Investors Double Support for Environmental and Social Proposals
Support for environmental and social shareholder proposals at US public companies more than doubled between 2005 to 2011, according to a study by the IRRC Institute (IRRCi). During this time frame, average support for these proposals grew from about 10 percent to more than 20 percent, it says.
At the same time, the proportion of shareholder-sponsored resolutions on E+S matters grew by a third, from about 30 percent to 40 percent, for all proposals going to a vote, according to Key Characteristics of Prominent Shareholder-sponsored Proposals on Environmental and Social Topics, 2005-2011. Also, the proportion of higher-scoring proposals increased (see chart).
The study finds three characteristics appear to be connected with prominent environmental or social shareholder proposals:
- Targeting: Proposals receive higher voting support when they occur at companies where investors also raise concerns over board performance.
- Timing: Proposals connected to current events gain prominence from their association with the headline-making events and/or related attention. Proposals also gain prominence if related to ongoing trends and developments in the regulatory, legislative and global arenas, as well as among industry-specific peers and ‚Äúleading companies,‚ÄĚ as defined by proponents.
- Sponsor: Prominent proposals tend to be associated with, and supported by, two types of proponents. These include socially responsible investors, defined as institutions that explicitly state that they seek both investment returns and social impact, and public pension funds. These investors play a leading role in shaping the shareholder proposal. By contrast, proposals submitted by special interest groups or individuals tend to receive lower levels of support.
In addition, proposals that call for disclosure generally received higher vote totals than those that call for a particular corporate action or change in corporate policy.
However, some E+S issues never seem to rise to any level of prominence. The data suggests that investors are less likely to support issues where a company credibly demonstrates it has or will sufficiently address the issue, or where the general topic may be better addressed through public policy or other non-corporate remedies.
The report gives various analyses of 24 proposal topics. Those analyses include:
- Total average support: During 2005-2011, average support varied greatly for each of the proposal topics, from 3 percent for tobacco risks to 31 percent for energy extraction techniques/waste.
- Growth trends in average support: A number of the highest supported proposal topics also experienced high compound annual growth rates in terms of annual average support, suggesting that support builds among investors as they become familiar with the specific issue. These proposal topics include: recycling and energy efficiency, energy extraction, renewable/sustainable energy and food and consumer safety.
- Average number of proposals filed/voted: The proposal topics with the greatest number of proposals voted appear to represent subject matter that is more ‚Äúuniversal,‚ÄĚ or applicable to all or multiple industries. A handful of proposal topics account for more than 60 percent of the total number of proposals voted on. These topics are political spending/lobbying, human/labor rights, climate change and sustainability, equal employment opportunity/diversity and animal testing/animal welfare.
The research is based on a review of the roughly 1,300 shareholder-sponsored E+S proposals, which were voted on across Russell 3000 companies during 2005-2011.¬†Ernst & Young LLP was the primary contributor to the report.
US investment in sustainable and responsible investments rose 22 percent between 2009 and 2011, according to a study published in November by the US SIF Foundation.
Research published the same month by the University of California, Davis, found companies that tout social responsibility and whose managers contribute to political action committees tend to provide higher returns to shareholders.
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