Key insights from the 2023 Proxy Preview

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Shareholder proposals are a key engagement tool used by US investors who want to shift the environmental, social, and sustainable-governance impacts of companies.

Proxy Preview is a leading data source on those proposals. In fact, Chicago Tribune calls it the “Bible for socially progressive foundations, religious groups, pension funds, and tax-exempt organizations”.

Proxy Preview has released its 2023 report, which analyses upcoming shareholder proposals, regulatory updates, and investor-company discussions for this 2023 AGM season. Here are Tumelo's top five takeaways from the Preview:


1. Number of shareholder proposals could exceed last year's record high

Ever since the Securities Exchange Commission (SEC) reversed Trump-era guidance in 2021 and therefore made it more difficult for companies to reject or block proposal submissions, the number of shareholder-submitted proposals has steadily risen.

A total of 542 proposals have been filed this year, and the Preview predicts that number to continue growing throughout 2023 and "exceed last year's unprecedented final total of 627".

Not all of the proposals will go to a vote; the SEC has removed 12 already, and 76 have been withdrawn by the filers, possibly due to them reaching agreements with the respective companies. As investor engagement with companies continue to progress, more proposals are expected to be withdrawn.


2. Climate change is still the most popular topic

Climate-change proposals make up 23% of the ESG shareholder proposals that have been filed in 2023, making it the most prominent topic for two consecutive years. Requests made by these proposals largely concern greenhouse-gas-emissions targets, but also touch on risk assessments and deforestation.

Of the 122 climate-related proposals filed so far, the majority (72) concern greenhouse-gas emissions, while the rest address strategy and risk assessment (42) and deforestation (8).

However, the Preview notes that while they have continued to grow in number since 2019, support for climate-change proposals dropped considerably in 2022 compared to 2021: a result of increasingly "aggressive requests" by filers. These requests were more prescriptive than those in previous years, which some investors evidently aren't too keen on.


3. Number of reproductive-health proposals continues to rise

The US Supreme Court's overturning of Roe v Wade back in June 2022 meant that abortion rights are now under state, rather than federal, jurisdiction. It allowed abortion rights to be redefined on a state-by-state basis; in some cases, leading to access to abortion being restricted.

According to the Preview, the landmark moment explains the growing number of proposals on reproductive health, with 22 filed so far this year.

A majority of the proposals ask their target companies to share how they will respond to restrictions on reproductive-health rights, particularly access to abortion. One of them went to a vote at Costco's annual general meeting (AGM) in January, and received 13.3% support from shareholders.


4. Anti-ESG proposals grow in number, but support remains low

"Anti-ESG" proposals refer to those that oppose ESG-focused action, and which the Preview says "share a belief that corporate America is too liberal".

To illustrate, a proposal filed at JPMorgan Chase and PayPal this year requests a report that assesses how the companies oversee risks related to discriminating against individuals based on characteristics such as their race, colour, and political views. The proposals argue that diversity policies go against the American right to free speech.

Compared with mid-February last year, the number of anti-ESG proposals has jumped from 27 to 40 this year. However, support for them is low: votes "in favour" of anti-ESG proposals over the years averages only around 4%.


5. Proposals on sustainable governance evaporates as corporate practices improve

A subset of governance proposals, sustainable-governance proposals typically raise concerns around board diversity and ESG-related pay. Their total fell by 70% this year compared to the same time four years ago, with only 35 proposals filed as of now.

According to the Preview, this trend is due to improved diversity at corporate boards and an increase in the number of companies that provide sustainability reporting. Susan Angele from The 30 Percent Coalition, an organisation advocating for increased diversity on corporate boards, notes that the number of S&P 500 companies that disclose their board's racial/ethnic diversity has increased from 34% in 2021 to 92% in 2022.

However, disclosures tend to be aggregated, and Ms. Angele noted that "more detailed disclosure" will be necessary to improve diversity.

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