If there is a silver lining from 2020, it is that “business as usual” no longer exists. Covid-19, the contested U.S. election, the racial justice uprising, and climate change disasters continue to take a toll on the global psyche and require fundamental systemic transformation. Shareholders, as always, reflect the zeitgeist in their proposals. What I see in 2021 is an authentic, empowered, and self-aware movement emerging from the chaos, putting us on a trajectory toward a regenerative economy and civil society based on justice and sustainability. Investors feel the momentum, as do company executives; shareholders are escalating with new tactics, tired of talk and demanding action at a scale appropriate to the risk.
Underlying this change is the fundamental need for transparency. The alphabet soup of SASB, GRI, IIRC, IASB, CDP, and others are converging, as a half dozen ESG ratings are beginning to align. New scorecards on racial justice, diversity, equity, and inclusion are now public. Investors in passive index funds can see that they are blindly complicit as they profit from society’s destruction; becoming aware of their power to align their investing with their values. It is also apparent that we cannot continue in a system where some people earn 1,000 times more than others. The spotlight on disclosure illuminates polarized wealth, privilege, and entitlement that underlay epic destruction of the ecosystems upon which we all depend for survival. We need to see even more granular data and we need these disclosures to be standardized and audited.
After decades of intense climate change shareholder actions, proponents are scaling up, aiming to have every public company in the world embrace a net-zero, Paris-aligned, climate transition plan and report progress annually. Shareholder groups in Australia, Asia, Europe, Canada, and the United States have joined in a global coalition called “Say on Climate” and major companies are voluntarily signing up. Every corporate leader understands that countries cannot achieve their Paris goals if companies do not do their part. Climate risk is investment risk and affects the entire economy; denial is not an option as this is an existential threat to every business, to civil society, and impacts the poorest communities disproportionately.
Simultaneously, in May 2020, the world witnessed the murder of George Floyd, the latest example in a long history of abuse; shocking Americans into seeing the racial injustice Black Americans experience daily. The escalating Black Lives Matter movement has forced a public re-evaluation of civil rights progress and has catalyzed change. Every corporation now can see how its policies and practices contribute to systemic racism; each must pivot to an antiracist stance. The 2021 proxy season is witness to a wave of new racial justice resolutions and those that focus on diversity, equity, inclusion, and wage justice; executives must understand change is long overdue. Now is the time to address these pernicious problems.
This momentum and awareness is generating record-high resolution withdrawals as companies agree with proponents’ identification of risks and are open to finding solutions together. Yet power that comes from concentrated wealth remains in the hand of a few; in particular, large asset managers and pension funds. Unless these organizations use their proxy voting power to send strong signals to the boards of intransigent companies we will remain talking about problems rather than solving them.
This is the year that corporate boards can put their rubber stamps away and exercise real oversight, requiring substantive action from management. Shareholders are organizing as never before to vote against boards that will not adopt a climate transition plan; disclose diversity, equity, inclusion and racial justice metrics; adopt policies to eradicate systemic racism; and implement the tenets of stakeholder capitalism that they have all pledged to uphold. Words will not suffice. Now is the time for action.
Andrew Behar
CEO, As You Sow