Shareholder proposals focused on environmental, social and governance (ESG) matters have dropped to 184 filings this proxy season, a marked decline from the 355 proposals filed at the same point in last year’s spring proxy calendar, according to a new report.
The study, co-authored by Michael Passoff, chief executive officer of Proxy Impact, an advocacy and proxy voting service for sustainable investors, found that the 184 proposals ask companies to take steps such as reporting more fully on carbon emissions or on workforce diversity. While most of these measures are nonbinding, the report notes they can still spur meaningful corporate change when they gain traction with investors and boards.
Passoff attributed much of the reduction in filings to a shift in tactic among both corporate leaders and shareholders. He said many executives have become more willing to negotiate privately with investors to resolve disagreements before they escalate into public proxy fights. That behind-closed-doors bargaining, the report says, has reduced the frequency of formal resolutions being submitted at companies.
"Shareholders thought they weren’t going to get a fair shake in filing resolutions, so they thought, does it make sense to file resolutions or to focus on company dialogues," Passoff said in a telephone interview.
Beyond changes in corporate behavior, Passoff and the authors highlight regulatory changes in Washington that have altered the mechanics of shareholder activism. Regulators appointed by U.S. President Donald Trump implemented rules that limited activists’ access to a securities database used in corporate contests and increased companies’ flexibility to omit certain items from shareholder ballots. The report argues these rules have raised the barrier for success in activist-driven campaigns.
With the major shareholder meeting season now underway, the study identified several prominent themes for this cycle. Among them are proposals related to rules governing data centers constructed for artificial intelligence applications and initiatives pressing companies for greater disclosure of lobbying activities. Support for many environmental and social measures has slipped in recent years.
The report also summarizes differing views among large investors and ESG-focused critics. Some large institutional investors argue that companies have already enacted substantial reforms on issues such as climate and diversity. Conversely, critics concentrated on ESG matters contend that corporate managers have retreated from prior promises on diversity and climate goals.
The forthcoming report will be published by shareholder group As You Sow and was co-authored by Amy Galland of Empower Venture Partners. It documents the fall in ESG resolutions and outlines the mix of corporate negotiation strategies and regulatory shifts that the authors say have contributed to the decline.