Below is an excerpt from ISS’ recently released 2020 Pan-European Proxy Season Preview. The full report is available to institutional subscribers by logging into ISS Link then selecting the Governance Exchange and its Report Center tab and to corporate subscribers by logging into Governance Analytics then selecting the Governance Exchange and the Report Center tab.
Climate change and related risks continue to be a top area of concern for many investors, as we enter the 2020 proxy season. Wildfires in California and Australia, disruptive flooding in the Midwest of the U.S., more extreme storms and other effects of a warmer climate have increased the pressure for action by corporations, governments, consumers, and other actors.
Although the U.S. federal government has backed away from its climate change commitments, many state and local governments are moving ahead with carbon regulation, and some countries are starting to issue decisions with consequences for capital planning. In February 2020, for example, the British’s government’s plans to build a third runway at London’s Heathrow airport were blocked by the London Court of Appeals because it stated that the government had failed to adequately take into account the runway’s impact on Britain’s commitments under the Paris Agreement.
The utility sector will most likely see a few shareholder proposals, but, with its transition toward a lower-carbon profile well under way, utilities are only likely to be targets for shareholder proposals if they have been seen to be lagging behind the rest of the industry.
Beyond climate-related environmental topics, many investors have continued to engage companies regarding the growing concerns over plastic pollution and expectations of corporate responsibility to address the issue. Shareholder proponents, mainly led by As You Sow, have filed a dozen proposals focused on plastic pollution and sustainable packaging this year. A majority of the proposals ask that the companies provide a report on what they are doing to increase their efforts to develop sustainable packaging or increase plastic recovery. In addition, some want to know what companies are doing to increase support of public policies and industry solutions to address plastic pollution.
One proposal at Walmart asks the company to assess and report on the impacts of continuing to use single-use plastic bags when several of its key peers have already stopped using them or have committed to phasing them out. The proponent points out that eight states, including California and New York, and over 50 countries ban or restrict the use of plastic bags. More than 470 U.S. municipalities in 28 states now ban or charge fees for single-use plastic bags. To date, four of these proposals – at CVS Health, Republic Services, Starbucks, and Waste Management – have been withdrawn due to commitments made by the companies. Three other proposals filed at industrial and energy firms request that these companies provide metrics on their efforts to reduce plastic pellet spills into the environment during the production process.
Meanwhile, shareholder proposals related to worker safety and fairness of opportunity were submitted in large numbers in 2019 and that trend is expected to continue. The number of shareholder proposals that were filed related to human capital management surged in 2019 to 55 proposals, up from 40 in 2018.
By Kathy Belyeu & Enver Fitch; ISS U.S. Research