantage imperative.
There is no standard answer for all companies or every moment of time. Want to talk about what’s right for your organization? Contact me at arodenhauser@dix-eaton.com and learn more about our ESG/Sustainability Communications practice here or sign up for our ESG newsletter here.
