Bloomberg Law
April 12, 2023, 9:00 AM

ANALYSIS: Early Shareholder Activity Foreshadows ESG Changes

Abigail Gampher
Abigail Gampher
Legal Analyst

This proxy season looks like it will shape up to differ from past seasons in key areas—sustainability report and race-related proposals—and a further shift in shareholder behavior will likely be spurred by the SEC’s proposed rule on climate-related disclosures, set to become finalized later this year.

But despite these looming changes, many familiar environmental and social issues will be presented to shareholders on the proxy ballot in the coming months.

Climate Concerns Return to Proxy

Shareholders are set to vote on 13 proposals requesting that companies address greenhouse gas (GHG) emissions and on 10 proposals requesting that companies address climate change risk at their 2023 annual meetings. These numbers are comparable with those from 2018 to 2022.

In the last five years, shareholders have voted on an average of five sustainability report proposals per year. However, sustainability report proposals are noticeably absent from definitive proxy statements so far this year.

In Q1 2022, for example, 95.4% of shareholders voted for Jack in the Box to produce a report on the sustainability of its packaging. Based on the strong support for the Jack in the Box proposal and the growing litigation against companies for green product claims, this is an area to watch for shareholder activity in Q2, despite the initial lull.

Shareholders Express Social Concerns

Shareholders will be asked to vote on a variety of social issues at annual shareholders meetings, but unlike environmental proposals, the social proposals don’t primarily focus on any one particular issue.

H1 race-related shareholder proposals increased from 2021 to 2022, but with only five of these proposals in definitive proxy statements YTD, it seems unlikely that this proposal type will break records in H1 2023.

Animal welfare has become a major concern for shareholders in recent years, and greater activity on the issue—as the increase in activism on the issue would suggest— likely lies ahead.

But a Tyson Foods Inc animal welfare proposal that has already been voted on this proxy season mustered little support (4.6%), signaling that it will take time for shareholder efforts to pay off.

Bloomberg Law subscribers can find related content on our ESG Practice page, Practical Guidance: Proxy Regulation page, as well as our Practical Guidance: Shareholders page. Data accessible at BI PROXY <GO>.

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