ESG shareholder resolutions grew in number in 2024, driven by anti-ESG proponents for the first time. Meanwhile, the number of proposals on governance rebounded, with resolutions seeking to bolster shareholder rights enjoying particular success, according to an initial review by Morningstar Sustainalytics.
According to the Morningstar proxy-voting database, the number of ESG shareholder resolutions voted on at US companies grew by 21, or 3%, in the 2024 proxy year. However, this represented a slowdown from 12% in the 2023 proxy year and 19% in 2022.
The number of resolutions by anti-ESG filers increased to 87 in the 2024 proxy year, from 48 in 2022 when they first started to appear in number. However, despite their rising volume, shareholders appeared uninterested in these proposals, averaging only 2% support and falling from 9% two years prior.
Lindsey Stewart (pictured), director of stewardship research and policy at Morningstar Sustainalytics, noted that having seen over 200 such proposals voted on in three years: “It’s reasonable to conclude that their point was to gain attention rather than shareholder support”.
“Looking purely at the data we have so far, we had a cohort of anti-ESG resolutions that popped up in 2022 that got roughly 9% support. In 2023 they posted 67 resolutions and got about half as much support. This year, 87 resolutions and half as much support again. So, I think if their goal is to increase shareholder support, then they probably wouldn’t act in this way.”
On the re-emergence of governance as a priority for shareholders, Stewart told PA Future there was a growing realisation it “is the foundation from which all the other sustainability stuff is built”.
“Whether you’re prioritising financial returns, or prioritising climate change, biodiversity, nature or human capital, if you’ve got entrenched boards, not independent management, with disproportionate levels of control compared with an equity stake in the business, all the other stuff isn’t possible. There are no levers to pull anymore. So, there’s been a bit more focus from investors in addressing those topics.
“We’ve had votes on things like simple majority voting decisions, eliminating supermajority requirements, declassifying boards and independent board chairs. These are areas in which shareholders broadly agree on things. And I think there’s been a much greater population of resolutions this year as a percentage of the whole that focuses on those basic shareholder rights principles. So, that’s driven the average support upwards with governance resolutions.”
Does the shareholder resolution process still work?
Overall, average support for ESG resolutions appeared to stabilise at 23%, or 26% excluding anti-ESG. This comes after two years of decline from a 2021 peak in support at 36%.
However, large asset managers appeared to have continued their withdrawal of support for environmental and social proposals in 2024, driving growth in a cohort of ‘near miss’ resolutions with between 30% and 40% independent shareholder support – something Morningstar has begun to categorise as ‘Bronze Tier’ resolutions, alongside Gold (those resolutions supported by an independent majority) and Silver (those with between 40 and 50% shareholder support). The number of resolutions falling into those two tiers has fallen since 2021.
Stewart further concluded the continued growth in the overall volume of resolutions with falling average support is “likely to prompt further questions about both the quality of proposals being filed and the future of the entire shareholder resolution process”, from both institutional investors and companies.
“I think, on the one hand, if you’re going to have any kind of democracy, whether it’s shareholder democracy or political democracy, there’s going to be a certain amount of inefficiency in the process that people will just have to tolerate because it allows people to actually have their say, whether everyone is interested in the point they’re making or not. Who knows whether that will change over time. But, on the other hand, it is probably worth having a conversation about just how many resolutions are the right amount.”
