A record-breaking US proxy season for shareholder proposals brought disappointment to environmental activists, as some investors shied away from backing climate proposals they saw as too prescriptive.
Buoyed by a victory last year at ExxonMobil and rules that made it easier to put public policy-related questions on proxy ballots, activists filed 389 environmental and social proposals with member companies of the Russell 3000 index, according to an analysis by The Conference Board of data supplied by Esgauge.
Yet the share of support for environmental proposals dropped from 37 per cent in 2021 to 33 per cent this year.
Some of this was due to the fact that 30 of the least controversial proposals were withdrawn after companies agreed to activists’ requests. Those that went to a vote tended to be further reaching or were at companies where management has strongly resisted environmentalist demands, the research shows.
The results reflected growing squeamishness among asset managers about tying managers’ hands on climate-related issues. This has been exacerbated by Russia’s invasion of Ukraine, which forced investors and companies to think more about energy security.
BlackRock set the tone earlier this year when the world’s largest money manager warned that it would be voting against shareholder resolutions on climate that it considered to be too extreme or prescriptive. The Conference Board analysis shows that other large investors are making similar distinctions in the name of long-term returns.
“It’s the board’s role to oversee and direct corporate strategy,” said Ben Colton, who heads stewardship at State Street Global Advisors. “As long- term shareholders, we need to be as pragmatic and consistent as possible.”
Proposals asking management to report on several environment-related options drew significantly higher backing than those that sought to restrict management behaviour. Seven resolutions asking for reports on plastic pollution garnered an average of 45 per cent support. However, 10 demands that banks and insurers stop financing new fossil fuel development received average support of just 10 per cent.
“Overall numbers don’t lie, but they don’t tell the whole story for this proxy season,” said Merel Spierings, The Conference Board researcher who analysed the numbers. She said that when the most prescriptive proposals are excluded, support for climate-related resolutions was largely unchanged from 2021.
The voting patterns at ExxonMobil make clear how these concerns are playing out this year. Last year, investors unexpectedly supported board candidates proposed by an activist hedge fund that wanted the oil major to do more on climate change. This year, several new climate-related proposals of different types were on the proxy ballot.
BlackRock voted against a proposal that would have required the US oil major to set specific targets to reduce its greenhouse gas emissions. It voted in favour of asking the company to do scenario planning for a range of energy transition pathways. State Street abstained on both.
The emissions limit proposal received just 27 per cent support, but the scenario planning item that BlackRock favoured ended up passing with 51 per cent of the vote. BlackRock owns about 9 per cent of ExxonMobil shares.
The reluctance of some investors to back prescriptive climate resolutions comes as Republican politicians are waging war against what they call “woke capitalism”. State governments in Texas and West Virginia are moving to boycott financial services groups that “discriminate” against fossil fuels.
But backers of the more specific climate proposals argued that they were necessary to move companies beyond vague promises to keep global warming to a minimum. All of the fossil fuel financing proposals met the 5 per cent threshold that allows investors to put them forward again next year.
“The resolutions were a critical step forward and helped move the conversation between investors and banks from long-term targets and disclosure to ‘What is your plan?’” said Ben Cushing, who runs the Sierra Club’s Fossil-Free Finance campaign. “It is really disappointing that these proposals were [considered] so prescriptive . . . they will be coming back.”
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