Support for ESG proposals plummeted from a peak high of 33.3% in 2021 to just 21.5% in 2023, according to Proxy Preview 2024, an annual report published by the shareholder advocacy group As You Sow, in conjunction with the sustainable non-profit Sustainable Investments Institute (Si2) and ESG shareholder aggregator Proxy Impact, assessing the state of play in the upcoming US 2024 proxy season.
Support for ESG resolutions in 2023 also experienced a significant decline from 2022 levels, when average support stood at 29.4%, the analysis reveals.
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One potential reason for the decline in support is the “anti-ESG” pushback that has swept across the US over the past two years, led by Republican politicians aiming to clamp down on ESG investment practices. Ultimately, their efforts have led to a swathe of state-level anti-ESG bills targeting banks' and asset managers’ climate policies, which include limiting investments in fossil fuels.
Proxy Preview 2024 notes that while the majority of these bills were "beaten back", a few became law and their ongoing costs to local and state municipalities "can be counted in the billions”.
Threats from state attorneys general about proxy voting just as the 2023 proxy season began are likely partially attributable to the decline in support, the report authors note.
They add that the fall in support for ESG resolutions last year (even as the number of resolutions surged and proportionally more went to votes) was likely due to an increase in proposals going "outside the traditionally targeted high-carbon energy and utility sectors", meaning “some investors may question the relevance of climate action for them”.
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By GlobalDataIn addition, “uncertainty continued about what will be included in the new SEC [Securities and Exchange Commission] climate disclosure rule” could have played a part in the decline, while separately, spiking energy prices prompted by Russia’s invasion of Ukraine, which pushed up profits and investor returns, “may have caused some investors to shelve criticism for the short-term in their voting decisions”, the report notes.
For the 2024 proxy season, 527 shareholder proposals have been filed so far, down from 536 at this point in each of the two previous years.
The volume of proposals specifically on climate change has fallen to 106, down from an all-time high of 122 at this point last year, which ultimately reached 139 by year’s end 2023.
Investors' "heavy focus on greenhouse gas emissions targets and reporting from last year remains", the report notes. The "biggest set" of climate change proposals are those concerned with climate transition planning (42 proposals), while 21 more are narrowly about emissions targets and reporting. Another 25 proposals are focused on climate change impacts, while 17 concern carbon financing.
Despite last year’s fall in support for ESG resolutions, the data shows that specifically anti-ESG resolutions are still struggling to gain a foothold in the proxy season. Of the total proposals filed, anti-ESG proposals only account for 8% of the total in 2024, while environmental proposals stand at around one third of the total – the same as last year.
Indeed, generally the make-up of ESG proposals remains the same as last year – with around 33% focused on environmental topics, 30% diversity, decent work and human rights, and 17% on corporate political influence.
Last year, the authors noted that, historically, anti-ESG proposals have received "very little voter support", averaging 4% or less in previous years. That is because the ideas in anti-ESG resolutions have “no traction with investors – nor with many companies", the authors said.
In terms of other key changes from last year, the “significant expansion” of resolutions about reproductive health in response to the 2022 US Supreme Court decision to overturn Roe versus Wade observed last year has not continued into 2024, while “the most notable new proposals” from 2024 are those that ask companies about their use of AI, with a few also referencing new recommendations to protect biodiversity and nature.
