IN-DEPTH: Tide turns on ESG proposals as investors navigate unchartered waters
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Companies have made 20% more no-action relief requests to the Securities and Exchange Commission (SEC) so far this year, reflecting an abrupt change of strategy that comes as both the volume and support for environmental and social shareholder proposals has nose-dived.
Some 156 ESG proposals tracked by Diligent Market Intelligence (DMI) have gone to a vote in the almost five-month period to May 22, 2025, down over 50% on the same period in 2024.
Environmental-focused demands have dropped off the most, with just 16 proposals with voting results averaging 12% support, compared to an average backing of 19% for the 73 green proposals tracked in the same period last year.
Social-focused proposals have witnessed a similar fate with 69 tracked to a vote by DMI compared to 183 in the same timeframe last year. Average support has fallen from 16% to 14%.
Governance-focused demands, however, have proved their resilience with the volume largely flat on the same period last year albeit with slightly lower support averaging at 46%.
Wait and see
Follow This was one of the climate-focused investor groups to publicly share its rationale for opting not to advance resolutions this season in what it said would be counterproductive given the “pro-fossil political climate.” Its founder Mark van Baal told DMI that many proponents are holding out to consider their options amid all the uncertainty.
“I think there's really a 'wait and see' now because of the election of Trump, the anti-ESG sentiment and states suing investors for considering climate,” he argued. Outside of state lawsuits targeting asset management giants, van Baal has himself felt the weight of legal action hang over his group's bid to push oil majors to accelerate reductions in Scope 1, 2 and 3 greenhouse gas (GHG) emissions, with ExxonMobil moving to sue the advocacy group and Arjuna Capital in a landmark case last year.
Fellow ESG investor As You Sow has also observed the challenging environment that has seen the volume of shareholder proposals drop for the first time in recent years. "The new SEC has already issued rules that make it easier for companies to exclude shareholder proposals, while partisan state Attorneys General and legislatures have continued anti-business efforts to stop consideration of systemic risks," the group asserted in an April statement.
A new SEC
The SEC is attracting more no-action requests to keep proposals off company ballots, especially after a February bulletin that indicated a move away from its recent policy of forcing companies to put proposals with “broad societal significance” before investors.
Continuing a pattern observed last season even under the SEC of the Biden administration, more and more companies are turning to the agency's no-action relief process with 220 requests advanced for decision in the five-month period to the end of May, up from 184 in the same timeline in 2024 and 100 in 2023. The success rate of such requests has also climbed, with 113 accepted by the SEC in the period and 46 rejected, DMI data reveal.
ExxonMobil, which bypassed the SEC last year with an unprecedented lawsuit against the two shareholder proponents, has no shareholder proposals on the ballot at this year’s meeting, which took place on May 28.
"There is a chilling effect, of course, and more on investors than on us because we still think this is the key tool, so we have to use it. But we have to convince investors that they should be more afraid of the climate crisis than of lawsuits," said van Baal.
A different world
The argument for a review of SEC rules around the shareholder proposal process has continued to drive division and debate in 2025 with Business Roundtable – an association of more than 200 U.S. company CEOs issuing a whitepaper last month calling for "bold" proxy process reforms, including “precluding shareholder proposals that advance broad ideological agendas” and higher submission and resubmission thresholds.
"The shareholder proposal process was intended to foster constructive engagement between investors and companies in support of long-term value,” said Kristen Silverberg, Business Roundtable president and chief operating officer. “Today, it too often serves as a platform for ideological agendas unrelated to the company’s long-term performance.”
The Interfaith Center on Corporate Responsibility (ICCR) and the Shareholder Rights Group (SRG) responded with a letter aimed at “bridging the divide." "Proposals are an articulation of interest by an informed and interested stakeholder who provides the very capital that allows for the business to exist and, for this reason, should never be easily dismissed," it argued.
"I think part of the problem is that the discussion around this topic is being phrased as if we should be drawing the parallel between shareholder democracy to voter democracy. It's a different thing," SEC Commissioner Hester Peirce told DMI in a recent interview. "We don't let any voter who has an issue stick it on the ballot. This is just a different world."
