The early data on U.S. proxy season reveals growing opposition to ESG in shareholder proposal filings, according to proxy advisory firm ISS-Corporate.
In a report published Tuesday, the firm said it’s seeing an increase in shareholder proposals that criticize environmental and social initiatives. So far this year, approximately 14.7% of all proposals are classified as anti-ESG, up from 10.2% in 2024.
“After peaking in volume in 2022, environmental and social shareholder proposals — such as those requesting companies to reduce [greenhouse gas] emissions or to report on gender and racial pay equity — have dropped, replaced by proposals that are skeptical of such initiatives,” the report said.
While there were just 13 so-called “counter-ESG” proposals submitted back in 2020, that jumped to more than 100 in 2024. With 62 filed to date this year, this season is on track for 150 of these proposals, ISS-Corporate said.
Despite the increase in counter-ESG proposals to 14.7% of total proposals, that’s still outweighed by 17.3% of proposals on environmental issues, 27.4% on social issues, and 40.4% dealing with governance and compensation issues, the report showed.
Historically, anti-ESG proposals have received very little shareholder support, typically attracting around 2% of investors’ votes, but this year, “some companies are likely to concede or make compromise to reach an agreement before the matter comes to a vote,” the report said.
Against this backdrop, the report said corporate disclosure of diversity information, and the use of diversity metrics in executive pay, “is expected to diminish.” Board diversity considerations are expected to retreat too.
“Norms and standards are shifting quickly, and many boards are having to navigate a slew of changes while attempting to meet complex and diverse expectations of their shareholders,” said Jun Frank, managing director and global head of compensation and governance advisory with ISS-Corporate, in a release.
“Under these conditions, it’s easy to lose sight of what matters to the company and its shareholders. Focusing on the fundamentals of corporate governance — economic relevance, robust and independent boards, and pay that’s aligned with performance — can act as a compass to navigate potentially confusing waters,” he added.
Additionally, the report noted that a last-minute change in the U.S. Securities and Exchange Commission’s approach to shareholder filings is “prompting some investors to pause or change their engagement strategy.
“That means issuers may face difficulties engaging with investors ahead of their shareholder meetings,” it added.
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