How US investors are tackling ESG this AGM season

Shareholders deploy new tactics to force change at polluting companies


As 2023’s AGM season rolls around, at least 542 shareholder resolutions have been filed so far in the US on ESG issues. As You Sow, Ceres and the Interfaith Center on Corporate Responsibility are the non-profits leading the charge, according to data compiled by Proxy Preview.

ESG Clarity looks at how shareholders are learning from past mistakes and switching up their tactics to tackle companies’ ESG shortcomings.

Banks and insurers offered more time

In recent years, US shareholders have tried to follow their European counterparts by demanding that banks and insurers cut ties with fossil funding. But Proxy Preview said this has had the opposite effect. For example, banks such as JP Morgan are financing more of this activity, not less. “The feedback was that the language was too strict, so this year we are seeing requests for ‘time-bound phaseouts’, that give individual companies more wiggle room,” it said. 

Shareholders are now proposing smaller, more realistic targets. The New York City’s Comptroller filed resolutions at Bank of America, Goldman Sachs and JPMorgan Chase, requesting they hit 2030 greenhouse gas emission targets for just two high-emitting sectors.

Directors held accountable for inaction

Frustrated institutional investors are voting down board directors to push companies into taking ESG issues more seriously. Norway’s $1.22trn sovereign wealth fund warned it will vote against the re-election of at least 80 company boards for failing to hit, or even set, environmental or social targets on issues such as the climate crisis, boardroom diversity, excessive executive pay and human rights abuses.

The tactic isn’t new – Proxy Impact was an early pioneer of this strategy – but it’s picking up traction with other investors, including Majority Action, which focuses on climate change, worker safety and racial justice.

Shareholders target company auditors

Shareholders have had some success in pushing oil and gas giants like Chevron and Exxon to provide audited reports on how a net-zero economy would affect their finances. They will carry this strategy through to 2023, predicts Proxy Preview, with proposals for audited reports “about how asset retirement obligations affect net-zero goals calculations” due to be submitted again at more companies.

The New Jersey Division of Investment, Christian Brothers Investment Services and As You Sow have filed a resolution asking five oil and gas companies to provide audited reports. Proxy Preview said: “At ExxonMobil, it adds that the report can be broken out in separate parts. The Phillips 66 proposal says (alone of the proposals) that ‘nothing in this resolution shall serve to micromanage.’ The resolution also is pending at Valero Energy.”

Shareholders tire of anti-ESG noise

Anti-ESG proposals are on the rise in the US. Hortense Bioy, global director of sustainability at Morningstar, told ESG Clarity that the political backlash against sustainable investing may have contributed to the $12.4bn of outflows from US sustainable funds in the space of a year. 

But the anti-ESG movement is triggering a backlash from tired investors, according to Jon Hale, director of ESG strategy at Morningstar. He told Proxy Preview: “They argue that investment decisions, especially those made on behalf of worker pension plans, should be made by professionals guided by fiduciary duty and not by politicians guided by ideology. Putting investment decisions in the hands of politicians is a recipe for poor investment outcomes; in this case, it’s also a recipe for poor outcomes for people and the planet.”

Despite achieving little in the way of substantive success yet, the anti-ESG movement may find success with the 2024 presidential primary season on the horizon. As of early April, Proxy Preview counted at least 59 anti-ESG proposals that had been filed, mostly on “biases” from companies on diversity or “ties to communist China”. But many of these have been withdrawn or rejected by the US Securities Exchange Commission.

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