Proxy season with a twist: The rise of the activist shareholder
This year’s proxy season has pushed a new set of actors to the forefront as environmental advocacy groups are making their presence felt at AGMs
Engagement is the domain of institutional capital. Every year the world’s largest institutional investors file resolutions that steer their companies in a certain direction. The weight of their holding compels the cognizance of their advice.
This year’s proxy season, however, has pushed another set of actors to the forefront of the battle between boards and shareholders: the activists.
These organisations, registered as non-profits and holders of minority equity, have filed climate resolutions that vary in their diagnosis and prescription. Their success (or failure) prompts a reimagination of how and when engagement works – and crucially, when it does not.
As You Sow – the downstream specialist
Of all the shareholder advocacy organisations, As You Sow has filed the most resolutions (over 30). Founded in 1992, its history is dotted with successful environmental advocacy at some of the world’s largest companies including Exxon Mobil, Unilever, PepsiCo, Dell, Apple, McDonalds and Nestle.
Famously, in 2009, the group’s climate resolution at Idacorp, a utility company, received 51% shareholder support. This remains one of the highest levels of support any climate resolution has ever received.
In addition, while most investors target upstream, hard-to-abate sectors, As You Sow is somewhat of a downstream specialist. While it has engaged with companies in energy, utilities and power – its history with consumer, financial services and food and beverage stands out.
This year, As You Sow’s resolutions are pushing for sustainable packaging at Mondelez and Amazon, lower plastics pollution at McDonalds and Walmart, emissions disclosure at J.P. Morgan and climate reporting at Twitter.
It is even pushing Netflix to disclose how its retirement plan protects employees from climate risk.
“By investing employees’ retirement savings in companies with outsize contributions to climate change, Netflix is generating climate risk, including transition risk and long-term systemic risk, to workers’ portfolios”, the resolution reads.
Apart from the downstream sectors, As You Sow has been reasonably successful at pushing the defence and aerospace industry to rethink its environmental footprint.
Its climate resolutions at defence contractors Lockheed Martin and Raytheon were supported by 35% and 37% of shareholders respectively.
Sierra Club Foundation– the strategic philanthropist
Another key activist shareholder is the Sierra Club Foundation. In its own words, the Foundation “promotes climate solutions, conservation, and movement building through a powerful combination of strategic philanthropy and grassroots advocacy”.
The “strategic philanthropist” has been a vocal advocate for corporate climate action, particularly in the financial sector.
Its campaign advocating to end insurance finance for oil and gas projects in the Artic has received widespread support. Chubb, one of the world’s largest insurers recently took a decision in line with the core demand.
When Vanguard, a large asset manager, withdrew from a global net zero alliance in 2022, the group’s campaign manager Roberta Giordano said “by not being proactive on climate, Vanguard is jeopardising its clients’ long-term financial security. The rest of the industry sees the writing on the wall”.
The focus on climate accountability in the financial sector is a characteristic of the group’s advocacy. This year, the Foundation has targeted large American banks: Goldman Sachs, Wells Fargo, J.P. Morgan Chase and Morgan Stanley. Its key demand from them – commit to phasing out fossil fuel finance.
As You Sow and Sierra Club are epitomes of a larger group of engagement aficionados. Follow This, a Dutch advocacy group that has put up a historic fight against Big Oil is another example.
In some ways, Follow This set the stage for shareholder advocacy. In 2015, the group began uniting shareholders to sponsor a resolution at Shell. It inspired a movement of smaller shareholders uniting over shared preferences.
As Mark van Baal, the voice behind Follow This put it: “one small shareholder can change the course of a company”.
The current proxy season suggests that his words have an audience.