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ShareAction’s Resolutions to Watch 2022: What have we learnt from this year’s AGM season?

Large companies have global impacts on issues like climate change and inequality. Each year, companies are required to hold Annual General Meetings (AGMs). During AGMs, investors vote on resolutions that cover everything from who is in charge to their climate change strategy. AGMs are key opportunities for investors to hold companies to account. For the financial system to work for people and planet, investors must influence companies by voting on resolutions at AGMs.

During the AGM season there are hundreds of resolutions filed by shareholders that ask companies to take action on environmental and social issues. That’s why, each year, ShareAction lists around 20 environmental and social resolutions that we consider to be the most important and impactful, and that we encourage investors to support.

These resolutions are only snapshots of the AGM season. We’ve chosen them to cover a broad range of social and environmental topics from across the globe, such as the first climate resolution to be voted on at a Swiss company, Credit Suisse.

Now that all of ShareAction’s Resolutions to Watch have been voted on, here are five lessons we’ve learnt from the 2022 AGM season.

Lesson 1: Investors could be using their voting power more to tackle climate change, inequality and public health issues

Not one of the Resolutions to Watch won majority support.

Average support was just 17.1 per cent, including votes as low as 1.5 per cent and as high as 38.9 per cent. Six resolutions weren’t voted on - three were blocked by the company, and three were withdrawn, likely because the company agreed to take action.

Resolutions with the least support tended to be particularly forward-looking, action-oriented resolutions. The resolution at international tobacco company Philip Morris, for example, requests the company to set a timeline to stop selling tobacco products and received just 1.5 per cent support.

Many of the Resolutions to Watch, however, stem from globally agreed and very modest environmental and social standards. For instance, it is widely accepted that forced labour is something companies should avoid. Yet the resolution at the American department store TJX on preventing forced labour received just 24.6 per cent support from investors.

Investors often justify voting against these resolutions by saying that they’re too prescriptive or financially immaterial, but in many cases resolutions are worded to allow management discretion as well as acting on an issue where the risks of inaction to companies are only growing.

Lesson 2: Proxy advisors could play a bigger part in driving investor support for environmental and social resolutions

Proxy advisors – who provide investors with voting recommendations – likely had an effect on voting outcomes. Despite recent claims about the declining role of proxy advisors, the three resolutions that attracted most support (J-Power, UPS, Amazon) were the only three that global proxy advisor Glass Lewis recommended investors to support. We can’t say for sure that Glass Lewis influenced these voting results, but they do seem to reflect investor attitudes towards environmental and social resolutions.

Other factors remain important too, like company management recommendations. All of the Resolutions to Watch were opposed by management. There is also a general reticence of asset managers to take meaningful action. We repeatedly see investors justifying their votes against resolutions on the basis that the company already has good enough policies or disclosure.

But environmental and social resolutions are filed because a company’s policy or disclosure is insufficient, and the filer has often concretely proved this to regulators when filing and defending the resolution. We hope that the Resolutions to Watch are a starting point for tackling inertia in the investment system. By supporting more environmental and social resolutions, proxy advisors could play a bigger part in driving the change we need.

Lesson 3: Some investors are leading action on climate change

Climate resolutions on the Resolutions to Watch list attracted the highest support – an average of 19.7 per cent. It is clear that climate is perceived by investors to present bigger financial, reputational and regulatory risks than more disparate social issues.

One landmark vote was at J-Power, Japan’s 2nd largest power utility. The resolution asked the company to set emissions reduction targets aligned with the Paris agreement. It was the first climate-related resolution put forward by a group of institutional investors at a Japanese utility and received 25.9 per cent support.

This is impressive because it is very much an action-oriented resolution. Additionally, under Japanese law, if the resolution passed it would be legally binding and require J-Power to amend their Articles of Incorporation.

Strikingly, it was voted on in late June when rising energy prices were being felt around the world stoking fears about energy security. We are excited to see how J-Power responds to this significant result and, how support for this resolution might change next year.

Lesson 4: Support is gathering on workers rights’ issues

Social resolutions on the Resolutions to Watch list attracted 14.8 per cent support on average. Within the social category, resolutions on workforce issues received higher support than public health resolutions (on average 19 per cent and 7.9 per cent respectively). Public health is still low on the radar for investors. The impact of public health on investments may be perceived by investors to be less direct and salient than for workforce issues.

A resolution at Amazon about allowing workers to organise was the highest supported Resolution to Watch with 38.9 per cent support. The vote followed damaging news articles about poor worker standards and aggressive anti-union practices. The resolution identified that Amazon’s current practices not only contradict their own stated values and policies but also fail to comply with international labour standards.

Amazon is the world’s second largest private sector employer. This resolution had the potential to improve the lives of millions of workers and their families and set a precedent for companies around the world. While it is concerning that not even a majority of shareholders voted in favour of this resolution, such strong support nevertheless sends a signal to the company and is a promising position to build on for next year’s AGM season.

Lesson 5: It remains vital to hold investors accountable for their voting decisions

Investors are taking action on environmental and social issues at the companies they invest in but there is much more to do. Now that the AGM season is over, we have the opportunity to hold investors accountable on how they voted on these key resolutions - and many more.

Look out for ShareAction’s upcoming Voting Matters 2022 report which will hold to account 80 of the world’s largest asset managers on how they voted at AGMs this year, covering over 200 resolutions on a wide range of issues from civil rights to company pay disparities and biodiversity.

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