Below are key takeaways from ISS’ recently released 2024 Proxy Season Preview – United States -Environmental & Social Issues. The full report is available to institutional subscribers by logging into ProxyExchange 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 civil and human rights topics are expected to continue to generate the most numerous Environmental & Social-related (E&S) shareholder proposals in 2024. Climate change, diversity, equity and inclusion (DEI) and political spending appear to be the dominant topics of E&S shareholder proposal filings going into the 2024 proxy season. The topics of drug pricing and accessibility, reproductive healthcare, artificial intelligence, and freedom of association, are topics expected to emerge or grow this year.
- So-called “Anti-ESG” shareholder proposals continue to be filed in higher numbers. These are diverse in nature, but the proposals are generally skeptical or critical of the value or legitimacy of some of the concepts that broadly pertain to climate risk or corporate social responsibility,and often aim to use traditional shareholder proposal language to advance views that may resonate more with shareholders that have a critical stance towards “ESG”.
- The number of E&S-related shareholder proposals filed in the U.S. reached an all-time high in 2023, and that trend is expected to hold in 2024. In 2023 there were 643 E&S-related proposals filed. The high number of filings coupled with the SEC’s guidance that has made it more difficult for companies to omit shareholder proposals, also resulted in a record 372 E&S proposals reaching the ballot. The volume of proposals in 2024 is expected to be largely on par with 2023.
- However, support for E&S-related shareholder proposals dropped for the second consecutive year in 2023. U.S. E&S shareholder proposals received 16 percent median shareholder support, down from 22 percent in 2022 and 29 percent in 2021. While in 2022 there were 37 majority supported E&S-related proposals in the U.S, that decreased to 8 majority-supported proposals in 2023, despite the fact that more proposals were voted on. It remains to be seen whether the 2023 declining support levels for E&S shareholder propsals will continue in 2024.
- Technology companies expected to come under greater shareholder proposal focus. Rapid technology development including Artificial Intelligence (AI), the rise of misinformation, and the ubiquitous nature of social media continue to generate concern among some shareholder proponents about fairness, censorship and about what can be believed.
- The Securities and Exchange Commission (SEC) issued its long-awaited final climate financial risk disclosure rule on March 6, 2024. The rule will require various disclosures by companies to help investors better assess material climate-related risks. The rule will not require companies to disclose emissions associated with their value chains (or Scope 3 emissions).
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By: Kathy Belyeu, Michael Ellis, Enver Fitch
