ESG Shareholder Proposals Gain Surprisingly Strong Support

A familiar scene unfolded at the annual shareholder meeting of oil giant BP in London last month when demonstrators derailed the proceedings less than 10 minutes after chairman Helge Lund started his opening remarks. Security officers dragging out protestors at such events long ago became a rite of proxy season.

Those kinds of attention-grabbing tactics have historically aided corporate activists in pressuring companies to implement stronger environmental, social and governance programs. This year, however, criticisms of corporate sustainability policies are taking on a different tone. A growing number of investors seem to be joining the backlash by making their voices heard through proxy votes.

In February, BP revealed it was backtracking on plans to slash oil output and shift its business towards renewable energy. While protestors were haranguing the company at last month’s meeting to take more significant action on climate change and transition away from fossil fuels, shareholders were voting on a resolution calling on BP to align its business with the Paris Climate Agreement. Although the measure failed, it received 16.75% of votes, up from 14.9% a year earlier.

Despite opposition from boards of directors, recent votes on related measures at other notable corporations played out in similar fashion. At Goldman Sachs, roughly 30% of stockholders supported a resolution calling on the investment bank to lay out its plans to align financing decisions with efforts to cut carbon emissions. Shareholders at financial services companies Wells Fargo and Bank of America were presented with similar proposals during their annual meetings – each received roughly 30% of votes in favor.

Given companies’ recommendations against the proposals, the fact the measures garnered those levels of dissent still represents significant pushback against their leadership on sustainability policies – climate change in particular. Notably, supporters of the ESG proposals included major institutional investors such as Norway’s sovereign wealth fund. Proxy adviser Institutional Investor Services also recommended voting in favor of the plans.

Nevertheless, in all cases, shareholders ultimately rejected calls for the companies to take stronger action on ESG issues. It seems difficult to make the case that investors are overwhelming corporate boards with demands to create even more rigorous ESG programs in that respect. On the other hand, the growing momentum behind ESG speaks to incremental changes over time in attitudes about concepts like fiduciary duty.

Not so long ago, companies could dismiss climate change as a matter outside their purview. After all, if companies are supposed to maintain a ruthless focus on maximizing shareholder returns, greenhouse gas emissions are someone else’s problem. That vision of fiduciary duty isn’t dead yet, but pushback against weak ESG programs show that it’s slowly fading away.