Record ESG And Anti-ESG Shareholder Proposals In 2024 Send Mixed Signals To CEOs And Boards

According to a recent report, shareholder proposals on environmental, social and governance (ESG) and anti-ESG issues reached record numbers through May of 2024, but support for these proposals has been mixed. According to governance consulting firm Georgeson’s Early Proxy Season Review, although anti-ESG proposals have skyrocketed in recent years, they’ve garnered limited support from shareholders. Furthermore, while ESG proposals have also surged, support for environmental and social proposals has declined. Corporate board members can use these findings to help their board determine the level of shareholder engagement that may be required now and, in the future, to avoid potential problems involving backlash on ESG issues. The bottom line: although it seems anti-ESG sentiment is growing, boards will need to devote significant time and resources to addressing ESG concerns.

The Georgeson report found that among Russell 3000 companies a record total of 998 ESG and anti-ESG shareholder proposals were filed—surpassing the total 947 filed in 2023. The report also found:

• Total ESG and anti-ESG proposals hit a new record, increasing by 5.2 percent over 2023

• ESG proposals were up 18 percent over 2023 while anti-ESG proposals were up 19 percent over 2023 and 90 percent over 2022

• Anti-ESG proposals focused on environmental issues more than doubled (from 6 in 2023 to 15 through May of 2024), but support for those proposals has declined each year since 2022. Average support for all anti-ESG proposals is 2.8 percent.

• Governance-related ESG proposals have increased 18 percent over 2023 with support for those proposals rising as well. The number of environmental and social proposals however have declined by 6 percent and 5 percent respectively since 2023.

These findings show that, because shareholder proposals in this area continue to increase, ESG will continue to be a major agenda item for boards. Directors will need to determine which specific areas of the environmental, social and governance spectrum their company must focus on. For example, energy companies will be more likely to focus more on environmental issues, while every organization will likely have individual social issues that may move its shareholders to submit proposals.

So, how could boards approach ESG-issues going forward? Consider the following:

What is the anti-ESG sentiment among your shareholders? Boards that have received anti-ESG proposals over the last few years must monitor those efforts closely to see if they are gaining momentum. Shareholder proposals that are submitted in consecutive years may indicate a growing frustration among investors. Engaging with shareholders to determine the reasons why they are submitting anti-ESG proposals can help prevent small disagreements from turning into major problems.

Is support for specific ESG issues growing and has the board responded? If shareholder proposals on specific ESG issues are submitted in consecutive years and voting support is growing, shareholder concerns about those issues are unlikely to disappear. A review of the company’s position regarding those ESG issues will provide insight into what the proper response might be. If support for an issue is growing, it may require more attention or just a survey of the shareholder base to confirm overwhelming support for the board.

Are you responding to governance-related ESG proposals quickly? Since the Georgeson survey reports that governance-related ESG proposals are increasing and the support for those proposals are increasing as well, this suggests that shareholders want boards to show that they are strong on governance. Accusations that boards are lax on governance are included in many takeover attempts, so addressing governance related shareholder complaints is a must.