The 2023 proxy season has been a mixed bag for ESG, with some shareholder proposals winning sufficient levels of support for resubmission, while others experienced a decline in investor backing. Below, Insightia examines both the challenges and successes of some of the leading climate activists this season, sharing their thoughts on how engagements have shaped up compared to previous years.

As of June 30, the 111 environmental shareholder proposals subject to a vote globally secured an average of 20.7% support, compared to 94 proposals winning 30.3% support throughout 2022. Globally, three (2.7%) of climate change-related proposals have won majority support, down from 13 (17.3%) throughout 2022.

Despite the increasingly vocal anti-ESG movement and rising inflation refocusing investors away from responsible investing and more toward financials, climate activists continued to hold companies to account for their sustainability commitments in the first half of the year.

Follow This

Follow This is well known in the climate activism space for holding U.S. and European energy giants to account on their Scope 1, 2, and 3 emissions reduction targets. This season, however, Follow This refined its focus to just seeking medium-term Scope 3 emissions at five companies; Shell, BP, Exxon Mobil, TotalEnergies and Chevron.

The Dutch activist’s proposals maintained support at European oil majors this season, with its calls for stronger emissions reporting winning 17%, 20%, and 30% support from BP, Shell and TotalEnergies investors, respectively, according to Insightia’s Voting module.

U.S.-listed oil giants delivered poorer results for the green advocacy group, however, with identical proposals to those seen in Europe winning just 11% and 10% support at Exxon Mobil’s and Chevron’s annual meetings, respectively. In contrast, Follow This’ emissions reduction proposals won 28% and 33% support each at both U.S. oil majors’ 2022 meetings.

“In the U.S., sadly, support plummeted,” McKenzie Ursch, legal advisor at Follow This, told Insightia in an interview earlier this month. “This year, companies have basically said to go ahead and file proposals. They are not as threatened, I think, and that really came out in the results of the votes this season.”

Ursch also noted a change in tack on the part of proxy advisors. “This year, we only received support for our resolution at TotalEnergies from ISS. Chevron and Exxon Mobil are miles behind where TotalEnergies is in mitigating their climate impact, so to advise for a proposal at TotalEnergies and against identical ones in the U.S. doesn’t make sense.”

As You Sow

As You Sow has been a consistently active player in the U.S. corporate governance space, with no less than 52 ESG resolutions submitted this season, compared to 50 throughout 2022, many of which call for Scope 3 emissions targets and climate risk in retirement plan reporting.

In 2023, 65% of the responsible investment organization’s engagements so far resulted in proposals either being withdrawn or resulting in no further escalation, a 13% decline compared to 2022. The climate activist has failed to secure any majority votes, compared to securing seven majority votes on environmental proposals in 2022.

Much like Follow This, Andrew Behar, CEO of As You Sow, cited the “weakened” stance taken by proxy advisors Institutional Shareholder Services (ISS) and Glass Lewis as a major reason for the decline in support for ESG proposals this season. In 2022, ISS recommended voting against 6% of As You Sow’s proposals, compared to 33% so far this season.

The anti-ESG movement also played a key role in declining support, according to Behar. “A letter from 21 red-state Attorney’s General was timed to arrive right as major asset managers were preparing to vote,” he said. “The letter mentioned As You Sow 37 times and strongly suggested that voting for our resolutions would lead to repercussions.”

Despite the many challenges of 2023, As You Sow still boasts many successful engagements, having reached agreements with companies like Caterpillar and Church & Dwight to enhance their climate and plastic pollution reporting.

Market Forces

Market Forces regularly engages with Asia-Pacific issuers on climate change, and this season filed proposals calling on Woodside Energy and Santos to disclose how they will manage down oil and gas assets, in order to align with net-zero emissions goals by 2050.

Similar to Europe, support for climate proposals in the Asia-Pacific region has remained steady. Market Forces’ proposal at Woodside was supported by 15% of votes cast at the company’s 2023 annual meeting, a one percentage point increase compared to a year prior. Approximately 18% of Santos shareholders supported Market Forces’ proposal, up from 15% in 2022.

Notably, directors at both energy firms faced increased opposition in 2023. At the Woodside annual meeting, Ian Macfarlane, who sits on Woodside’s sustainability committee, faced nearly 35% opposition to his reelection. At Santos’ April meeting, over 10% of shareholders opposed the reelection of environment and risk committee member Janine McArdle.

“Large shareholder votes against directors, as well as increased support for Market Forces resolutions, demonstrate clear investor dissatisfaction with these companies’ inadequate approaches to climate risk,” Will van de Pol, acting CEO of Market Forces, told Insightia. “Results are significant, considering these votes against directors took place while the companies both delivered record profits related to the Ukraine war affecting global oil and gas markets.”

Green Century Funds

Green Century Funds engaged with nearly 60 companies this proxy season and filed 32 proposals on a variety of ESG topics, ranging from plastic pollution reporting to adopting deforestation targets. The fund manager withdrew 20 proposals in exchange for company commitments, including commitments from Kraft Heinz, Exxon Mobil, and Citigroup.

Ten Green Century proposals had gone to a vote by mid-June, with requests for enhanced plastic packaging targets performing notably well. Approximately 56% of investors backed Green Century’s call for General Mills to report on how it can increase the scale, pace, and rigor of its sustainability efforts by reducing plastic packaging, while a request for Sysco to report on quantitative, time-bound goals for reducing its absolute plastic use garnered 92% support.

The overall level of support for Green Century’s resolutions has been on the decline, however, with fewer proposals that end up on the ballot receiving majority support. The anti-ESG movement was again cited as a contributing factor, with the fund manager expressing concern regarding the lack of support ESG resolutions are winning from leading fund managers.

“We are overall seeing less support for our resolutions this year than in recent years, which tracks with trends for other proposals across the board,” Annie Sanders, director of shareholder advocacy at Green Century, told Insightia. “We feel that a non-insignificant factor here is large asset managers pulling back on their support for ESG proposals and softening previously strong language outlining their stances on environmental issues.”