Shearman & Sterling LLP A Review of the 2023 Proxy Season: An E&S Backlash? | 20
KEY TAKEAWAYS
• E&S continues to be a dominant focus of shareholder
proposals—and the number of submissions continues
to grow each year. The SEC's apparently favorable
disposition towards E&S proposals contributes to this
growth.
• Large institutional investors have not changed
their investment policies significantly in recent
years, and they continue to remain supportive
of high-quality E&S proposals that seek greater
transparency on companies' management of E&S
risks. However, shareholders are reviewing the
substance of proposals carefully and are less likely
to support generic, poor quality or prescriptive
proposals, even if related to E&S topics that they
would otherwise support.
• Companies must continue to assess and manage
their E&S risks, as well as their strategy for
shareholder disclosure and engagement on E&S
matters. While companies should expect that
shareholders will remain focused on E&S matters,
shareholder review and support for E&S proposals
are careful and discerning. Companies should not
be afraid to oppose E&S proposals that are truly
generic, poor quality or overly prescriptive, as
shareholders may agree with that assessment.
• Anti-ESG proponents are submitting an increasing
number of shareholder proposals, and they appear
to be supported by well-funded and organized
groups. In spite of the low passage rate of anti-
ESG proposals thus far, there is no sign that their
number will decrease. Companies should expect
these proponents to grow increasingly sophisticated,
including in the ways in which they will spotlight
corporate E&S activities that they oppose.
• Shareholders support proposals—and not
proponents. Shareholders are discerning about
aligning with the proponent of a proposal, but if a
high-quality proposal is submitted by a proponent
who has historically taken positions on E&S matters
that directly conflict with a shareholders' investment
principles, some shareholders' may nevertheless
support the proposal if its end result (e.g., a request
for additional disclosure) is supportable.
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2023 also saw a significant increase in the number of
proposals submitted by "anti-ESG" proponents. None
of these proposals passed, but they are categorized as
E&S proposals for data tracking purposes, thus skewing
data that purports to focus solely on the support of E&S-
favorable proposals.
Anti-ESG Proposals
Reflecting on its 2023 proxy voting record, Vanguard
remarked, as have other institutional investors, that
the significant decline in its support of E&S proposals
does not reflect a change in its own policies, but
rather a change in the quality and scope of the
proposals submitted: "Despite changes in voting
results, which are driven largely by the volume and
substance of the proposals presented, our approach
to evaluating shareholder proposals—including those
on environmental and social matters—has been
consistent over time. Our focus remains on identifying
proposals that address financially material risks at a
given company, supporting proposals that may fill gaps
in the company's current practices (while not intruding
on company strategy and operations) and providing
sufficient latitude to the company on implementation."
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See Vanguard, "Vanguard Investment Stewardship – U.S. Regional
Brief," https://corporate.vanguard.com/content/dam/corp/advocate/
investment-stewardship/pdf/policies-and-reports/us_2023_
regional_brief.pdf (August 28, 2023).
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For example, in 2022, an anti-ESG proponent focused on forced
labor in China submitted a proposal that received 36.8% support
because it requested additional disclosure from Disney on the due
diligence it undertakes to evaluate the human rights impact of its
activities outside the United States. See Ruth Saldanha, "Forced
Labor in China, Where Pro-ESG and Anti-ESG Groups Meet," https://
www.morningstar.com/sustainable-investing/forced-labor-china-
where-pro-esg-anti-esg-groups-meet (April 14, 2022).
Source: Proxy Season Review: Navigating ESG Backlash &
Shareholder Proposal Fatigue (October 18, 2023), at 15, https://
www.conference-board.org/publications/2023-proxy-season-review-
navigating-ESG-backlash-and-shareholder-proposal-fatigue.
2022 2023
Filed 54 92
Voted 45 65
Passed 0 0
Average support 9% 5%
