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| 5 minutes read

ESG Shareholder Activism in the 2023 AGM season

Shareholder activism with environmental, social or governance (“ESG”) objectives has steadily increased in recent years — the 2023 AGM / proxy season will be no exception. This article sets out the backdrop to recent developments in the ESG activism arena, developments so far this year and how companies can prepare for such activism going forwards.

A rising tide

Historically, shareholder activism has tended to focus on enhancing shareholder value by calling for changes in strategic priorities and M&A or challenging executive pay and board appointments.  These issues have, of course, not gone away — with remuneration issues falling under the ‘G’ in the ESG umbrella. There are, however, now further pressures on companies to ensure that the delivery of value to shareholders takes place in an environmentally (‘E’) and socially (‘S’) responsible manner.  In the 2022 proxy season in the US, for example, shareholders filed a record 529 resolutions relating to ESG issues at annual meetings of publicly-traded US companies, an increase of c.20% from 2021.

What to expect in 2023?

As in previous years, ESG activists such as FollowThis have targeted the oil majors with shareholder resolutions requiring these companies to align their existing targets or set medium-term targets in line with the Paris Agreement relating to the emissions arising from the use of their energy products.  FollowThis has been joined by asset managers such as Edmond de Rothschild, Degroof Petercam and Achmea in co-filing some of these resolutions. A group of shareholders including Legal & General Investment Management and HSBC Asset Management have co-filed a resolution ahead of Glencore’s AGM asking that the company detail its plans to meet its coal reduction targets. These examples show that ESG activism is not just the preserve of full-time activist NGOs — they are often supported by traditional investors focused on financial returns as ‘occasional activists’.

Activism is not limited to carbon-intensive businesses or simply to targeting carbon. Financial institutions, retailers and tech companies are all in the firing line and being asked to address climate change, as well as lobbying, supply chain due diligence, D&I and racial justice. For financial institutions, this expansion includes pressure to move away from financing fossil fuels. This year, investors have filed resolutions at major banks such as Bank of America, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo — urging these banks to adopt policies to phase out clients engaging in new fossil fuel exploration and development. Two of the ‘Big Three’ asset managers, i.e. BlackRock and State Street, are subject to shareholder proposals asking them to report on how they could improve returns by focusing on climate-related investment stewardship. 

Other activists have focused on the ‘S’ in ESG.  Earlier this month, a coalition of investors, including Columbia Threadneedle, Aviva Investors and AXA Investment Managers, announced that they would write to companies ahead of their AGMs asking boards about their approach to low-paid workers impacted by the rising cost of living, along with a living wage and provision of secure work. On the eve of Nestlé’s AGM on 20 April, a group of 26 investors responsible for over $5.3 trillion of assets issued a statement calling on the company to increase its proportion of sales of healthier food products in relation to its sales of less-healthy products which proposal has been accepted in part by Nestlé.

In the UK so far this year, we have seen only four board-proposed ‘Say on Climate’ advisory resolutions amongst the FTSE100 companies compared to 14 in the 2022 AGM season. The number of climate-related resolutions requisitioned by shareholders of FTSE100 companies has remained constant at three in both the years. However, we have already seen a number of instances of ESG activism, including disruptive activism, at the AGMs this year.

What can companies do to prepare?

While we expect ESG activism to continue to grow in 2023 and beyond, companies could take a number of steps in preparation.  As with all forms of activism, regular shareholder engagement is crucial — both offering talks with ESG activists concerned and keeping in touch with other shareholders.  Investor relations teams should monitor regularly research and proxy advisers’ reports.  

Companies should be prepared for difficult shareholder questions that might come up at the AGM (e.g. on transition plans) and management could consider whether putting forward their own advisory ‘Say on Climate’ resolution may be appropriate.  It can help if companies become ‘their own activists’ and analyse potential areas of weakness to be dealt with in advance.  For example, Anglo American sought to do this earlier in the year with the appointment of sustainability specialist Magali Anderson to their board. 

Companies should consider how to support targets with detailed plans showing how those aims can be achieved — the absence of such plans is often a motivation for ESG activists. Once commitments are made, companies should be wary of rowing back from them: recent activism by UK pension schemes has been driven by concerns that oil majors are paring back commitments to reduce emissions. Companies should ensure that their climate change and biodiversity disclosures are accurate and be alert to inadvertent greenwashing risks. Once activist action is initiated, companies must assume that private engagement will become public and ensure clear and unified communication and consider assembling internal and external teams (e.g. investor and public relations; legal).

The 2022 proxy season in the US also witnessed new fault lines emerge with ‘anti-ESG’ shareholder proposals being put forward by investors who continue to believe in the ‘Friedmanesque’ doctrine that a company’s sole responsibility is to increase its profits. It is possible, although not yet apparent, that such proposals could garner prominence in Europe and companies should be prepared to engage with activists on both sides of the fence.

Lastly, companies should note that ESG investors may couch their demands in the language of financial returns — e.g. selling less healthy food products could create ‘systemic risks to investor returns’ or the failure to drive down emissions will harm the ‘long-term future of the company’ — which could also be them setting the stage for litigation for alleged breach of directors’ duties to promote the success of the company under s.172 Companies Act 2006. Of note in this regard recently is the unsuccessful derivative action brought against Shell’s directors by ClientEarth, the advocacy group, arguing that Shell’s directors failed to comply with their legal obligation to manage the company’s climate risks which in turn could jeopardise the company’s long-term commercial viability.

Notwithstanding the mixed success rate so far, we expect that ESG activism will continue to gain prominence and corporate boards should be prepared to proactively engage with evolving forms of activism keeping in mind foremost their fiduciary and other duties as directors under the law.  In practical terms, companies should focus on shareholder engagement, clear and consistent presentation of the company’s position on ESG matters and adequate preparation for general meetings.


agm, governance, decarbonisation, human rights, shareholder activism