For Many Investors, ESG Remains a Material Priority for Shareholder Proposal Assessment  

NEW YORK (October 31, 2024) – ISS-Corporate, a leading provider of compensation, governance, cyber risk monitoring, and sustainability offerings to help companies improve shareholder value and reduce risk, today announced the findings of an in-depth analysis of shareholder proposals submitted at U.S. public companies over a 10-year period running from July 2014 through June 2024. The analysis examines investor sentiment around assessing environmental, social, and governance (ESG) risks via the volume and support levels of different types of such proposals and looks at the underlying patterns of corporate behavior and disclosures driving shareholders’ ESG campaigns. Amid intensifying debate around the value of ESG and the emergence of shareholder campaigns that seek to counter corporate action on environmental and sustainability topics, the report investigates how the debate around ESG has impacted investor sentiment and shaped corporate practices more broadly.

Key findings include:

• The number of E&S shareholder proposals has increased over the past decade, with initiatives focusing on climate change and human capital management driving the surge. Proposals related to E&S topics accounted for 62 percent of the total proposals submitted by shareholders in 2024, up from 44 percent a decade earlier. The Security and Exchange Commission’s November 2021 Staff Legal Bulletin, with updated guidance on Rule 14a-8, served as a catalyst in the surge of shareholder proposals, as it made the exclusion of E&S proposals by companies more challenging. Governance and compensation related shareholder proposals have decreased in volume in recent years, as core corporate governance-related issues became a less prominent subject of shareholder focus.
• Support levels for E&S shareholder proposals have decreased since peaking in 2021, but this does not necessarily indicate a de-prioritization of sustainability factors for many investors. 2021 saw an explosion in support for environmental proposals (primarily of those focusing on climate change), with a record 46 percent of proposals coming up for a vote receiving at least majority support and a median support level of 49 percent of votes cast. Social proposals also saw peak support in that year, against the backdrop of the pandemic and widespread racial justice protests in 2020. In subsequent years, median support levels plunged to 19 percent of votes cast in 2023 and 21 percent in 2024. However, the report suggests that shareholder engagement around these topics is becoming more nuanced, as target companies exhibit more mature environmental management programs, more advanced climate disclosures, and improved social disclosures and programs. The decreased voting support levels suggest that shareholder proponents are finding it more challenging to demonstrate significant gaps in companies’ programs and generate broad support from other investors, since companies are better able to demonstrate progress in these areas. Amidst these dynamics, the support for E&S proposals among some large asset managers has declined.
• Shareholder campaigns tend to target large-cap firms, and these companies have made particularly significant strides over the last several years in the quality of their sustainability disclosures and practices and corporate governance practices. A review of corporate sustainability disclosures shows that the overwhelming majority of S&P 500 companies now disclose key climate, labor, diversity, and other E&S metrics, a significant increase over the past six years.   
• So-called anti-ESG campaigns, which target corporate environmental and/or social initiatives and which have been primarily driven by self-described conservative groups filing “center/right” proposals, have increased in volume over the past three years. These proposals made up approximately 11 percent of the total shareholder proposals submitted in 2024 – up from around 2 percent of submitted requests from July 2014 to June 2021 – but average support levels remain in the low single digits at 1.7 percent of votes cast during the last three years. Low support levels in this case suggest that these campaigns have failed to make the case to other shareholders that corporate E&S policies are not in line with investor interests.

“While flagging support for E&S proposals may appear to suggest waning investor interest in these topics, the larger picture of improved corporate sustainability disclosures and practices suggests that corporates and investors are in fact increasingly engaged on these issues and perceive them as highly relevant to material risk analysis,” said Kosmas Papadopoulos, Executive Director and Head of Sustainability Advisory Americas at ISS-Corporate.

Read the full analysis from ISS-Corporate here.

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About ISS-Corporate
Companies turn to ISS Corporate Solutions, Inc. (“ISS-Corporate”) for expertise in designing and managing governance, compensation, sustainability, and cyber risk programs that align with company goals, reduce risk, and manage the needs of a diverse shareholder base by delivering data, tools, and advisory services. ISS-Corporate’s global client base extends across North America, Europe, and Asia, as well as other established and emerging markets worldwide. ISS-Corporate is a wholly owned subsidiary of Institutional Shareholder Services Inc. (“ISS”). ISS-Corporate provides advisory services, analytical tools and publications to companies to enable them to improve shareholder value and reduce risk through the adoption of improved corporate governance practices. The ISS research teams, which are separate from ISS-Corporate, will not give preferential treatment to, and are under no obligation to support, any proxy proposal of a corporate issuer nor provide a favorable rating, assessment, and/or any other favorable results to a corporate issuer (whether or not that corporate issuer has purchased products or services from ISS-Corporate). No statement from an employee of ISS-Corporate should be construed as a guarantee that ISS will recommend that its clients vote in favor of any particular proxy proposal or provide a favorable rating, assessment or other favorable result. For more information, please visit https://www.iss-corporate.com/.

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Audrey Dedrick
Associate, Communications
media@iss-corporate.com