What boards actually think about ESG proposals

This year, Corporate America saw a record number of social and environmental proposals (ESG) at shareholder meetings. 

But how often do ESG proposals actually get passed? And do strong performing companies have an easier time getting ESG proposals passed?

To find out, Fortune reached out to Diligent, the global leader in modern governance providing SaaS solutions across governance, risk, compliance and ESG. Diligent looked at 1,185 environmental and social shareholder proposals at 790 meetings held between January 2016 and June 2022 at 320 companies.

The numbers to know 

27.9%

• … the average share of votes supporting ESG proposals.

30.4%

• … the average share of votes supporting “environmental” shareholder proposals.

26.8%

• … the average share of votes supporting “social” shareholder proposals.

358

• … “environmental” shareholder proposals occurred during the six year period that Diligent studied. 

827

• … “social” shareholder proposals occurred during the six year period that Diligent studied. 

Big picture

• ESG proposals are on the rise—but the vast majority of votes are still against them. Only around 1 in 4 proposals are getting “yes” votes. 

A few deeper takeaways

1. High-performing firms only had a slightly easier time passing “environmental” proposals. 

Researchers at Diligent sought to find out if top-performing companies (in terms of total shareholder return) got more “yes” votes for their ESG proposals.

The findings are mixed. Let’s start by looking at “environmental” proposals.

Among top-performing companies, 34.67% of their “environmental” proposals got “yes” votes. That’s higher than relatively lower performing companies. But not by much. Among companies with the lowest total shareholder returns, 31.15% of their “environmental” proposals got “yes” votes.

2. Same goes with “social” proposals. Top-performing firms only had a tiny edge. 

Among top-performing companies, 29.08% of their “social” proposals got “yes” votes. Among firms with the lowest shareholder returns, 27.14% of their “social” proposals got “yes” votes.

Here’s what the researchers had to say: “The data shows that more environmental and social shareholder proposals were successful at annual meetings at the top-performing companies by total shareholder returns in the 12 months leading up to the vote. Furthermore, average support for environmental and social shareholder proposals was higher at the top-performing companies.” 

*Methodology: The data is inclusive of all U.S.-listed company meetings, held since 2016, where environmental and social shareholder proposals were voted on. The total shareholder return (TSR) was calculated for each meeting using the close price one year prior and the close price on the meeting date. The total shareholder return is inclusive of dividends paid during the period. The meetings were grouped into quintiles according to TSR performance: The 1st being best performing and the 5th being worst performing. The vote results for each proposal at the meeting was then compared with the grouping with a view to examine any correlation with performance prior to the meeting and votes for environmental or social proposals.