Sustainable Finance Newsletter - ESG support falls back

Cato

12/06/2024 17:11

By Ross Kerber
       June 12 (Reuters) - Tesla's closely watched shareholder
meeting tomorrow will be one of the last big events of the
current AGM season, making it a good time to look over some
statistics for the year's voting.
    
You can read about the numbers in this week's main story below.
I've also included links to stories about a McDonald's
chicken-sandwich saga and worries that gains from the recent S&P
500 rally are concentrated among just a few big tech giants.
    
Please connect with me on LinkedIn. If you have a news tip,
potential content, or general thoughts you can email me at 

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ESG proxy support falls back
New data shows support for environmental, social and governance
(ESG) resolutions at U.S. companies slightly lower in 2024 than
in 2023, and at its lowest level since 2015.

Figures from the Sustainable Investments Institute show average
support for the resolutions at publicly-traded U.S. companies
stood at 20.6% so far this year, and well below a peak of 33.3%
in 2021. 

There are a lot of ways to read these numbers. An obvious cause
is that the largest asset managers have dialed back their
support for resolutions on social issues or climate change, the
institute's Executive Director Heidi Welsh told me. 
    
Another interpretation, she said, "could be that people were
worried about companies being able to do whatever they wanted
under Trump," leading to the votes increasing during course of
the former U.S. president's term, and then dropping after Joe
Biden won the office.
    
Finally, she said, many companies have in fact made requested
changes, such as on workforce diversity disclosures. 
The data covers meetings held through early June of this year,
and excludes some governance resolutions that lack a social or
environmental component. 
       
A Vanguard representative declined to comment. A representative
for top asset manager BlackRock  BLK.N  declined to comment on
its voting this year but referred to a report it provided on its
voting last year. The report said BlackRock backed fewer
resolutions last year than in 2022 as many were "over-reaching,
lacking economic merit or simply redundant."
    
The data comes as the resolutions themselves are under attack
from some corporate leaders who say a 2021 policy change by U.S.
securities regulators allowed too many shareholder items to come
to a vote. 
    
I showed the voting trend data to a people with a range of
views. Some responses: 
    
* Tom Quaadman, executive vice president for the U.S. Chamber of
Commerce, the top business lobbying group, said the increasing
rejection of shareholder proposals "reflects that (investment)
return is the paramount priority of investors." 

* Jennifer Schulp, a director at the libertarian-leaning Cato
Institute, pointed out that ESG-focused funds have faced big
outflows. "It stands to reason that those same investors that
are choosing other investment strategies are also choosing not
to support ESG strategies for corporate management
decision-making," she said. 
    
The introduction of "pass-through" voting programs by top fund
firms could also play a role, Schulp added.
    
* Sanford Lewis, an attorney who represents shareholder
resolution filers, said the 2024 results were still near the
2023 average support figure of 21.5%. The pace of decline is
leveling, he said, because the number of asset managers subject
to political pressure to vote against ESG items is limited.
"There are still many pension funds and foundations and European
funds that are not going to be subject to this kind of
pressure," he said.
    
Lewis added that even votes of 25% or 30% in support of an item
can influence companies, because boards want to keep as many
investors happy as possible.  
   
Company News   
Bad news for McDonald's,  MCD.N  which was told by Europe's
second top court it does not have the right to use the term "Big
Mac" for poultry products, a partial win for Irish rival
Supermac's in a long-running trademark dispute.
    
Vanguard said its funds supported the election of Exxon's
 XOM.N  director nominees at its annual meeting on May 29, but
the mutual fund giant cited lingering concerns about the energy
company's lawsuit against climate activists.
 
GameStop  GME.N  shares tumbled for a second consecutive session
on Monday, extending deep losses after the return to YouTube
last week of "Roaring Kitty" stock influencer Keith Gill failed
to spark fresh investor enthusiasm for the struggling shopping
mall retailer.
    
On my radar  
Tesla's annual meeting on June 13 is shaping up at a referendum
on the leadership of CEO Elon Musk, particularly on Item 4, the
measure to ratify his record $56 billion pay package. The
company's many retail investors could be a source of support,
but getting them to vote poses a challenge.
    
Gains by chipmaker Nvidia NVDA.O  NVDA.O  and a handful of other
giant stocks have propelled much of the S&P 500's growth so far
this year, reviving concerns that the performance is too
concentrated.
    
A more rightward-leaning European Parliament will make it harder
to pass ambitious EU climate policies, but the majority of
Europe's current world-leading green policies are likely to stay
put, lawmakers, officials and analysts said.

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ESG resolution support falls back from 2021 peak    https://reut.rs/3yTqr4C
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 (Reporting by Ross Kerber in Boston; Editing by David Gregorio)
 ((ross.kerber@thomsonreuters.com; (617) 412 0093;))