Shearman & Sterling LLP 17 | A Review of the 2023 Proxy Season: An E&S Backlash?
A Review of the 2023 Proxy
Season: An E&S Backlash?
Lara Aryani and William Kim
Insights
Over the last several years, companies, shareholders
and regulators have focused increasing attention on
three areas of investment risk: environmental, social
and governance (ESG). While these risks are not strictly
financial, investors have increasingly come to expect
companies to address the ways in which these
matters impact their businesses and the mitigation
plans —if any—companies expect to adopt to manage
these risks.
Environmental and social matters (E&S) in particular
are in the crosshairs of a contentious debate on
the role of politics in corporate boardrooms. Active
political opposition to E&S corporate activities has
emerged with condemnations from public figures like
Elon Musk and Florida Governor Ron DeSantis and
state legislatures introducing at least 165 "anti-ESG"
bills in 37 states.
1
Following years of record-breaking
shareholder support for E&S proposals, average
shareholder support for E&S proposals declined
steeply in 2022 and 2023.
Shareholder Support for E&S Proposals
Source: Broadridge, Broadridge ProxyPulse – 2023 Proxy Season
Preview at 5, https://www.broadridge.com/report/2024-proxy-season-
preview-and-2023-proxy-season-highlights.
In the wake of declining passage rates and support
rates for E&S shareholder proposals, various
commentators have speculated on the "death" of ESG,
the success of the "anti-ESG" movement and the fading
interest of shareholders in the environmental and
social risks that seemed to be so prominent in prior
years.
2
However, a closer look at the data suggests
a more nuanced explanation. It is likely that the rise
of "anti-ESG" activism has had some chilling effect
on the ESG activities of certain shareholders, some
of whom may be revising fund materials or limiting their
use of the term "ESG" in discussions with investors.
3
But the overall decline in shareholder support for E&S
proposals is less likely due to a reversal in shareholder
perspectives or policies on E&S matters and more
likely the consequence, at least partially, of the high
number of low quality E&S shareholder proposals that
were submitted in the 2022 and 2023 proxy seasons
relative to prior years.
Even at the height of shareholder support for E&S
proposals, institutional investors warned that their
support for E&S proposals was, like their support for
any shareholder proposal, contingent on the proposals
meeting certain criteria. For example, in 2021,
Vanguard stated that its "funds are likely to vote in
1
See Pleiades Strategy, "2023 Statehouse Report: Right-Wing
Attacks on the Freedom to Invest Responsibly Falter in Legislatures,"
https://www.pleiadesstrategy.com/state-house-report-bill-tracker-
republican-anti-esg-attacks-on-freedom-to-invest-responsibly-earns-
business-labor-and-environmental-opposition (June 2023); see
also David Hood, "DeSantis Signs Sweeping Anti-ESG Bill Targeting
Funds, Banks," https://news.bloomberglaw.com/esg/desantis-signs-
sweeping-anti-esg-bill-targeting-funds-banks (May 2, 2023).
2
See Nicole Goodkind, "ESG Investing is Dying. That's Not a Bad
Thing," https://www.cnn.com/2023/04/28/investing/premarket-stocks-
trading (April 28, 2023); see also Jeff Green and Saijel Kishan,
"Support for ESG Shareholder Proposals Plummets Amid GOP
Backlash," https://www.bloomberg.com/news/articles/2023-06-09/
support-for-esg-shareholder-proposals-plummets-amid-gop-
backlash (June 9, 2023); see also Abigail Gampher, "Proxy
Season Saw More ESG Proposals but Little Success," https://
news.bloomberglaw.com/bloomberg-law-analysis/analysis-proxy-
season-saw-more-esg-proposals-but-little-success (July 12, 2023);
see also Aswath Damodaran, "ESG is beyond redemption: may
it RIP," https://www.ft.com/content/d4082c75-3141-4a58-935b-
60a44c22897a?shareType=nongift (October 23, 2023).
3
See Saijel Kishan, "ESG Investing Goes Quiet After Blistering
Republican Attacks," https://www.bloomberg.com/news/
articles/2023-05-19/esg-investing-goes-quiet-after-republican-
attacks (May 19, 2023).
0 5 10 15 20 25 30 35 40
2023 2022 2021 2020 2019
32.9%
25.5%
30.3%
31.3%
37.4%
2019
2020
2021
2022
2023
