The 2023 proxy season is now underway, with both companies and investors alike gearing up for a busy few months full of meetings and voting. Here are six types of shareholder proposals that are set to make waves in the coming season.
Emission reductions at big oil
Proposals calling on global oil majors to reduce their greenhouse gas (GHG) emissions rank among the most high-profile engagements every proxy season, and 2023 will be no exception.
Follow This, which annually submits proposals calling on U.S. and European oil companies to strengthen their climate commitments, “refined its focus to four super-majors” this year, according to its website. The environmental advocacy organization has submitted proposals at Shell, BP, ExxonMobil, and Chevron, ahead of their 2023 annual meetings.
“In the past, we have focused on emission reductions in the short-, medium-, and long-term for Scopes 1, 2, and 3,” McKenzie Ursch, legal advisor for Follow This, told Insightia in an interview. “This year, our resolutions focus only on Scope 3 emissions, and further, focus only on the medium-term target for these emissions. By focusing only on that which is most essential, these resolutions will bring clarity to investors that no oil major has a Paris-aligned strategy.”
Throughout 2021 and 2022, 24 climate change shareholder proposals have been subject to a vote at U.S.-listed energy and utility companies, yielding six majority wins.
Racial equity audits
Racial audits, which seek reporting on a company’s diversity and civil rights policies, ranked among the most successful ESG shareholder proposals in 2022 and will likely play a key role in social engagements in the coming season.
The number of racial audit proposals subject to a vote at U.S.-listed companies last year more than tripled to 35, compared to nine in 2021. An impressive 24.2% of audits won majority support last year, while no racial audit Rule 14a-8 exclusion requests submitted to the Securities and Exchange Commission (SEC) in the past three years have been approved, according to Insightia’s Voting module.
Proposals of this kind have already been filed by Trillium Asset Management, Nathan Cummings Foundation, and As You Sow at companies such as Chevron, AT&T, and Travelers Co. ahead of the 2023 season, but many investors argue audits of this kind should become a standard form of corporate reporting across all industries.
“Given the pervasiveness of corporate actions that reinforce or exacerbate systemic racial inequities, racial audits should not be limited only to companies that have demonstrated track records of harm or failures of risk mitigation,” according to Majority Action’s and the Service Employees’ International Union’s recent report ‘Equity in the Boardroom.’ “Independent racial equity audits should be conducted regularly across all firms, regardless of the perceived quality of a company’s self-disclosures.”
All things healthcare
The U.S. healthcare sector faced nearly triple the number of environmental and social shareholder proposals in 2022 compared to a year prior, with shareholders keen to understand how companies are promoting equal access to COVID-19 treatments.
Nine proposals subject to a vote at U.S.-listed healthcare companies, seeking reporting on vaccine equity and anticompetitive practices, won 26.7% average support last year.
“In response to COVID-19, we saw more public investment and governmental support for the development of vaccines than ever before, but U.S. taxpayers were underwriting this risk, not the companies themselves,” Megan Jones-Montiero, senior director, health equity, at the Interfaith Center for Corporate Responsibility (ICCR), told Insightia in an interview.
“In 2023, we are asking companies to enhance disclosure of secondary and tertiary patents,” she added. “We want to ensure corporate business strategies that are geared towards protecting intellectual property don’t do so at the expense of patient access.”
Fossil fuel financing
The energy sector isn’t the only one facing pressure to address climate change, with fossil fuel financers also being urged to reduce their coal lending policies.
European banks in particular have faced sustained pressure to decarbonize, with one proposal seeking reporting on efforts to reduce emissions at Swiss insurer Chubb winning 72.2% support, despite management recommending against the proposal.
ShareAction has been a prominent advocate in this space, pushing both Lloyds and HSBC to commit to ceasing financing of new oil and gas fields, as well as pushing Credit Suisse to strengthen its Arctic oil & gas sands policies last year.
Looking to 2023, U.S. banks will start facing similar demands. In January, ICCR revealed its members have submitted proposals to six major fossil fuel financers, seeking net-zero transition plan reporting and fossil fuel financing phase-out commitments.
“All major U.S. banks continue to finance billions of dollars for new coal, oil, and gas projects every year,” said Dan Chu, executive director of the Sierra Club Foundation, in a January statement. “We have actively engaged with bank leadership so they are clear about what investors expect from their banks, and we anticipate strong levels of support this spring from fellow investors.”
Human rights reporting
Proposals seeking human rights risk assessments are winning increasing levels of support year-on-year, particularly in the defense and technology sectors, where investors seek reporting on firearms- and artificial intelligence-related risks, respectively.
In 2022, the four human rights proposals subject to a vote at U.S.-listed aerospace and defense companies won 38.9% support, compared to 24.2% support two years prior. Last year, CommonSpirit Health made the history books for the highest-supported human rights proposal in history. The proposal won 68.5% support at Sturm Ruger’s June annual meeting, despite facing management opposition.
In the U.S. tech sector, the six proposals seeking human rights reporting won 36.8% support in 2022, more than triple to 9.5% one year prior, according to Insightia’s Voting module.
“Every company is a technology company now, utilizing artificial intelligence systems and software to run their businesses better,” Anita Dorett, director at the Investor Alliance for Human Rights, told Insightia. “This proxy season, we will renew our focus on transparency and accountability, particularly relating to algorithmic decision making and artificial intelligence,” she said. “How are companies addressing the human rights risks that come with continued technological innovation?”
Plastic pollution
Plastic pollution proposals may be relatively few and far between but have experienced a significant increase in support from investors in the past two years. The six proposals seeking pollution reporting at U.S.-listed companies in 2022 won 41.9% average support, compared to 28.9% average support exhibited two years prior.
Equally as impressive, proposals concerning Sysco’s and Jack in the Box’s sustainable packaging commitments won above 90% support at both of their 2022 meetings, despite neither proposal being endorsed by management.
Green Century Capital Management and As You Sow, which have led this initiative, have filed multiple plastic pollution resolutions ahead of 2023 annual meetings at companies such as Chevron, Amazon, and McDonald’s. In October, shareholder activist Engine No. 1 also got involved, calling on Coca-Cola to form a partnership with waste-management company Republic Services, to help meet its sustainability targets.
“[In 2023], we’ll continue our focus on plastic pollution by asking companies to reduce their plastic packaging footprint in order to mitigate the flow of 11 million tons of plastic waste released into the ocean every year,” Annie Sanders, director of shareholder advocacy at Green Century, told Insightia Monthly in a December interview.