“Progressive” ESG Shareholder Activism: Pushing and Pushback

“Progressive” ESG Shareholder Activism (full series)
Understanding ESG Activism | Quantitative Trends
Qualitative Trends | Pushing and Pushback

Pushing and Pushback

The quantitative and qualitative acceleration of ESG shareholder resolutions is easier to understand when one recalls that ESG activism is just ordinary sociopolitical issue activism undertaken within the corporate sector. It is subject to the same tendency toward maximalist objectives, pursued incrementally, and limited only by the willingness of those targeted to accede to whatever demands are currently being made. In traditional activism, this generally means the voters and their elected representatives. In ESG activism, this generally means institutional shareholders and corporate leadership.

Occasionally, ESG activists tip their hand on this point. In explaining the foundation’s 2023 decision to file shareholder resolutions at companies like Disney and UnitedHealth Group targeting their past election-related expenditures, the executive director of the Educational Foundation of America said that the goal was to pressure them into “reconsider[ing] their contributions to politicians harming their employees through enacting abortion bans.” That is a political objective, plain and simple.

This is not to say that ESG activists don’t hold long-term goals for the corporation itself. In 2021, a nonprofit called the Shareholder Commons filed a series of resolutions at companies such as BlackRock, Alphabet (Google), and Amazon asking them to become public benefit corporations. This would legally permit them to pursue broad social objectives though their operations, even at the expense of generating shareholder value. Although those resolutions attracted scant support from shareholders, other activist groups have promoted long-shot congressional legislation that would establish a federal chartering system for corporations, requiring them to operate for public benefit purposes.

The good news for those who would prefer that corporate America not continue down this particular path is the increasing pushback against ESG investing and activism. And the pushback appears to be having an effect. Late in 2022, major asset manager Vanguard withdrew from the Net Zero Asset Managers initiative and is also apparently no longer a member of the Ceres investor network, having been listed on the latter’s website as recently as May 2023.

While ESG shareholder resolutions remain dominated by left-leaning interests, the proportion filed from the right has been growing—from a low of 3 percent in 2016–2017 to 8 percent in 2023, according to past Proxy Preview reports. Many of these have been submitted by the National Center for Public Policy Research, which also publishes an annual Proxy Navigator voting guide to serve as an alternative to the pro-ESG Proxy Preview. Indeed, in 2023 the Proxy Preview changed its longstanding category name for right-of-center shareholder resolutions from “conservative” to “anti-ESG,” appearing to implicitly concede that in practice “ESG” is synonymous with liberal-left ideological objectives.

In June 2023, the Wall Street Journal wrote of how this pushback had evidently caused many U.S.-listed companies to become distinctly less inclined to tout their ESG initiatives compared to previous years. The paper pointed to data showing that the phrases “environmental, social and governance,” “ESG,” “diversity, equity and inclusion,” “DEI” and “sustainability” were mentioned on 575 earnings calls from April 1 to June 5, representing a 31 percent decline from 2022. While this may represent more of a messaging shift than a substantive one, at least for the time being, it is nonetheless notable.

There is a natural tendency in business to gravitate toward the path of least resistance in ESG matters—an inclination that to date has been heavily influenced by the disproportionate pressure coming from the ideological Left. Only when companies perceive the costs of their controversial ESG initiatives to clearly outweigh the benefits—whether because activists pushed things too far, the pushback became too intense, or perhaps most likely a combination of both—will those activists cease to make further “progress” within corporate America.