How Today’s Investors are Framing Conversations on Corporate Sustainability
By Allie Rutherford, Leader, Corporate Governance Center, Ernst & Young
Last week, Ernst & Young released a new report, How today’s investors are framing conversations on corporate sustainability. As the report shows, investors are continuing to demonstrate a strong interest in environmental and social (E+S) topics through the submission and support of shareholder proposals and through company-investor engagement. E+S proposals continue to make up the largest category of shareholder proposals and average support is now around 20%, roughly double the 2005 level.
Long-standing E+S proponents are having a greater impact on how companies address corporate sustainability, particularly on environmental topics – though some companies are already undertaking these initiatives on their own. Investors are focused on three key areas so far this proxy season – and these proposals combine to account for close to 60% of total E+S submissions:
- Enhanced disclosure and board oversight of corporate political spending/lobbying
- More sustainability reporting and cuts in greenhouse gas emissions (climate change/sustainability)
- Greater diversity at the board level and efforts to promote diversity within company ranks
Shareholder proposals on climate change/sustainability and other new and emerging topics are evolving in connection with changing investor expectations – they are increasingly prescriptive, tailored to the company-specific situation, more focused on the broader supply chain, and are getting submitted to a broader range of companies.
As investors press more companies to address E+S related opportunities and risks, and companies and investors work together on these matters, this report helps management and boards prepare for, and adapt to, these developments. The insights are based on the Ernst & Young Corporate Governance Center’s proprietary database and conversations with approximately 30 institutional investors, including large asset managers, public pension funds, labor-affiliated funds and socially responsible investors. More information about this study can be found at: http://www.ey.com/Publication/vwLUAssets/Investors_with_long-standing_interests_in_environmental_and_social/$FILE/Corporate_Sustainability.pdf.