In Charts: Gap narrows between support for environmental and social US corporate resolutions

Social issues, especially companies’ political activities, were dominant in the 2023 voting season, Morningstar reports. Meanwhile, despite a rise in environmental and social resolutions, average support for both was down on 2022

The gap between US companies’ support for “key” environmental shareholder resolutions and that for their social equivalent is closing, according to Morningstar, where such key resolutions are those supported by at least 40 per cent of a company’s independent shareholders.

In a new report, the data provider shows that average support for key environmental resolutions diminished more rapidly in this year’s voting season, falling from 58 per cent last year to 49 per cent in 2023. Support for key social proposals, meanwhile, dropped from 55 per cent to 48 per cent.

There is therefore now only a 1 percentage point gap between support for key environmental and social resolutions, lower than the gap of 3 percentage points registered in 2022 and 4 percentage points in the preceding two years. 

The details

The total number of environmental and social resolutions increased by 23 per cent to 337 proposals, compared with 2022. However, US companies’ average support for these motions fell to just 20 per cent, compared with 30 per cent in 2022.

Social resolutions remained dominant in the most recent proxy season, representing 37 of the 53 key ESG resolutions this year. This was much lower, however, than the 76 key social resolutions recorded in 2022. Proposals concerning political activity continued, usually in the form of motions seeking disclosure over political spending and companies’ lobbying, Morningstar said. 

But the data provider observed that “requests for disclosure on congruence of political spending with corporate values represented a new theme in 2023”. Two of these resolutions achieved more than 40 per cent shareholder support.

There was, meanwhile, a sharp drop in the number of key resolutions demanding civil rights and racial equity audits, from 16 last year to just three in 2023. “Many companies were responsive to previous requests,” Morningstar said. “As a result, some proposals were withdrawn and there was lower support for those that went to a vote.”

The context

A drop in key environmental proposals from 22 last year to 12 in 2023 “coincides with incoming regulation set to fill many of the reporting and governance gaps on climate that were previously filled by shareholder resolutions”, said Morningstar director of stewardship investment research Lindsey Stewart.

Among these environmental resolutions, the number of proposals targeting climate change and greenhouse gas emissions dropped to 10 from 15 last year. Environmental resolutions focused on areas beyond climate change – targeting areas such as plastic use and water management risks – also dropped significantly, from seven in 2022 to two this year.

BlackRock and Vanguard, the world’s two largest asset managers, have dropped their overall support for environmental and social resolutions in 2023 because of “poor quality” and overreaching proposals, attracting criticism from US liberal voices at a time of heightened politicisation for ESG subjects.

Vanguard said that a policy change at the US Securities and Exchange Commission made it harder to exclude proposals “what may be considered ‘micromanagement’ of a company”.