Dive Brief:
- U.S. shareholders submitted a growing number of environmental and social proposals over the past decade, with 612 such proposals sent to company boards in 2024, or 62% of the total number of proposals. This compares to 44% of proposals focused on those topics a decade earlier, according to a new report by proxy advisory firm ISS-Corporate.
- The increased focus on environmental and social issues came as shareholders pulled back on governance and compensation proposals over the past decade, with 382 submitted in 2024 — a 56% drop since 2015.
- ISS-Corporate’s research showed a small increase in the number of environmental and social proposals submitted between 2022 and 2024. However, that includes a record 108 anti-ESG proposals in 2024, up 39% from the prior year, and shareholders remain largely unswayed by the majority of these proposals, ISS-Corporate reported.
Dive Insight:
Increased politicization of ESG risks and reporting drove the increase in anti-ESG proposals, according to ISS-Corporate’s report. Anti-ESG proposals made up approximately 11% of all requests in the year through June 2024, compared to approximately 2% of requests from July 2014 to June 2021.
The increase has not corresponded with a groundswell of shareholder support for anti-ESG requests. Median support level for these measures was 1.7% from July 2021 to July 2024, with median support at 1.5% in 2024.
“Investors show little to no interest in proposals that advocate a political viewpoint without demonstrable economic relevance,” the report said.
ISS-Corporate’s analysis is based on review of shareholder proposals submitted at U.S. companies from July 2014 to June 2024. The firm looked at the content of shareholder proposals, corporate behavior and the evolution of sustainability and corporate governance disclosures over the past decade.
Support for environmental proposals declined since 2021, when proposals on this topic – particularly relating to climate change — received record levels of support. During that year, 46% of voted proposals on that topic passed, with a median support level of 49% of votes cast.
However, median support levels dropped to 19% and 21% of votes cast in 2023 and 2024, respectively. Despite this decline, the volume of environmental proposals that reach a vote is at historically high levels, with 97 and 82 proposals going to vote in 2023 and 2024, respectively. On social proposals, median support peaked in 2021 with 33% of the votes cast, followed by a steady decline in subsequent years.
In the 2010s, the proportion of withdrawn environmental and social proposals grew, a finding the report pointed to being a reflection of the effectiveness of shareholder campaigns and a trajectory toward consensus. In 2021, withdrawals on these proposals reached a record 49%, owing to “record support levels and overall momentum towards greater transparency and commitments in relation to sustainability management,” according to the report.
By contrast, the percentage of withdrawn proposals declined since 2021: By 2024, the percentage of withdrawn submitted proposals dropped to 31%. This decline may be attributed to two causes: companies’ efforts to beef up sustainability disclosures and management programs may cause shareholders to up the ante on proposals; and less of an appetite for compromise among shareholder campaigns.
“The lower rate of withdrawals of environmental and social proposals suggests companies and proponents are finding less common ground,” the report said.
Governance and compensation become less of a submission priority
ISS-Corporate characterizes the growth of shareholders’ environmental and social proposals over the past decade as an explosion of interest, surpassing governance and compensation topics that dominated discussions in the mid-2010s. Climate change and human capital management — including diversity, equity and inclusion — drove the growth of these proposals in recent years.
The report suggests a declining priority for governance-related topics over the past decade. However, support for governance topics bolstered overall ESG proposal support in the latest proxy season, according to reporting from Morningstar Sustainalytics.
“Over the decade, many governance-related issues were either resolved or became less prominent, though persistently large volume indicates that governance and compensation remained important,” the ISS-Corporate report said.
Despite a decline in the number of governance and compensation proposals in recent years, ISS-Corporate reported a 13% increase between 2023 and 2024. ISS-Corporate said some of the increase could be driven by concerns over executive compensation, evolving market conditions, or shifts in corporate behavior following the COVID-19 pandemic.
