Sustainability in Motion Podcast – Episode 6: Sustainability and Proxy Season

Hosts:

• Matt Orsagh, Chief Content Officer at ED4S
• Nawar Alsaadi, CEO and Founder of Kanata Advisors, Chief Adviser at ED4S
• Guest: Heidi Welsh, Executive Director at the Sustainable Investments Institute

Episode Overview:
In this episode, Matt and Nawar speak with Heidi Welsh of the Sustainable Investments Institute to discuss key trends and issues in the current proxy season. They explore the impact of shareholder proposals, evolving topics within ESG, and the rise of anti-ESG movements that challenge the growing sustainability focus in proxy voting.

Key Takeaways:

1. Top Issues in Proxy Season

   • ESG topics in proxy season are segmented into corporate political spending, environmental issues (primarily climate), and social policy topics (e.g., human rights, diversity, and equity). Political spending is particularly impactful as it connects with various other sustainability topics and policies.

2. Historical Context of Proxy Issues

   • Originally centered around social justice topics like South African apartheid, shareholder proposals have evolved to encompass climate change and human rights, reflecting the broader societal concerns of the time. Quantification of climate risk has made ESG more mainstream, influencing Wall Street’s risk analysis.

3. Growth of Anti-ESG Movement

   • Anti-ESG proposals have surged, often challenging diversity and corporate social policies. Despite this, investor support for these proposals remains low (average 2.5%). Nevertheless, the political nature of these anti-ESG proposals continues to impact corporate engagement on sustainability.

4. Shifts in Investor Engagement

   • Today, there’s a more collaborative approach between investors and companies, as sustainability-focused investors seek to influence corporate practices through constructive dialogue. Proxy proposals now serve as a last resort, often preceded by extensive engagement efforts.

5. Regulatory Considerations and the “Acting in Concert” Rule

   • Anti-ESG advocates have leveraged regulatory interpretations (such as “acting in concert”) to deter collective investor actions on sustainability. However, sustainable investors argue that collaboration is essential for addressing complex ESG issues and enhancing risk management.

Conclusion:
This episode highlights the shifting dynamics of shareholder engagement on sustainability. As climate and social issues become integral to business strategies, proxy season remains a key avenue for investors to voice concerns and influence corporate practices. Despite challenges from anti-ESG movements, the demand for transparency and long-term risk management continues to grow, underscoring the enduring importance of ESG in corporate governance.