Investors appear to have rolled back support for climate resolutions this year, according to a preliminary analysis of 92 proposals at companies in “climate exposed” sectors from financial services company Morningstar.
Although Morningstar intends to publish a full analysis of 2023 data later this year, it claims that this preliminary analysis, focused on the energy, insurance and banking sectors, gives a “pretty good indication” of 2023 proxy season trends; namely, that investors are continuing to reduce support for climate resolutions, with average support falling from 20% in the 2022 proxy year to 17.1% in 2023.
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This decline was driven by investors at US companies, where average shareholder support fell by almost nine percentage points to 16.7% in 2023, from 25.5% in 2022.
By contrast, there was a “slight increase” in support for these resolutions (to 17.6% from 14.7%) in non-US markets: Canada, the UK, France, Australia and Switzerland.
This drop in overall support comes in spite of the total number of resolutions increasing, with 53 climate resolutions filed in the first 11 months of the 2023 proxy year compared with 49 throughout 2022.
Morningstar suggests that asset managers were reluctant to support many of the new shareholder proposals on environmental and social themes "on the grounds that they were unduly prescriptive".
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By GlobalDataFor example, in the insurance sector, which saw the largest fall in support, shareholders typically demanded "specific time-bound reductions" in insurers’ fossil fuel underwriting businesses.
Resolutions of this nature are "a step too far for many asset managers", says Morningstar, noting that some believe such proposals "ignore existing policies and seek to micromanage the company".
By contrast, resolutions filed at banks included a number of less prescriptive demands such as more information on banks’ climate policies and strategies.
Keep up with Energy Monitor: Subscribe to our weekly newsletterResolutions at energy companies received slightly less support in 2023 compared with last year, especially on resolutions relating to the thorny issue of scope 3 emissions.
Report author Lindsey Stewart told Energy Monitor that the rise in total resolutions filed, coupled with a decline in support, is more likely a reflection on the types of resolutions filed this year, as opposed to a strong signal that investors are turning their backs on climate change.
Nevertheless, Stewart notes that other factors, such as the global energy crisis conditioned by Russia’s war in Ukraine, are likely to have contributed to this fall; for example, leading investors to be more wary about asking companies to commit to reducing fossil fuels.
Additionally, Stewart points out that in 2023, investors have been “much more” focused on how their portfolio companies are “going to get [their] share of the Inflation Reduction Act”, than on “how they can save the planet”.
It is also possible that the anti-ESG movement spreading across the US has played a part in dampening asset managers’ support for climate-related proposals, although Stewart warns it is “possible to overstate” the influence of this movement on investors’ decision-making.
