Shareholder votes on climate issues have intensified this year

Public companies have been spurred into action by shareholder votes at a remarkable pace this year, and nowhere has that been more effective than on climate and social justice issues.

According to a recent proxy season analysis by think tank The Conference Board, 101 climate-focused shareholder proposals were filed in 2022 among companies on the Russell 3000 Index. majority votes in their favour. That compares to 60 shareholder proposals filed in 2021, eight of which were accepted.

“While investors, regulators and others are concerned about the risks that climate change poses to businesses in general, they are particularly focused on the impact that companies with significant greenhouse gas emissions are having on climate,” said report author Matteo Tonello, chief ESG research director at The conference board.

“If they haven’t already, these companies should consider gathering information on the costs and benefits of designing an emissions reduction strategy that includes targets and timelines.”

Social themes

According to the report, of the 43 resolutions addressing racial equity and civil rights audits, eight received majority support. In comparison, no such proposal was adopted in 2021.

On “human capital management” and social issues in general, there were a record 155 shareholder resolutions this year, compared to 136 in 2021, according to the report.

“Due to past wrongdoing or the results of their own investigations, some boards may have reason to believe that their companies face litigation and reputational risk in this area,” Umesh Chandra said. Tiwari, Executive Director of ESGauge, who contributed to the report. with the Conference Board, Russell Reynolds Associates and the Center for Corporate Law and Governance at Rutgers University.

“If so, directors might conclude that an independent audit is the best risk mitigation strategy because it can get to the root of cultural issues and anticipate bigger issues down the road.”

Additionally, four resolutions were passed this year on employee arbitration policies, the groups found. There were also 53 proposals filed regarding corporate political spending, four of which passed.

Meanwhile, more companies have seen less support for their pay votes, with 67 losing votes this year, down from 61 in 2021, according to the report.

Companies are increasingly tying some CEO pay to climate goals, but those arrangements have been criticized for being far too lax.

CEO misfortunes

A report last week As You Sow of nearly 50 U.S. companies with the highest levels of greenhouse gas emissions found that most have low standards for CEO compensation targets or simply no performance-related targets climate.

The group assigned D or F grades to 89% of the 47 public companies it reviewed, because these companies do not have quantitative standards for climate-related pay or do not link CEO pay to it.

“Climate metrics included in CEO compensation can either incentivize timely progress on reducing emissions or act as another form of corporate greenwashing,” said lead author Melissa Walton, head of the executive compensation and climate associate at As You Sow.

“Among companies that have linked CEO compensation to a climate-related metric, we have generally found that the metric is worded in a way that does not adequately incentivize emissions reduction performance.”

None of these companies received an A in this report, which would require linking CEO pay to a Paris-aligned 1.5°C climate target. However, As You Sow gave Xcel Energy the highest rating, a B, for linking CEO pay to quantitative metrics. reduction of emissions.

Teresa H. Sadler