‘Anti-ESG proposals’ up 60 percent this year, despite low support in 2022

The number of “anti-ESG” proposals filed at US firms has jumped 60 percent compared with the same point last year, despite such shareholder requests historically attracting extremely low support. 

At least 43 anti-ESG proposals have been put to companies so far this proxy season, defined in the latest annual Proxy Preview report as those that “share a belief that corporate America is too liberal”. Twenty-seven had been filed this time last year. 

The greatest number of the resolutions question the wisdom of racial and ethnic board diversity, suggesting that diversity, equity and inclusion (DE&I) programmes and anti-racism initiatives discriminate against conservative white people.  

Failing to get passed SEC  

Last year, anti-ESG proposals attracted support of less than 4 percent on average, according to the Proxy Preview report, published last week. Many were also excluded through the US Securities and Exchange Commission’s “no action” process, the mechanism by which companies seek assurance from the regulator that it will not act if they do not allow shareholders to vote on it at their next annual meeting.  

For instance, six proposals put forward by US conservative think tank the National Centre for Public Policy Research (NCPPR) were excluded in 2022. 

At least nine NCPRR proposals have fallen foul of the “no action” process this proxy season, with the majority being excluded over procedural errors. Others were omitted because they were deemed to breach the SEC’s “ordinary business” rule, meaning they delve too deeply into matters relating to the day-to-day running of the company. 

Among the proposals excluded on the grounds of ordinary business was one at JPMorgan Chase asking the financial heavyweight to report on any practices that “prioritise non-pecuniary factors when it comes to establishing, rejecting, or failing to continue client relationships”. 

JPMorgan Chase, the NCPPR wrote, “has a history of cancelling the accounts of those who hold opinions and political views that deviate from hard-left political orthodoxy”.   

Its proposal at Bank of America, seeking a “congruency report” into the bank’s partnership with “globalist organisations”, failed because it did not meet the SEC filing requirements.  

That proposal raised concerns with the bank’s links with groups with “radical agendas” such as the Business Roundtable, the influential association of US CEOs, and the World Economic Forum (WEF). 

Responsible Investor spoke with Scott Shepard, fellow at the NCPPR, about the group’s strategy, given the low level of support for its proposals. 

He told RI that the “left” has been filing for many more years and initially received similarly low support.

Shepard added that part of the strategy is to get its idea in front of boards, publicly, “so that when lawsuits come later, they can’t say, ‘well, gosh, we had no idea this is something we should do. We didn’t know everybody had the same civil rights in America’.

“Well, yeah, you did, because we pointed it out to you. You had actual and constructive notice of that fact.” 

Blocking proposals 

One practice adopted by NCPPR in recent years involves mimicking the requests of sustainability-focused proposals, with the aim of getting the former excluded on the ground of the substantial duplication rule by filing first. The conservative group puts forward its actual position in the statement that accompanies the core request.  

Shepard refers to these as “blocking proposals”. 

When asked about how this furthers NCPPR’s cause, Shepard told RI: “One of the reasons everybody engages in these shareholder proposals is to influence companies to move in the way that the proposals want. We think that a lot of the left-of-centre proposals are bad ideas, so if we can keep one of them off, or at least keep the rhetoric in our direction, [we will].” 

In the summer, the SEC proposed a rule change that would prevent blocking proposals by putting forward a revision that would mean resolution would only be excludable “if it addresses the same subject matter” and “seeks the same objective by the same means”.   

There were signs that this change was on the cards when the SEC broke with convention in February 2022 and denied Johnson & Johnson’s bid to exclude SRI house Trillium Asset Management’s racial justice audit proposals because the NCPPR had already filed a similar one – albeit with a radically different motivation.  

In the end, Trillium’s proposal attracted majority support, whereas NCPPR’s received less than 3 percent of shareholder votes. 

Shepard conceded that once the new SEC rule is in place there will not be room for blocking proposals any more but added that the think tank has “lots of other tactics”. 

Last year, the NCPPR’s former executive vice-president, Justin Danhof, joined US “anti-woke” investment house Strive Asset Management. When RI asked Shepard if there would be any collaboration between the two on shareholder proposals going forward, he said: “We still stay in touch.”

When asked about his thoughts on the anti-ESG term, Shepard described it as a “dumb, but revealing label”. 

“The only way we’re anti-ESG is if ESG only means left-wing goals. The companies and activists who are calling us anti-ESG, every time they do it, what they illustrate is that they’re not acting with regard to risk, or legality, or anything.”