As the proxy season is in full swing, an early analysis of environmental shareholder proposals suggests that many trends from the 2021 proxy season are carrying over into this year - some to an extreme. Here are just a few preliminary observations about environmental proposals thus far in 2022: 

• As we predicted earlier this year, it has become more difficult for companies to reach a negotiated compromise on or omit environmental proposals. We expected that, emboldened by the success of their proposals last year, proponents see less incentive to negotiate a withdrawal of their proposals. But the magnitude of the leap is striking. As of May 12th – when the most recent proxy voting results were filed – 70% of environmental proposals (26 out of 37) have come to a vote. This compares to 33% of proposals (13 out of 40) that came to a vote in the same period last year. Of the 30% of proposals that didn’t go to a vote thus far this year, 24% were withdrawn and 6% were omitted (compared to 55% and 13%, respectively in the same period last year).

• The focus on climate continues to increase. As of May 12th, the number of climate-related proposals increased both in absolute numbers (27 this year compared to 26 in the same period last year) and percentage (73% versus 65%).

• As expected, average support for environmental proposals remains high and there is growing support for proposals beyond climate. As of May 12th, support for environmental proposals averaged 31% and four proposals passed. Proposals on plastic packaging/pollution are currently averaging 53% support.

• But average support for environmental proposals has dropped, driven by several factors. First, the SEC’s recent guidance on shareholder proposals, widening the scope of permissible proposals that address significant social policy issues, has led to an influx of environmental proposals of lesser quality and relevance going to a vote. Second, some climate-related proposals are becoming more prescriptive, which – in combination with the war in Ukraine and the subsequent uncertainty around global energy markets – have made investors such as BlackRock reluctant to support certain proposals. These include proposals to ban the financing or underwriting of projects that could lead to new fossil fuel development (which are receiving an average of just 11% support). Third, in several instances, the company is already doing what the proponent is asking for. If you adjust for these effects, support for (more traditional) environmental proposals is as high as last year. 

If you’d like to conduct your own analysis of 2022 proxy season in real-time, I encourage you to sign up for a demo of the ESG Advantage Shareholder Voting Benchmarking Tool. It lets you generate customized reports on shareholder and management proposals based on topic, proponent, outcome, and company from 2018 through the current proxy season in the full Russell 3000.

70% of Environmental Shareholder Proposals Going To Vote

70% of Environmental Shareholder Proposals Going To Vote

20 May. 2022 | Comments (0)