It wasn't too many years ago when sustainable investors would be happy with just enough support for a shareowner resolution addressing environmental, social and corporate governance (ESG) for it to qualify for the following year's proxy ballot.
The degree to which the landscape has changed is made evident by a review of the 2013 proxy season compiled by Jackie Cook of Fund Votes. Cook's Proxy Season Roundup summarizes the votes on 502 resolutions submitted by shareowners in 2013. Two-thirds address corporate governance concerns, while the remaining focus on environmental and social issues.
Overall, the governance resolutions gained an average 41 percent support, down slightly from the 10-year high of 45 percent in 2009 but still impressive nonetheless. Of the 326 such resolutions, 88 gained the majority support of shareowners. Resolutions addressing board declassification and majority votes on resolutions and director elections all averaged majority support. Also, 64 resolutions were filed requesting an independent board chair, the highest number ever. The 64 resolutions averaged 32 percent support, and 77 percent of Netflix shareowners voted in favor of an independent chair.
With many mainstream investors continuing to turn a blind eye to the long-term financial consequences of environmental and social issues, such resolutions traditionally gain a smaller percentage of shareowner support, and such was the case again in 2013. But again: The 21 percent vote in support of such resolutions this year would have been unthinkable just a few years ago. Furthermore, the percentage represents a 10-year high for these resolutions.
Fourteen environmental and social resolutions earned at least 40 percent shareholder support in 2013, with requests for sustainability reporting that includes greenhouse gas emissions and energy efficiency targets gaining over 40 percent support. Resolutions requesting disclosure of political spending and lobbying expenditures attracted significant support as well, while more than one-third of shareowners at major oil and gas companies supported resolutions addressing the controversial practice of hydraulic fracturing.
The primary focus of Fund Votes has been tracking the shareowner voting records of mutual fund companies, and Ceres commissions Cook to report on mutual funds' voting on an annual basis. Cook's analysis of last year's voting records delivered some encouraging news: Three large financial firms -- DWS, AllianceBernstein and Oppenheimer -- supported most shareowner resolutions addressing climate change.
On the other hand, the report notes, “Six fund families failed to support even a single climate-related resolution in 2012 ... BNY Mellon, Franklin Templeton, ING, Pioneer, Putnam and Vanguard.”
“Too many mutual fund managers still fail to grasp the risks that climate change poses to companies they invest in,” said Mindy Lubber, president of Ceres. “U.S. mutual funds, with their sizeable ownership of domestic corporate stocks, need to consider the merits of shareholder requests on climate change and formalize their proxy voting guidelines accordingly.”