2024 proxy season brings some strong commitments for climate action

Investors continued to show deep angst about the climate crisis by filing a record number of climate-related shareholder proposals this year. When it came time to vote, though, they gave them only lukewarm support. 

More successful were proposals that were withdrawn in exchange for corporate climate commitments.

Shareholders filed 278 climate-related proposals, according to a tally by Ceres, winning support from an average of 22.4 percent of shareholder votes. Including all environmental-social-and governance (ESG) topics, more than 500 proposals were filed, according to the Sustainable Investment Institute, with average support at only 19.8% of shares voted.

On the positive side, the season produced some significant wins. Seventy-one companies agreed before voting took place to take actions sought by their shareholders, in exchange for withdrawal of the proposals.

From manufacturers agreeing to set emissions reductions targets and adopt climate transition plans, to banks agreeing to disclose their lending to renewable energy projects compared to fossil fuel energy projects, such commitments have become the real fruit of engagement.

“If an issue has to go to a vote, it means there was some challenge in the dialogue,” said Ceres Vice President Kirsten Spalding, so follow-through might be less enthusiastic. “Commitments do two things: they accelerate corporate action on issues that really matter; and they often result in more disclosure, and that helps the entire market.”

Source: Ceres: “From Commitment to Implementation” July 2024

Implementation rates high

In a new analysis of corporate follow-through on commitments made to shareholders, Ceres researchers found that 73 percent of corporate climate commitments made in exchange for shareholders withdrawing proposals resulted in the company “fully or mostly” implementing the commitment within three years. Twenty-three percent of commitments were “partially” implemented in that time. 

Resolutions that won majority votes got lower levels of implementation. The study found that companies “fully” or “mostly” implemented requests in 61 percent of winning shareholder resolutions within three years, and “partially” implemented 33 percent. That means that engagement and negotiation often prove more effective than hostile resolution votes. 

Key 2024 commitments

Some key commitments from the 2024 season:

JPMorgan Chase, Citi and Royal Bank of Canada agreed with the New York City Comptroller representing the retirement funds of New York City employees to report the ratio of bank financing for clean energy projects compared to its financing for fossil fuel extraction projects. The New York City Employees’ Retirement System had filed proposals at these three banks and others.  After the three banks each agreed to report that ratio on a regular basis and the methodology used, New York withdrew them. 

“The transition from financing fossil fuels to low-carbon energy is going far too slowly,” City Comptroller Brad Lander said when the agreement was reached, adding that he hoped more transparency would prompt a faster transition.

3M, Warner Bros. Discovery, and NPX Semiconductor all agreed with Green Century Capital Management to adopt greenhouse gas reduction targets and issue climate transition plans aligned with the Paris Agreement.

“That’s the goal of engagement: to win policy changes at the companies,” said Annie Sanders, Green Capital’s director of shareholder advocacy. Green Century also won commitments on plastics use from VF Corp and Walt Disney Co.

“Companies do want to address shareholder concerns and do see the value” of topics that shareholders raise, Sanders said.

McDonald’s and Monster Beverage agreed with investors PGGM and Mercy Investment to report on their water risks.

Demands for emissions disclosures

Resolutions winning majority votes this year included climate proposals at DexCom, Jack in the Box and Wingstop.  Specifically, 56.6 percent of Jack-in-the-Box shareholders and 52.2 percent of Wingstop shareholders voted to seek disclosure of the companies’ greenhouse gas emissions and ask for targets on reducing emissions, as put forth in proposals by The Accountability Board. At DexCom, 51.9 percent of voters demanded a report on the company’s political spending.

Many resolutions, including at Markel Group and Constellation Brands, won more than 30 percent of shareholder support, a level that historically has prompted some response by the company, according to BlackRock’s 2021 Stewardship Expectations report and Morningstar.

The average level of support for ESG proposals was dampened because some proposals were actually anti-ESG resolutions, said Heidi Welsh, executive director of the Sustainable Investment Institute. Shareholders showed distinct apathy for those, with less than 2 percent average support.  

Yet big investment management companies have become hesitant to vote for climate- and sustainability-related proposals in a presidential election year, Welsh said, depressing levels of support.