

Anti-ESG rhetoric may have contributed to a sharp fall in support for sustainability resolutions at US firms during this year’s proxy season, Heidi Welsh, executive director of the Sustainable Investments Institute (Si2), told Responsible Investor.
“While it is true that there are some new issues, I can’t help but think the overall noise and fervour from anti-ESG players has had an impact this year – even if the market fundamentals about ESG risk remain unchanged and climate change disruptions are becoming ever more apparent,” she said.
Welsh was responding to the findings of a study produced by Proxy Preview in collaboration with non-profits As You Sow and Si2. The research looked at 335 votes on shareholder proposals asking for disclosure and action on ESG issues. More than two dozen proposals are still pending.
The analysis showed overall average support falling and majority votes were also “down sharply”, at just eight compared to close to 40 in the two previous years.
The highest support for an ESG proposal was at NY Community Bancorp asking for a report on Paris-aligned public policy work. Ninety-five percent of shareholders voted for the proposal, which was supported by management.
A proposal at Coterra Energy calling for a report on methane and targets received 74.4 percent support, while one asking asking for a worker health and safety audit at retailer Dollar General attracted 67.7 percent.
During a webinar focusing on the study, several reasons for the drop were suggested. These included an increase in the intensity of resolutions, the introduction of “novel proposals” and new issues, concerns that resolutions are too prescriptive, and the impact of the anti-ESG movement.
Proxy Preview’s press release said: “Large mutual funds and proxy advisors have pulled back support for proposals as they face political attacks from anti-ESG players.”
Welsh told RI: “The dramatic drop-off in support can only have come from erosion in support from the largest investors. That’s just math. I have also talked to a number of large institutional investors who told me they think overly specific proposals have prompted them not to vote in favour.”
Anti-ESG fails to get support
Despite increasing political focus on the issue, however, anti-ESG proposals fared much worse.
In 2022, 34 proposals were put to the vote and received an average of 3.5 percent support. This year saw 52 proposals, which only averaged 2.4 percent support – half the level required to qualify for resubmission.
Welsh noted that “almost all” anti-ESG proposals relate to social policy issues. “They are about the culture wars, and they argue against proposal supporting diversity, equity and inclusion,” she said. “There’s a handful about political influence. There’s hardly anything like climate change.”
An interesting development this season is a lawsuit by the National Centre for Public Policy Research (NCPPR) against the SEC, after the regulator issued a no-action letter on a proposal submitted by the right-wing think tank at Kroger.
As detailed in Freshfields’ 2023 proxy season analysis, Kroger initially sought no-action relief to exclude NCPPR’s proposal asking the retail giant to issue a public report detailing the risks associated with omitting “viewpoint” and “ideology” from its written equal employment opportunity policy.
The SEC said Kroger could omit the proposal and issued a no-action letter.
In May, NCPPR filed a lawsuit seeking to ensure “that the SEC either proceeds in a transparent and unbiased fashion or is stopped altogether”. According to the think tank’s website: “This suit could help steer the SEC back toward its original purpose of mandating disclosures of basic financial information and policing fraud.”
Kroger did include the proposal at its AGM in June, where it received 1.9 percent support.
Elizabeth Bieber, head of shareholder engagement and activism defence at Freshfields, flagged anomalies in the case.
“It’s not the process one would expect. In past instances, when shareholder proponents don’t want the SEC involved or think the SEC should not be involved in no-action relief, the next step is generally to sue the company to compel inclusion of the proposal in the proxy materials, or theoretically to enjoin a meeting until a vote on the proposal has occurred.”
On whether similar cases will pop up next year, Bieber said it depends on how successful the proponents are “and whether they believe their aims are served through this type of litigation.”
Climate change dominance
Unsurprisingly, Proxy Preview’s analysis showed that overall the biggest category of ESG-related proposals this year was again climate change.
According to the analysis, most focused on GHG emissions and related risk management, “hewing to previous disclosure and target-setting ideas but with more about timeframes and net-zero aims”. It noted that the new proposals were also fairly specific, and cited both changes as likely reasons for the drop in support.
Notably, however, proposals requesting reports on methane emissions and targets – including one at Coterra Energy – saw strong support, while those calling for “cutting carbon” received 43 percent at Bloomin’ Brands and 48 percent at Quest Diagnostics.
Resolutions on issues such as lobbying and oversight, fair pay and worker treatment also proved popular with shareholders.
On lobbying, proposals calling for “value congruency between corporate policies and political expenditure” have proliferated, with varied outcomes.
According to Proxy Preview, these types of resolutions did best when focused on how election spending aligns with corporate policy (averaging around 30 percent) and less well when asking about all influence spending efforts (averaging around 18 percent).
At Leidos Holdings, an IT services firm, an election spending values congruency proposal received 41 percent support.
Reproductive rights
This year also saw a surge in reproductive rights proposals. In total, 12 resolutions asking how companies are navigating the new landscape of abortion restriction and related maternal health problems following the June 2022 Dobbs Supreme Court decision were put to the vote.
Investor appetite for corporate action on the issue seems limited, however. Average support for the proposals was around 11 percent, half the level seen for three proposals last year.
Proxy Preview noted, however, that another 12 proposals on reproductive rights were withdrawn. “That is a testament to productive negotiations in which firms explained their benefits and agreed to report on risks, with an emphasis on digital privacy.”
The Freshfields report also flagged one anti-ESG proposal on the topic filed at Eli Lilly, in which NCPPR requested a report detailing any known and reasonably foreseeable risks and costs caused by opposing state policies regulating abortion. The proposal received 1.9 percent support.