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Sustainable Finance Newsletter - ESG support falls back



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By Ross Kerber

June 12 (Reuters) -Tesla's closely watched shareholder meeting tomorrow will be one of the last big events of the current AGM season, making it a good time to look over some statistics for the year's voting.


You can read about the numbers in this week's main story below. I've also included links to stories about a McDonald'schicken-sandwich saga and worries that gains from therecent S&P 500 rally are concentrated among just a few big tech giants.


Please connect with me on LinkedIn. If you have a news tip, potential content, or general thoughts you can email me at ross.kerber@thomsonreuters.com


Also: PEOPLE! I need more responses for our ongoing readership survey. Like, have I focused too much on shareholder matters? What have you learned from the newsletter so far? What else should I be writing about? Share your views in the survey here.

ESG proxy support falls back

New data shows support for environmental, social and governance (ESG) resolutions at U.S. companies slightly lower in 2024 than in 2023, and at its lowest level since 2015.


Figures from the Sustainable Investments Institute show average support for the resolutions at publicly-traded U.S. companies stood at 20.6% so far this year, and well below a peak of 33.3% in 2021.


There are a lot of ways to read these numbers. An obvious cause is that the largest asset managers have dialed back their support for resolutions on social issues or climate change, the institute's Executive DirectorHeidi Welsh told me.


Another interpretation, she said, "could be that people were worried about companies being able to do whatever they wanted under Trump," leading to the votes increasing during course of the former U.S. president's term, and then dropping after Joe Biden won the office.


Finally, she said, many companies have in fact made requested changes, such as on workforce diversity disclosures.

The data covers meetings held through early June of this year, and excludes some governance resolutions that lack a social or environmental component.

A Vanguard representative declined to comment. A representative for top asset manager BlackRock BLK.N declined to comment on its voting this year but referred to a report it provided on its voting last year. The report said BlackRockbacked fewer resolutions last year than in 2022 as many were "over-reaching, lacking economic merit or simply redundant."


The data comes as the resolutions themselves are under attack from some corporate leaders who say a 2021 policy change by U.S. securities regulators allowed too many shareholder items to come to a vote.


I showed the voting trend data to a people with a range of views. Some responses:


* Tom Quaadman, executive vice president for the U.S. Chamber of Commerce, the top business lobbying group, said the increasing rejection of shareholder proposals "reflects that (investment) return is the paramount priority of investors."


* Jennifer Schulp, a director at the libertarian-leaning Cato Institute, pointed out that ESG-focused funds have faced big outflows. "It stands to reason that those same investors that are choosing other investment strategies are also choosing not to support ESG strategies for corporate management decision-making," she said.


The introduction of "pass-through" voting programs by top fund firms could also play a role, Schulp added.


* Sanford Lewis, an attorney who represents shareholder resolution filers, said the 2024 results were still near the 2023 average support figure of 21.5%. The pace of decline is leveling, he said, because the number of asset managers subject to political pressure to vote against ESG items is limited. "There are still many pension funds and foundations and European funds that are not going to be subject to this kind of pressure," he said.


Lewis added that even votes of 25% or 30% in support of an item can influence companies, because boards want to keep as many investors happy as possible.

Company News

Bad news for McDonald's, MCD.N which was told by Europe's second top court it does not have the right to use the term "Big Mac" for poultry products, a partial win for Irish rival Supermac's in a long-running trademark dispute.


Vanguard said its funds supported the election of Exxon's XOM.N director nominees at its annual meeting on May 29, but the mutual fund giant cited lingering concerns about the energy company's lawsuit against climate activists.

GameStop GME.N shares tumbled for a second consecutive session on Monday, extending deep losses after the return to YouTube last week of "Roaring Kitty" stock influencer Keith Gill failed to spark fresh investor enthusiasm for the struggling shopping mall retailer.


On my radar

Tesla's annual meeting on June 13 is shaping up at a referendum on the leadership of CEO Elon Musk, particularly on Item 4, the measure to ratify his record $56 billion pay package. The company's many retail investors could be a source of support, but getting them to vote poses a challenge.


Gains by chipmaker Nvidia NVDA.O NVDA.O and a handful of other giant stocks have propelled much of the S&P 500's growth so far this year, reviving concerns that the performance is too concentrated.


A more rightward-leaning European Parliament will make it harder to pass ambitious EU climate policies, but the majority of Europe's current world-leading green policies are likely to stay put, lawmakers, officials and analysts said.


ESG resolution support falls back from 2021 peak https://reut.rs/3yTqr4C


Reporting by Ross Kerber in Boston; Editing by David Gregorio

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