Support for environmental and social topics among energy companies “slipped meaningfully” this year, according to a report by the Royal Bank of Canada (TSX:RY).
Backing for environmental, social and governance (ESG) proposals at shareholder ballots during this year’s annual general meeting (AGM) season fell from last year’s highs, as minds turned to matters of energy security amid the burgeoning crisis.
Updated guidance from the US Securities and Exchange Commission about how ‘no action’ requests from corporates would be handled led to an increase in the overall environmental and social ballots lodged.
However, RBC said investors on the whole were not enamoured by the “prescriptive nature” of some of the shareholder proposals, which they believed may not have made it to the vote in previous years.
This ties in with comments from BlackRock, the world's biggest asset manager, earlier this year that it will not vote in favour of as many shareholder resolutions at AGM this year as many were too “prescriptive” and demanding for companies.
While the number of governance proposals on the ballot “far exceeded prior years”, RBC said support for these resolutions slipped compared to 2021.
A significant portion of climate-related resolutions on the ballot this year related to greenhouse gas emissions reduction targets, both near and long term. Some focused on aligning climate disclosures and targets with existing policy frameworks.
Whereas proposals targeting the industrial and consumer sectors “saw high levels of support”, those “focused on financed emissions saw low support levels”, RBC said in its report.
READ: Shell AGM besieged by climate protestors
One area of environmental governance that received widespread backing was around sustainable packaging and plastic waste at retailers, which the bank said gleaned higher than last year.
However, political lobbying made up a smaller portion of total shareholder proposals this year, a change from during the tail-end of the pandemic last year when healthcare, industrial and communication sector lobbying was top of the agenda.
Racial equity audits also reached the ballot papers this year, especially in the finance sector, and were particularly popular with many getting majority support.
“This year we saw this topic increase in focus, with proposals targeting a much broader mix of sectors,” the bank said in its report.
Ballot issues such as concealment clauses around harassment and discrimination, and disclosures on racial and gender pay gaps also received “very high support levels”.