The New York State Common Retirement Fund, the third largest public pension fund in the US with $279 billion in assets, will withhold support for all directors at companies failing to implement majority-backed shareholder proposals – a policy with particular relevance for ESG, given the increasing support sustainability-focused proposals are attracting.
In its updated proxy voting guidelines, published on Wednesday, the fund said it will “withhold support for all incumbent directors on a board that failed to implement a shareholder proposal that received majority support at a company’s most recent meeting”.
It added that it will also “generally withhold support for incumbent governance committee members who failed to implement a shareholder proposal that received majority support at any time over the last three years”.
Last proxy season saw a record number of ESG-orientated shareholder proposals get majority support in the US, with 34 proposals attracting the support of more than half of investors, compared with 21 the year before.
Records have already tumbled early this season, including the first majority support (53 percent) for a racial justice audit proposal at Apple last month and the incredible 95 percent support for the plastic proposal at fast food firm Jack in the Box – believed to be the largest support ever for a sustainability-related resolution that is opposed by the company itself.
Aside from several company-endorsed proposals in recent years, most ESG shareholder proposals are opposed by corporate management and are often challenged – with increasingly less success – via the US Securities Exchange Commission (SEC) “no action” process.
While shareholder proposals in the US are typically nonbinding, there is an expectation that companies will respond to a majority vote – however, that is not always the case. Last month, RI reported that US upstream oil and gas giant ConocoPhillips stated in its preliminary proxy statement that its plan does not include a “Scope 3 (end-use) emissions target”, despite 59 percent of shareholders supporting a proposal last year calling for just that.
New York State’s new proxy voting guidelines are also designed to ramp up the fund’s scrutiny of company directors on climate change.
“Failure of companies to appropriately manage and comprehensively report climate and other material ESG risk may lead the fund to withhold support from audit committee members, directors responsible for oversight, or the entire board,” the document stated.
New York State voted against 404 individual directors at 88 firms last year, including Berkshire Hathaway, Chevron and Phillips 66. It also supported activist Engine No 1’s slate of “climate competent” directors at Exxon Mobil, three of which made it on to the board of the oil giant.
Going forward, New York State also said it will pre-announce key votes against directors at companies failing to address climate risks and will do the same for important climate proposals.
Earlier this month, the fund publicly called on shareholders to back resolutions at six US financial heavyweights – including Bank of America, Goldman Sachs and JPMorgan Chase – asking the banks to align their fossil fuel financing policies with achieving net-zero emissions by 2050.
Yesterday, New York State comptroller Thomas DiNapoli, sole trustee of the fund, also announced that it had withdrawn its proposal at Amazon following the online retail giant’s decision to undertake an independent racial equity audit, to be led by former US attorney-general Loretta Lynch. Last year, the same proposal, also filed by the New York State fund, was supported by 44 percent of the company’s shareholders.