Proxy season is upon us! This means we are entering the time of year when companies hold meetings to elect new board members, approve executive pay, and address the concerns of shareholders.
For investors who care about the social and environmental impacts of their investments, this is an opportunity to influence company behavior for the better. Shareholders have the opportunity to vote on proposals ranging from corporate accountability on greenhouse gas emissions, to addressing gender pay gaps, remediating toxic environmental impacts, or improving diversity on company boards.
Despite the right-wing attack on the use of environmental, social and governance considerations in making investment decisions, shareholders are filing more ESG-related proposals than ever before. For example, shareholders filed almost twice the number of proposals related to climate change this year than they did two years ago.
This is great news! It means that more and more people are waking up to the realization that owning stock in a company gives them a say in how that company is run.
Investors in mutual funds rely on their fund managers to cast proxy ballots on their behalf. As fiduciaries, these financial professionals are responsible for voting in the best interest of their clients.
Funds with a socially and environmentally responsible - or ESG - mandate, must also consider how their votes align with the environmental, social, and governance concerns that their shareholders count on them to address.
Here’s a brief overview of the themes that will show up in this year’s proxy season, based on an assessment from the shareholder advocacy organization, As You Sow.
The emergence of ESG investing into the mainstream is reflected in the number of proposals related to how companies measure, report, and act on their climate impact. This year, shareholders filed 122 proposals related to climate change, compared to just 66 in 2021.
Investors want to know the extent to which companies are contributing to the problem, and what they plan to do about it. Investors also want to know how companies are calculating and addressing the material risks they face as a result of climate change, and how their lobbying activities align with their stated climate goals.
Other environmental proposals ask companies to address deforestation, measure their methane emissions, and report on water contamination and use. A handful of proposals ask banks to provide information about how they finance fossil fuel projects.
Shareholders will vote on fewer proposals on diversity and pay equity this proxy season than in years past, but that’s because many resolutions are withdrawn before a proposal makes it on the ballot if a company is willing to negotiate. Advocates withdrew 20 diversity equity and inclusion proposals this year after reaching agreements with management. Reflecting a shift in corporate culture, a growing number of companies are proactively disclosing such data.
One area where the number of social proposals is increasing however, is in regards to health and reproductive rights.
This year, political opposition to environmental, social, and governance (ESG) investing led to a small uptick in shareholder proposals demanding that companies stop addressing these issues, and stop releasing data about their environmental impact or diversity metrics. Accounting for only 8% of the total number of proposals filed this year, they are unlikely to gain much traction.
The more data investors have about all aspects of a company—including the company’s social and environmental impacts—the more informed they can be in their decisions. Because of this, proposals asking for disclosures appeal to a wide audience and are more likely to pass than those that ask a company to take a specific action. However, a proposal doesn’t need receive a majority vote in order to send a message about what is important to investors. This makes proxy voting, whether immediately successful or not, an important tool for nudging companies in the right direction.
At LongView, we pay close attention to the voting strategies of the funds we use. We discuss them with portfolio managers, and we take account of their votes. It’s just one of the ways we try to ensure that your money is invested in alignment with your values, while doing good for you, and for the world.
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