Proxy season sees rise in environmental and social issues: Morningstar

The number of shareholder resolutions that address environmental and social issues jumped this proxy season, as did investor support for these proposals, according to a new report from Morningstar.

In the wake of the 2022 annual meeting season, the research found that the number of shareholder resolutions focused on either environmental or social issues jumped from 145 in 2021 to more than 250 this year.

Climate-related issues are leading the way, the report noted, particularly in the energy and banking sectors “amid increasingly urgent warnings from the scientific community.”

However, the research found that other environmental and social issues are also seeing more shareholder attention, with resolutions involving biodiversity and natural capital, diversity and inclusion, and human and labour rights.

“Much of this increase is attributable to the [U.S. Securities and Exchange Commission’s] revised guidance addressing ‘significant social policy issues,’ which broadened the definition of permissible shareholder resolutions,” the report said.

The resolutions are also seeing increased shareholder support, it noted.

“Out of those 2022 proxy-year resolutions, 140 gained the support of more than 20% of shareholders. Fifty seven gained more than 40% support, and 27 actually gained majority shareholder support,” the report said.

The increase in proxy voting activity has, in turn, produced increasingly detailed voting policies from major asset managers, the research  found.

“This leads to more predictable voting outcomes for asset managers, which in turn can help investors make informed choices about which managers’ active ownership approach best reflects their own [environmental and social] priorities,” it said.

Morningstar examined the policies of 25 major asset managers (13 European firms and 12 U.S. managers). Nine of the 13 European firms have policies that it rated as “high” or “very high” for their focus on these issues, whereas 11 of the 12 U.S. firms are rated as “medium” or “low.”

Specifically, the research found that Allianz GI, BNP Paribas, Fidelity International, and LGIM provide the highest level of detail on environmental and social issues in their proxy voting policies.

It also noted that the major index fund managers — BlackRock, State Street and Vanguard — are all rated as having a “medium” focus on environmental and social issues.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.