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Jul 08, 2021

E&S proposals build momentum this proxy season

Preliminary data shows environmental and social proposals receiving record levels of support

Investor support for environmental and social shareholder proposals at Russell 3000 companies has increased significantly this year, based on early proxy season analysis from Georgeson.

According to the analysis, 30 environmental and social proposals have already passed, which is the highest number on record. This is a 50 percent increase on the total number of such proposals receiving majority support during the 2020 proxy season.

There is also record-breaking support for shareholder proposals focused on plastic pollution, political contributions and board diversity. Georgeson says investors have submitted nearly 150 percent more workforce diversity-related proposals in 2021 than in 2020 (from 37 to 91), while climate change proposals have risen by 73 percent (from 36 to 62).

The analysis covers proxy meetings at Russell 3000 companies between July 1, 2020 and June 2, 2021.

Hannah Orowitz, senior managing director at Georgeson, says in a statement that this proxy season so far ‘has already produced a number of unprecedented results. Shareholders have demonstrated a marked and decisive shift in their willingness to use proxy votes to express their views regarding ESG risks and opportunities, resulting in more environmentally and socially focused shareholder proposals – and greater support for them.’

There were 40 percent more environmental proposals submitted this year than in 2020, with more than 60 percent being withdrawn as of June 2. More than half (33) of the withdrawn environmental proposals related to reporting on climate change.

‘Beyond proxy ballots, more environmental and social proposals did not reach a vote this season, demonstrating the extensive engagement that took place between companies and shareholders during the off-season,’ Orowitz says.

Aside from the volume of environmental proposals receiving majority support this season, in some cases the percentage of support received is also unprecedented. For example, at General Electric and Bunge, management recommended that shareholders vote in favor of environmental proposals this year, which Georgeson’s report authors note is atypical.

Of just over 100 socially focused shareholder proposals voted to date, 18 have passed, which represents a slight increase on the 2020 proxy season. The bulk of these proposals address either diversity or political contributions and lobbying payments, which continue to be prevalent issues. This year, 74 such proposals were filed, compared with 70 last proxy season, and 46 of those have or will be voted on.

Proposals related to diversity broadly cover asking for racial equity audits, disclosure of EEO-1 data and reporting on diversity, equity and inclusion (DE&I) efforts. Although no racial equity audit proposals received majority support this year, two proposals asking for EEO-1 data and four asking for reporting on DE&I efforts passed.

None of the racial equity audit proposals received majority support, but half of those voted received support in excess of 30 percent, which is notably high for a first-time proposal.