Shareholder resolutionsA powerful tool for active ownership
Many shareholder victories have already been recorded this proxy season:
- Despite companies attempts to block them, twelve proposals on the topic of Access to Medicine have made it on the ballot at pharmaceutical companies[i].
- At Apple’s 2022 AGM, a majority of shareholders supported a resolution asking the company to carry out an independent assessment into its adverse impacts on civil rights[ii].
- Duke Energy announced a clean energy action plan following a resolution filed by As you Sow, which was subsequently withdrawn.[iii]
Shareholder resolutions are already shining in the 2022 proxy season illustrating how investors are unlocking their power. More investors can join the trend and do more to accelerate progress on many environmental, social and governance (ESG) topics.
Shareholder resolutions – A rising trend
Shareholder resolutions are a powerful tool that investors can use in their active ownership strategies. Done in conjunction with engagement, co-filing a shareholder resolution will get the attention of the company, other shareholders and sometimes even more generally stakeholders. If progress on an ESG issue of concern during an engagement is not satisfactory, shareholder resolutions should be used to encourage companies to improve on their practices.
The increasing trend within investors to integrate ESG considerations in their investment process and to apply active ownership activities has had an impact on both the number of filed shareholder resolutions as well as the level of support they have received. For example, in the US, where shareholder resolutions have been widely used for a while already, 2021 witnessed another record of ESG shareholder resolutions filed and the numbers so far for 2022 are on track to a new record being set[iv] (Figure 1).
Figure 1 - Proxy Preview 2022 - https://www.proxypreview.org/
The trend is also true outside the US. For example this season, investors filed resolutions at Credit Suisse (Switzerland), BP (UK), Shell (UK) and TotalEnergies SE (France) urging these companies to do more to tackle climate change. This illustrates how investors are going beyond engagement and using shareholder resolutions to push for bigger and faster change.
In parallel, there is a higher expectation on investors to support those resolutions when they are in line with their ESG goals[v] and this is translating in higher approval rates, including some majority votes. See for example Figure 2 from ICCR, which ACTIAM is part of, looking back at 2021 successes[vi]. Investors can confirm this trend and be bolder supporting shareholder resolutions in line with their sustainability policies. Engagement is a great way to set ESG expectations with companies and to discuss progress. In addition, shareholder resolutions via co-filing or supporting those filed by other shareholders will help achieve greater results.
Figure 2 - ICCR members 2021 majority votes
A range of themes
Shareholder resolutions can be used on a broad range of ESG themes, mirroring what is important to investors in line with their sustainability strategies. Climate change is of course high on the agenda and shareholder resolutions on this theme are abundant. Many other themes, like diversity, lobbying activities, decent work are also the subject of shareholder resolutions (Figure 3). Investors can therefore use ESG resolutions and align them with their individual ESG goals to bring real world impact on many topics.
Figure 3 - 2022 Proxy Season Review - https://www.proxypreview.org/
An interesting example this season is the case of Amazon and a resolution asking the company to provide greater tax disclosures, which has made it to the ballot for their upcoming May 25th Annual General Meeting. Taxation has recently emerged as a sustainability topic as the legal practice of tax avoidance has been scrutinised and made it to the public eye because of its broad social implications. Investors are asking companies to increase tax transparency and treat taxation as a broader sustainability theme. More surprising in this case is that the SEC rejected Amazon’s challenge of the resolution. For the first time on the topic of taxation, the SEC did not side with the company, rejecting Amazon’s claim under the ordinary business exception. The SEC decided that the matter can be seen as a governance issue and therefore admitted the resolution. Here is therefore an example of how investors can use shareholder resolutions on a relatively new sustainability topic. ACTIAM welcomed the news as it aligns with its views and work on taxation as a sustainability issue.
How we use it at ACTIAM
At ACTIAM, co-filing is used as an active ownership tool. Alongside engagement and voting, it is used not only to manage material risks but also to bring our investments within the adaptive zone. The goal of our active ownership instruments is to create real world impact, which ACTIAM believes will reduce sustainability-related risks and improve financial performance. Co-filing, like the other active ownership activities is therefore driven by the ACTIAM sustainability policy and its material drivers with an aim to bringing companies to transition to the adaptive zone.
For the current AGM season, ACTIAM joined forces with different coalitions such as Share Action and As You Sow and co-filed 5 shareholder resolutions on the topic of climate change, health, plastic pollution, water and living wages (see table for details). ACTIAM welcomes the fruitful discussions which happened with companies and investors during this process and the commitments made. It confirms that shareholder resolutions are a very productive active ownership tool.
As just described, ACTIAM witnessed in practice how a shareholder resolution can escalate an issue, accelerate the dialogue and give important topics the attention they deserve. Indeed, looking at the co-filing done for the 2022 proxy season, ACTIAM is pleased that this has led to increased dialogue with companies and concrete commitments that will bring real world impact. Co-filing should not be seen as a conflictual process. Constructive conversations are held during the co-filing process and ACTIAM expects continued positive engagement conversations with these companies whether the resolution made it to the ballot or was withdrawn. The story does not stop with the filing of the resolution. It is just one tool which brings ongoing engagement discussions and commitments. Indeed, when engagement alone does not achieve its objectives or not fast enough, shareholder resolutions are a powerful tool to speed the progress so that real world impact can be seen within a acceptable timeframe.
[i] 2022 Shareholder Proposals at Pharma Companies Prevail at SEC | ICCR (Interfaith Center on Corporate Responsibility)
[ii] ESG resolution round-up: majority support for first civil rights audit proposal of 2022 at Apple | Responsible Investor (responsible-investor.com)
[iii] Investors Applaud Duke Energy’s Expanded Net-Zero Emissions Commitment — As You Sow
[v] ShareAction | 2022 Voting Expectations of Asset Managers