View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Asset class
  2. Equity
July 24, 2023

Was there an ESG backlash this proxy season?

Proxy season this year was considered a bloodbath for ESG investors. Capital Monitor digs into whether it truly was.

By Paul Hodgson

ESG, proxy season, asset management
ESG crime scene. It’s getting harder for ESG-proposals to get over the line in 2023. (Image by Gwoeii via Shutterstock)
  • Vote totals in support of ESG-linked proposals were higher in 2022, at an average 29.3%, falling to 21.3% in 2023, with fewer majority votes.
  • More proposals went to a vote in 2023 (366 compared to 316 in 2022) and fewer were withdrawn (222 compared to 275 in 2022).
  • ISS and Glass Lewis weakened their stance in 2023. Last year ISS recommended against 6% of As You Sow resolutions; this year they were against 33%.

The upheaval surrounding ESG in the US can be measured by the glut of news headlines depicting the political and legal fighting between political parties and highly influential asset owners.

Proxy season in the US proved depressing for ESG advocates. According to Sustainable Investments Institute (Si2), vote totals in support of ESG-related proposals sank in 2023 compared to the previous year, falling to 21.3%, down from 29.3%.

So, should the very public spat – that centres on whether ESG factors should formally play a role in investment decision-making – be a worry for those pushing ESG into the corporate agenda?

Andrew Behar, CEO of shareholder representative As You Sow, thinks not. Although he acknowledges the situation, he argues the levels of success achieved in 2023 are still remarkably positive for ESG.

In summary, for 2023, there was a 70% success rate for ESG-related proposals As You Sow was involved in – engagements settled without escalation or withdrawn. In 2022, it was a 77% success rate – both very high, Behar argues.

Behar also notes that of As You Sow’s 48 filed resolutions that went to a vote in 2023, 38 out of the 39 first-year resolutions attained the resubmission threshold; 5% of the vote in the first year, while seven were second year, and all but three of these attained the resubmission threshold (15%).

“This is a 90% success rate for voted resolutions,” Behar says, “compared to 2022, which saw 100% of resolutions attaining resubmission thresholds.”

Content from our partners
What you need to know about private markets 
Why investors should consider investing in nature
Green for go: Transforming trade in the UK

Behar has a layered explanation for the shift in support levels: “This year, we had much tougher resolutions. For example, asking for actual emission reduction targets rather than just asking for disclosure. These higher intensity resolutions tend to get lower votes as they ratchet up the ask.”

For a comprehensive view of the fortunes of shareholder proposals this season, Capital Monitor turns to research house Si2.

Less ESG by proxy

However, while support votes may have gone down this year, in some instances this is because it was the first year for many companies facing climate proposals, where you might expect greater resistance to change.

Behar adds that many of the more recent filings are at mid-size companies, as the larger companies have been engaged and are working toward solutions. “These smaller companies tend to have more insider ownership which tend to vote against shareholder resolutions,” he adds.

Furthermore, proxy advisors ISS and Glass Lewis weakened their stance in 2023. Last year ISS recommended against 6% of As You Sow resolutions; this year they were against 33%, according to Behar, who believes the tougher resolutions are a contributing factor to this shift.

Behar also points to a letter from 21 Attorneys General from Republican-led states delivered when asset managers were preparing to vote. The letter mentioned As You Sow 37 times, says Behar, and implied voting for As You Sow’s resolutions would lead to legal repercussions.

“This led asset manager legal teams to back off on prior commitments as they assessed the risk – which our attorneys believe is just more empty political theatre,” says Behar.

Anti-ESG pressure

Julie Gorte, senior vice president for sustainable investing at asset manager Impax, agrees. “The anti-ESG movement was responsible for dipping support for social proposals, covering issues such as diversity; again, a result of investors wanting to keep their heads below the lip of the foxhole.”

Heidi Welsh, executive director at Si2, points out that anti-ESG resolutions almost doubled in number this year, but their support level fell by more than a percentage point: “Most of these proposals asked companies to stop doing things and release less information. Investors clearly don’t support a very right-wing push to totally ignore ESG risk, even if they were less likely to support a whole range of other issues.”

Gorte says: “The anti-ESG proposals are basically rhetoric, filed to make a statement, the proponents don’t expect companies to adopt them, they are just to make a political point.”

For example, ISS had to respond to a group of US state Republican finance chiefs to address attacks in a May 15 letter to proxy advisory firms. ISS said it “does not typically exercise control over clients’ voting decisions. It is the client who creates or selects the voting policies and guidelines, consistent with their own fiduciary obligations…”

Si2’s Welsh says the areas where the largest declines in support for resolutions were for those covering environmental issues, board governance (from 2021 to 2022), decent work, political activity and workplace diversity.

Many of these support levels fell by over 10 percentage points, though, adds Welsh: “It’s not actually as bad as it seems for political activity resolutions because of three low votes on the new 'Model Code' proposals about indirect election spending from CPA [Center for Political Accountability] — it got little support – but the regular lobbying oversight/disclosure proposals held up.”

However, there were some majority-supported shareholder resolutions, as shown in the chart below.

Majority Supported Resolutions, 2023

Topic Company Proposal Vote (%) Proponent
Social (Political Activity) New York Community Bancorp Report on Paris-aligned public policy influence efforts 94.96 Unitarian Universalists
Environment (Climate Change) Coterra Report on methane emissions/reduction targets 74.37 Vermont State Treasurer
Social (Decent Work) Dollar General Commission worker health and safety audit 67.7 Domini Social Investments
Social (Workplace Diversity) Expeditors Intl of Washington Report on diversity programs 57.28 Clean Yield Asset Mgmt.
Social (Decent Work) Wells Fargo Review/report on workplace bias policy 55.03 NY State Common Retirement Fund
Social (Human Rights) Starbucks Assess/report on adherence to ILO/UN trade union stds 52.03 SHARE
Social (Decent Work) Kroger Report on gender/racial pay disparity 51.89 Arjuna Capital
Social (Political Activity) McDonald's Report on lobbying 50.31 SOC Investment Group
Source: Si2

The New York Community Bancorp resolution was supported by the board. A further 15 received more than 40% of the vote, according to Si2, including resolutions on lobbying disclosures, racial justice, board diversity and Paris-aligned lobbying.

 “[We] found an increase in proposals at financial companies, where any sort of ESG idea is a tougher sell,” says Welsh. “Ten years ago, there were a lot more proposals at utilities and energy companies. There’s a very clear nexus with climate issues that everyone can understand: oil/gas, and coal-burning.”

According to Si2, the sectors with the most proposals are consumer staples, energy, financials, industrials, materials and utilities, and average support has gone down in each of these sectors over the last two to three years except for materials, where it went from 1.7% in 2022 to 26.5% in 2023.

But Gorte says that shareholder resolutions are a last resort. “The vast majority of our engagement does not accompany a shareholder proposal; shareholders engage with companies far more often than they file shareholder proposals,” says Gorte.

Once you get to the proposal stage it will be met with a number of different reactions.

Gorte says: “When you get down to that group of companies that do receive proposals and decide just to take the Rhett Butler approach – ‘Frankly, my dear, I don’t give a damn’ – that’s a very tiny minority.”

[Read more: US: Climate and lobbying high on proxy investor agendas]

Websites in our network
Select and enter your corporate email address To receive our weekly newsletter – to your inbox, simply send us your work email.
  • Chief executive officer
  • Chief investment officer
  • Portfolio manager
  • Chief operating officer
  • Chief financial officer
  • Treasurer
  • Chief technology officer
  • Chairperson
  • Managing director
  • Director
  • Group or senior manager
Visit our privacy policy for more information about our services, how Progressive Media Investments may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Thank you for subscribing to Capital Monitor.