By Pickering Energy Partners
Over the course of the last several years, the Pickering Energy Partners ESG Consulting team has observed a variety of trends emerging related to ESG and proxy voting. Since the SEC amended its no-action letter guidance in November 2021, we’ve seen increases in both successful ESG resolutions as well as votes against directors as investors rely less on shareholder proposals to express their views on ESG-related risk.
Shaping the 2023 proxy season, issuers should be keenly aware of these developments:
- ESG has become a lens through which investors can engage with companies, which has culminated in an increase in ESG-related activist engagements and shareholder proposals.
- BlackRock, State Street and Vanguard turned their attention to directors this year, sending a clear message that directors who fail to maintain sufficient oversight of ESG issues risk being unseated.
- Changes to proxy voting policies have resulted in those who lead public companies having a broader set of shareholders with whom to engage in 2023.
- Going into 2023, there will be increased scrutiny from Proxy Advisers such as ISS and Glass Lewis on disclosure of climate risks and targets, diversity across all levels of the organization (including at the board level) and director accountability.
- Companies should prepare for increased engagement across topics such as climate risks and governance, board diversity, racial equity, political activity and cybersecurity.
Companies must begin preparing for shifting tides during the 2023 proxy season. Importantly, we expect to see an increasingly higher degree of support for ESG-related shareholder proposals and a larger number of directors voted against based on a lack of climate oversight. Management teams can prepare for the 2023 proxy season by:
- Educating the Board of Directors on trends in proxy voting and planning to involve directors proactively in engagement with shareholder
- Analyzing institutional investors’ proxy voting guidelines and policies now to ensure disclosures address the issues investors care about
- Ramp up engagement efforts with investors, stewardship teams, and the broader audience of limited partners (LPs) ahead of the 2023 proxy season
Energy Workforce partner Pickering Energy Partners provides insights on ESG due diligence, disclosures and reporting.