Shareholder rebellions suggest US investors support regulatory focus on social as well as environmental disclosures.
Voting outcomes in a turbulent AGM season suggest investors want greater transparency from US corporates on a variety of social issues, as well as the mandatory climate-related disclosure regime being mulled by regulators.
“I’m seeing an equal balance and focus on social and environmental issues within corporates; there’s been a very dramatic sea change,” Meredith Benton, Principal and Founder of consultancy firm Whistle Stop Capital, told ESG Investor. “Right across the board, we’ve seen extremely high voting support for ESG-related resolutions. We’re officially entering a new landscape for how companies are expected to respond to ESG-related issues.”
Investors increasingly want to see information on a corporate’s workplace composition––its recruitment, retention and promotion rates, Benton said.
“If a company isn’t willing to share that information, then that’s an indicator of company priorities in and of itself,” she added.
Already this AGM season, a majority of American Express investors voted in support of a shareholder resolution filed by NGO As You Sow, which asks the company to report on how its internal workplace practices align with its stated commitment to diversity, equity and inclusion.
In April, As You Sow filed a resolution against fashion brand Nike due to “insufficient quantitative data for investors to determine the effectiveness of its human capital management programme as it relates to workplace diversity”. This is despite the fact that Nike has been branding and advertising itself as a highly inclusive brand.
Following ongoing damaging allegations of harassment and discrimination in the workplace, As You Sow asked Nike publish an annual report which clearly outlines the board’s progress on assessing the effectiveness of its diversity, equity and inclusion programmes, as well as measures the board is taking to improve diversity and inclusion efforts. The resolution hasn’t yet gone to vote.
“[These are companies that] have made very fervent statements around the importance of racial justice, but they aren’t sharing the data around their own workforces or treatment of employees,” Benton said.
Regulators focused on climate disclosures
Climate-related disclosures are also high on the voting agenda as regulators increasingly hold US corporates accountable, said Lila Holzman, Senior Energy Programme Manager at As You Sow.
The US Securities and Exchange Commission (SEC) has taken steps to reverse Trump-era rules on shareholder proposals, which would limit shareholders’ ability to engage with companies on ESG-related issues, like companies’ net-zero pledges.
The SEC’s Acting Chair Allison Herren Lee has also been vocal on climate-related disclosures, recently directing the Division of Corporation Finance to “enhance its focus on climate-related disclosure in public company filings”.
Currently, the SEC is seeking public comment on what a climate-related reporting framework in the US should look like.
“It’s a good opportunity for US investors to weigh in and share what they want from corporates’ climate-related disclosures,” Holzman said.
Ahead of any regulation being introduced, US shareholders are increasingly willing to escalate climate-related resolutions, she noted, referring to Exxon Mobil, which is currently battling an activist hedge fund’s board slate ahead of its shareholder meeting later this month. Issues cited include Exxon’s spending on fossil fuels and opaque plans to manage its energy transition.
“That level of attention on company boards is only going to increase, particularly in cases where boards aren’t acting and providing the ESG-related disclosures shareholders are asking for. That tells shareholders they’re still not taking this seriously, and that’s not good enough,” Holzman said.
At General Electric’s (GE) recent AGM, 98% of investors voted for a shareholder resolution asking GE to report on whether and how it plans to achieve net-zero greenhouse gas (GHG) emissions by 2050. The resolution was filed by As You Sow on behalf of Amalgamated Bank.
“The fact that GE management and the board actually supported the resolution shows a significant shift for the company and I think that it also shows a shift in terms of investor perspectives,” said Holzman.
Nonetheless, regulatory action and corporate focus needs to concern all social and environmental impacts within corporate ESG-related disclosures, said Holzman.
“There’s increasing investor recognition that many ESG-related issues are linked across social and environmental, so corporates shouldn’t be thinking about these issues in isolation. Social elements are clearly important, too, and can’t be neglected,” Holzman said.