- The 2021 U.S. proxy voting season marked an escalation of shareholder engagement on climate-related issues as well as an expansion of tactics.
- Many investors are moving beyond requests for disclosure to voting against directors for
perceived failures of climate risk mitigation.
- The 2021 season saw the advent of the Say-On-Climate proposal, an attempt to secure a dedicated ballot item that would enable investors to express views on a company’s management of climate-related risks on a recurring basis.
- The number of climate-related shareholder proposals as well as levels of support have grown over the past 3 years.
- The recent IPCC AR6 Synthesis report and 2021 US Proxy Season trends outlined in this report demonstrate that the days of regarding climate disclosure and risk as “non-financial” niche issues targeted by a relatively small number of activists and NGOs are over.
On Monday, August 9th, the Intergovernmental Panel on Climate Change (IPCC) issued its Sixth Assessment Report (AR6). Released against a backdrop of wildfires in California, Greece, and Turkey, floods in Germany, Belgium, and China, and record heat in Canada and Siberia, the report states unequivocally that “human influence has warmed the climate at a rate that is unprecedented in at least the last 2000 years,” and that “global warming of 1.5°C and 2°C will be exceeded during the 21st century unless deep reductions in CO2 and other greenhouse gas emissions occur in the coming decades.” 
Responding to the report’s findings, United Nations Secretary-General Antonio Guterres stated that “the climate crisis poses enormous financial risk to investment managers, asset owners, and businesses,” and added that “these risks should be measured, disclosed and mitigated.”  The ability of investors to assess climate risks, such as whether companies are taking steps to reduce emissions at a rate consistent with 1.5°C and 2°C scenarios, depends on a variety of factors, including regulatory frameworks and market norms related to disclosure and engagement. In Europe, investors have been able to review disclosures generated by the EU’s Non-Financial Reporting Directive (NFDR) since 2018. In addition to the NFDR, the EU’s Sustainable Finance Disclosure Regulations (SFDR) and Taxonomy regulation impose a level of transparency and consistency that allows for a degree of benchmarking. In the US, by contrast, climate-related disclosure is largely voluntary. While the US Securities and Exchange Commission (SEC) recently initiated a climate change disclosure rulemaking process, it is not yet clear whether the framework that emerges will enable investors to “measure” and “mitigate” climate-related risks on a consistent, market-wide basis. During the 2021 US proxy season, investors in US companies seeking to “measure” and “mitigate” climate-related risks were compelled to focus on individual companies, using tactics that have evolved in the absence of a mandatory disclosure framework.
Climate-Related Shareholder Engagement During the 2021 Proxy Voting Season
The 2021 U.S. proxy voting season marked an escalation of shareholder engagement on climate-related issues as well as an expansion of tactics. In addition to submitting shareholder proposals, shareholders and shareholder advocacy groups launched a large number of vote-no campaigns as well as a successful proxy contest at Exxon resulting in the election of 3 operation and climate-focused board members.  The number of climate-related shareholder proposals has grown over the past 3 years and the 2021 season saw the advent of Say-On-Climate proposals, an attempt to secure a dedicated ballot item that would enable investors to express views on a company’s management of climate-related risks on a recurring basis. In addition to shareholders asking for a right for regular review of a company’s climate transition plan, Moody’s Corporation and S&P Global put forth a management proposal asking for shareholder approval of their transition plans.
2021 U.S. Shareholder Proposals