While the anti-ESG backlash did not diminish the number of ESG shareholder proposals being put to US firms this year, there are signs it has affected support.
More than 30 ESG-orientated resolutions achieved more than 50 percent support in 2022, a drop from 40 the year before.
But Heidi Welsh, founding executive director of US non-profit, Sustainable Investments Institute (Si2), told Responsible Investor that with only a month or so to go until the end of proxy season, there have only been around five majority supported proposals. “I do think that we are going to have far fewer majority votes this year,” she said.
Welsh added, however, that the drop off cannot all be attributed to the politicisation of ESG in the US.
“While all the anti-ESG noise may have made it harder for some to vote in favour of ‘normal’ ESG proposals, I think the lingering economic disruptions from the pandemic and the energy market impacts from the war in Ukraine also may have affected votes on climate change proposals, particularly at energy companies,” she said.
Another factor that might have impacted tallies, Welsh suggested, is that everyone is waiting on the US Securities and Exchange Commission’s (SEC) climate disclosure rule, which had been expected in April but is not likely to be published until the autumn.
“Many companies argued this spring that it is premature to request more detailed disclosure without knowing what the rule is going to require,” she said.
Danielle Fugere, president at As You Sow, a prolific filer of ESG proposals in the US, echoed Welsh, telling RI that the non-profit has not seen majority support this year.
She added that her guess is that the drop-off is associated with the largest asset managers.
Last May, BlackRock – perhaps the most targeted asset manager in anti-ESG rhetoric in the US – warned it would oppose more climate proposals in 2022, arguing that they have become “more prescriptive or constraining on companies and may not promote long-term shareholder value”.
This perspective was echoed by Vanguard earlier this year to RI.
Glass Lewis supports pioneering climate proposals at Chevron and Exxon
Influential proxy adviser Glass Lewis has thrown its support behind several first-time proposals at Chevron and Exxon this year, including one calling on the US oil majors to recalculate their baseline emissions to discount reductions arising from divestment or transfer of assets, a process referred to as “re-baselining”.
The exercise is seen as key by proponents in getting a real sense of a firm’s real world decarbonisation efforts and prevents them taking credit for reductions that come from simply ditching assets.
Glass Lewis stated in its recommendations on Exxon that such a disclosure “could provide useful context for shareholders concerning the company’s progress on its goals”.
The resolution was filed by As You Sow. Fugere told RI that she was surprised the adviser was supporting their proposal “because they haven’t been supporting very many of our proposals this year”. But she added that: “Glass Lewis generally does support accuracy and transparency, and so from that perspective, it makes sense.”
Another new proposal at Exxon being backed by Glass Lewis has been co-filed by UK investment giant Legal & General Investment Management (LGIM), calling on the company to “fully disclose” how the IEA’s net-zero scenario would impact the retirement of its assets.
The proposal was filed with US-based Christian Brothers Investment Services (CBIS), whose proposal at Exxon last year calling for an audited report assessing the financial impact of the IEA’s net-zero scenario assumptions, including future asset retirement obligations, attracted majority support (51 percent).
Despite the show of support for the 2022 resolution, CBIS’s CIO, John Geissinger, said Exxon’s disclosures still give investors little insight into how retirement costs might accelerate and to what extent.
Similar proposals filed at Valero and Phillips 66 by the State of New Jersey Common Pension Fund were omitted after the SEC agreed with the fossil fuel firms that the request fell foul of the watchdog’s rule around micromanagement.
Exxon is likely kicking itself that it did not challenge the proposal via the SEC’s ‘no action’ process, given the success of its peers in avoiding it.
The Texas-based firm, however, did challenge the proponents and think tank Carbon Tracker, which is supporting the proposal, in an SEC filing earlier this month in which it said they had “have muddied the waters with publications related to the proposal that contain inaccuracies, inconsistencies and misstatements”.
Pushing back on the proposal, Exxon questioned being asked to disclose against the IEA’s Net Zero Emissions by 2050 (IEA NZE) scenario when “virtually all observers, including the IEA itself, agree that the world is not on the IEA NZE pathway”.
Carbon Tracker has now responded to Exxon. Its head of accounting, audit and disclosure, Barbara Davidson, described Exxon’s challenge to its work as “at best a distraction from the question on the ballot”.
“Exxon’s board believes an NZE-like transition is currently unlikely, does not think the information would be helpful and does not want to provide it. Investors will have to weigh in,” she said.
Litigation risk at Exxon
European asset owner representatives, the Local Authority Pension Fund Forum (LAPFF) and the Ethos Foundation, have announced their support of a first-of-its-kind litigation proposal at Exxon, requesting the company report on the cumulative risks of environmental lawsuits against the company.
Norway’s largest pension fund KLP has also reportedly confirmed it will vote in favour of the resolution, filed by Anna Marie Lyles, a managing director at private venture capital firm Bio-Gist Ventures.
The proposal goes to the vote following a recent decision by a court in Guyana, which rejected Exxon’s and the government of Guyana’s attempt to dilute the company’s obligation to bear all costs to clean up any future oil spill at its offshore operations.
Tax goes to the vote at US oil majors
Last Thursday, a tax transparency proposal went to the vote at ConocoPhillips, attracting around 17 percent of the vote.
It was the first of three filed at US oil majors this proxy season by Oxfam America, with the backing of European investors. Danish pension fund PenSam co-filed at ConocoPhillips.
Next Wednesday, the same proposal, which asks the firms to issue a “tax transparency report” to investors using the Global Reporting Initiative’s (GRI) tax standard, goes to the vote at Exxon and Chevron.
The big proxy advisers Glass Lewis and ISS have maintained the same position on the proposals at the majors as they did at Amazon last year, with the former supporting and the latter opposing, RI understands.
Just over one-fifth of shareholders backed the proposal last year at Amazon. It was put to the online giant again this year and went to the vote on Wednesday. The results have not yet been made public via the SEC website.
Today (Friday), sees the proposal on adopting a 2030 Paris-aligned emission reduction target filed by Dutch climate activist Follow This go to the vote at TotalEnergies.
Investors will also vote today on a proposal requiring Anglo-Swiss miner Glencore to disclose how its thermal coal production and capex aligns with Paris, filed by Legal & General Investment Management and HSBC Asset Management.