After a dip in 2016, the number of sustainability reporting resolutions surged back in 2017 and reached 58 proposals in 2018, a high for the decade. Thirty-four are now pending, six have been withdrawn and just two have been omitted. Many more withdrawals are likely, if last year’s tendencies hold: there were 31 withdrawals in 2018, surpassing the 22 votes. (Graph below.)
Sustainability reporting in corporate America has become increasingly common, making companies that do not report stand out; proponents are going to the relatively smaller non-reporting firms and asking for disclosure, with 23 resolutions this year seeking reports. At the same time, resolutions increasingly are asking companies to tie sustainability metrics to executive pay incentives. Last year, pay resolutions on an array of topics grew to 22 and this year there are 20. (Graph p. 68.) This year, though, the focus so far is even more on tying incentives to drug pricing risks.
A handful of proposals over the years have asked large investment managers to review and report on their proxy voting about social and environmental resolutions, with an eye to persuading the firms of these issues’ materiality. The big funds started voting in favor of a few climate-relate proposals in 2017, and in 2018 they branched out to support additional proposals about gun rights, the opioid crisis and other topics. This sea change in voting policy has pushed support levels to all-time highs and produced an unprecedented number of majority votes. Just one resolution this year raised the issue, at Artisan Partner Asset Management, but Walden Asset Management withdrew when the firm agreed to change its voting policy.
Timothy Smith
Director Of Esg Shareowner Engagement, Walden Asset Management
Carly Greenberg, CFA
Manager Of Esg Investing, Walden Asset Management
CHANGE IN PROXY VOTING AS MANY ASSET OWNERS ACCEPT ESG AS PART OF FIDUCIARY DUTY
Each year, investors file approximately 800 shareholder resolutions. In 2018, more than 450 proposals focused on environmental and social issues. For a significant portion of these resolutions, companies and proponents reached agreements and the proponents withdrew. But nearly 180 proposals went to a vote.
Shareholders have filed environmental and social proposals since the early 1970s, and resolutions on governance extend back to the 1950s. Early on, both companies and other investors treated environmental, social and governance (ESG) proposals with incredulity. These days, however, many recognize such proposals have strong business cases buttressing their requests and many vote thoughtfully.