A look back on 2023 shareholder proposal voting records ahead of the 2024 proxy season.
Over the last few months, the Vancity Investment Management ESG team has been busy filing shareholder proposals and meeting with companies to discuss some of those proposals in preparation for the 2024 proxy season. The first months of 2024 also saw some published reports from third parties reviewing and analyzing trends of shareholder proposals from 2023. Here are a few key insights from those reports.
Investor “hesitation” surrounding climate-conscious resolutions.
In February 2024, Investors for Paris Compliance published their second annual Canadian Climate Voting Report which assesses the climate proxy voting record of select Canadian asset managers committed to decarbonizing their investment portfolios via engagement. The report looked at the voting records of 35 asset managers selected based on their memberships in climate engagement organizations, such as Climate Action 100+ (CA100+) and Climate Engagement Canada (CEC). Vancity Investment Management is a member of both organizations. The report showed that generally, “there remains great hesitation among investors to support resolutions addressing climate transition risk.”
Vancity Investment Management named one of top Canadian investors to support climate-related resolutions.
The report assessed 26 shareholder proposals (“resolutions”) filed at 21 companies that relate to seeking better corporate disclosure of climate risks and opportunities, or the adoption of policies to align with the goal of the Paris Agreement to limit global temperature increase to 1.5C above pre-industrial levels. Only 5 of the 35 investors (14%) consistently supported all resolutions on which they voted, including Vancity Investment Management, which voted on 7 proposals. Another 5 asset managers increased their support level by at least 25% compared to the previous year.
Disappointingly, 43% of the 35 managers assessed were shown to have voted against the majority of climate-related resolutions. The report notes that this high number may not necessarily reflect asset managers’ opposition to the nature of the proposals, but it may indicate an overly cautious approach.
Of the climate proposals, reports on climate lobbying alignment received the highest level of support (70%), while proposals asking for the phase-out of fossil fuels received the lowest level of support (28%). Proposals aiming for disclosures on emissions, GHG reduction targets, and climate transition plans all received more than 49% of support, which indicates a high level of investor interest.
Recent climate voting trends in the US.
On the topic of CA100+ and turning our attention to the US, it was recently reported that several large asset managers (JPMorgan, State Street) have resigned from those organizations or have scaled back support. BlackRock transferred its membership to its international arm, removing its US assets from the organization. While none of the firms cited politics as the motivation behind their decisions, it’s widely believed that political pressure is the driving factor.
The trend of scaling back support has also been noted in these firms’ proxy voting records. Overall, investor support for climate-related proposals were noted to be lower in 2023 than in 2022. A report from Georgeson stated that State Street’s support for ESG proposals fell to 37% in 2023 from 50% in 2022. BlackRock’s support for ESG proposals fell from 37% in 2022 to just 15% in 2023. One caveat to note is that not all ESG proposals are necessarily quality proposals. Proposals that are overly prescriptive or those failing to recognize a company’s effort towards meeting the ask may have contributed to the low level of support.
Lastly, as we have previously noted in past commentaries, we are seeing a rise of anti-ESG proposals. According to the same Georgeson report, there were a total of 68 anti-ESG proposals put to a vote in 2023. Fortunately, these anti-ESG proposals tend to receive immaterial levels of support.
