Americas

Biodiversity, AI Added to Investor Demands of US Firms

Shareholder proposals demanding transparency have been filed for the 2024 proxy season, with a strong emphasis on lobbying alignment.

Shareholder proposals on biodiversity and AI are among the key themes highlighted in shareholder advocacy NGO As You Sow’s (AYS) newly launched Proxy Preview 2024.

The report, published alongside the Sustainable Investments Institute (Si2) and Proxy Impact, reviewed at least 527 shareholder resolutions filed on ESG issues for the current proxy season.

The environment remains a central shareholder concern with more than 190 proposals filed, a near 20% increase on 2023. Resolutions address a number of specific risks including climate change, plastic pollution, and the vulnerabilities of agricultural supply chains.

The preview flagged that US shareholders are using proposals for the first time to raise concerns over the impact of biodiversity loss on their portfolios. Five firms face questions that invoke Taskforce on Nature-Related Financial Disclosures recommendations to protect biodiversity and nature released last September, requesting a biodiversity impact and dependency assessment.

These include proposals from Domini Impact Investments to Home Depot and International Paper asking each to “conduct and disclose a biodiversity impact and dependency assessment”. The impact investor has asked Home Depot to include “the full value chain and use of sold products, to inform its strategy to prevent negative impacts on biodiversity”. Separately, it called for International Paper to report on “the degradation of high-integrity forests”.

“Shareholder advocacy and sustainable investing is resilient and growing as companies and investors continue to assess and address ESG risk as part of fundamental business practices and to fulfil their fiduciary duty,” said Andrew Behar, CEO at AYS. “New shareholder resolutions this year invoke the rights of nature and defend virgin ecosystems, alongside innovative ideas on climate change.”

AI proposals flag political, governance concerns

Alongside biodiversity, AI and its implications on business was spotlighted by the preview as being an “entirely new issue for proxy season”. Thirteen proposals seek to challenge technology and media companies, including Alphabet and Meta, on guiding ethical principles on artificial intelligence, misinformation, and human rights impacts.

The report pointed to two proposals in particular as covering new ground. The first focused on how global political risks may be exacerbated by online content hosted by Meta. The second, filed by AYS, asked Meta to ban political ads ahead of November’s US general election to combat divisiveness and misinformation as covering new ground.

The majority of the proposals had been filed by the pension trust of American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). These requested that tech and media companies make disclosures or provide reports on the ethical principles they are employing to guide the use of AI in their businesses.

At the end of last month, Apple faced a proposal requesting it publish a transparency report on the use of AI in its business operations. The proposal received 37.5% of votes despite the company having advised its shareholders to vote against.

“Investors continue to raise strong concerns about the tech industry’s outsized impact on society,” said Michael Passoff, CEO of Proxy Impact and the preview’s co-author. “Shareholders are calling for more transparency and accountability on crucial social issues such as political election disinformation and the exponential growth of online child sexual exploitation.”

Global trends

The 527 shareholder proposals filed this year is marginally down from 536 last year at the same point last year, but it is still possible the final total will reach 630 like in 2023 and 2022. Institutional Shareholder Services (ISS) Governance’s 2024 Global Outlook Report recently projected that US environmental and social shareholder proposals could match or surpass the record number reached last year.

Social issues, including corporate political influence, workplace diversity, equity, and inclusion, and human and labour rights comprise 52% of this year’s shareholder proposals.

The preview did however note support levels for shareholder proposals had “fallen substantially” on average in the last two years. Support for pro-ESG proposals dropped to 21.5% last year compared to the all-time high of 33.3% in 2021 The report stated this was “largely because the biggest asset managers have stopped supporting as many proposals”.

ISS Governance’s report also saw shareholder support for environmental and social proposals decline for a second consecutive year. These proposals garnered 18.7% in support on average, down from 26.2% in 2022.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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