Insights from Brunswick’s Global ESG Practice
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Leading or Lacking? ESG during the 2022 AGM season
While the eyes of the world are on the Russia-Ukraine war, and while companies the world over are grappling with the fallout, the 2022 AGM and proxy season is quietly getting underway.
ESG is now, without question, a mainstream lens through which companies are viewed and assessed by investors. AGMs have become firmly established as a platform for shareholders to bring key ESG issues to the attention of boards and the public.
Global ESG assets are projected to surpass $41 trillion by 2022 and $50 trillion by 2025, one-third of the projected total assets under management globally, according to Bloomberg Intelligence. ESG funds represent the fastest-growing part of the global fund market.
We expect ESG issues to rank high on this year’s AGM discussions between investors and managements, continuing a strong trend we saw in 2021, when we observed the following:
- A higher percentage of shareholder proposals on environmental issues are winning majority support. Shareholders across Europe, the US and Australia sent a clear message through their voting that they expect companies to establish robust decarbonization strategies and plans. Around 30% of shareholder resolutions on environmental issues received majority support from investors in 2021, with resolutions on specific aspects of climate action, such as lobbying, receiving more support than resolutions on corporate climate strategy.i
- The “Say on Climate” campaign is gathering pace, although it received mixed reviews depending on regional investor perspectives. Say on Climate votes that were backed by company management have received high levels of investor support, often with upwards of 90% “for” votes.ii
- Diversity as the key social issue, with many disclosure-related diversity resolutions receiving good support. Overall, however, most shareholder resolutions on other social issues failed to get significant or received considerably lower support than environmental resolutions.iii
Since last year’s AGMs, we have seen significant political and regulatory changes across the world, such as broad endorsement around the globe of TCFD as a standard for climate disclosures; the merger of SASB with the IIRC and the establishment of the International Sustainability Standards Board; incoming supply chain regulation in a number of Western countries; and the EU’s detailing of its Taxonomy which stipulates which corporate activities are to be regarded as sustainable and which ones are not.
Add to that landmark climate change litigation against Shell in the Netherlands, increasing activist investor activity on ESG and the recent intense pressure many companies are facing to abandon their operations in Russia, and it is clear there is potential for heated ESG debates and close votes in the run-up to AGMs this year.
So, what’s mere hype and what’s real? Will ESG top the AGM agendas, or will we see a lack of meaningful action between companies and investors around the world?