That push for detailed corporate action is clearly evident when it comes to climate change, which will continue to dominate the list of ESG priorities for shareholders.
Last year saw shareholders pressing portfolio companies to commit to a net-zero emissions future and to more transparency about how they address climate risk.
This proxy season will see more specific asks, investors say. Tracking and disclosing greenhouse gas emissions are a start, but investors now want to see concrete strategies and science-based targets for reducing all emissions, even Scope 3 emissions related to supply chains.
An early example came at Costco Wholesale Corp.'s annual meeting in January, when nearly 70% of shareholders approved the first proposal directly requesting that a company set targets that include emissions from its full value chain and that are aligned with achieving net-zero emissions by 2050 or sooner. Supporters included the $466 billion California Public Employees' Retirement System, Sacramento, and Norges Bank Investment Management, which manages the 12.34 trillion Norwegian kroner ($1.37 trillion) Government Pension Fund Global, Oslo, Norway's sovereign wealth fund.
Climate Action 100+, a global investor engagement initiative on climate change coordinated by five investor networks, has tracked 39 climate-related shareholder proposals filed so far this year. The new priorities in shareholder climate proposals include a company's greenhouse gas reduction targets, evidence that its lobbying practices align with net-zero goals of the Paris agreement, capital expenditures related to addressing climate change, energy transition plans and climate accounting.
Throughout the year, Climate Action 100+ benchmarks 167 companies with a combined $10.3 trillion in market capitalization that it estimates account for 80% of corporate industrial greenhouse gas emissions. This season, it has flagged three proposals so far at the North American companies it monitors.
One particular target is Berkshire Hathaway Inc., which has not met any Climate Action 100+ benchmark criteria, the group said.
This year, investors backing a proposal refiled from 2021 by CalPERS; the C$420 billion ($329.3 billion) Caisse de Depot et Placement du Quebec, Montreal; the $98.3 billion New Jersey Pension Fund, Trenton; and on behalf of the £30 billion ($39.1 billion) Brunel Pension Partnership, Bristol, England, are hoping to get the company to report on its physical and transitional climate-related risks and opportunities, in alignment with the Task Force on Climate-related Financial Disclosures.
Institutional investors are making it personal for directors of companies with the most significant emissions. In his annual proxy letter sent to portfolio companies in January, State Street Global Advisors President and CEO Cyrus Taraporevala said that this year the asset manager will "encourage disclosure" aligned with its 10-point expectations for corporate climate transition plans.
For companies in major indexes in Australia, Canada, Europe, the U.K. and U.S. that are not aligned with the TCFD framework, "we will start taking voting action against directors," Mr. Taraporevala said, and next year, "we will hold companies and directors accountable for failing to meet these expectations."
Holding directors accountable for lack of concrete plans and progress toward net-zero goals also eliminates the need for special resolutions, said Edward Mason, director of engagement for Generation Investment Management in London, with $39 billion under management. "It is absolutely essential that investors align their voting on directors with climate expectations. This is the prime tool for big investment managers to direct the transition to net-zero," Mr. Mason said.
