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November 25, 2014

Record High Support for ESG Resolutions by Shareowners in 2014
    by Robert Kropp

More resolutions addressing environmental, social, and corporate governance issues were filed by shareowners in 2014 than ever before, and proxy voting results thus far indicate record support for them as well. -- The 2014 proxy season is not over quite yet, but a report on results thus far, authored by Heidi Welsh of the Sustainable Investment Institute (Si2), reveals that many more shareowners are incorporating environmental, social, and corporate governance (ESG) considerations when voting their proxy ballots.

Si2, a nonprofit ESG research organization, collaborates with A s You Sow on the publication of the latter's annual Proxy Preview.

This proxy season saw a record number of ESG resolutions filed; the 454 resolutions filed this year were far more than ever before. Also, shareowner support for the resolutions is at an all-time high as well: the average is 21.7% for the 200 resolutions voted on at the time of the report's publication. There have been five majority votes thus far this year, and 22 resolutions have gained at least 40% support.

Since the Supreme Court's Citizens United decision in 2010, far more money has poured into the electoral system than ever before, raising serious questions about the health of the nation's democracy.
In the continuing absence of a Securities and Exchange Commission directive mandating disclosure of corporate political spending, sustainable investors and other advocates have responded with record numbers of resolutions. Investors allied with the Center for Political Accountability (CPA) filed 49 resolutions requesting disclosure, one of which received a majority vote.

Walden Asset Management and the American Federation of State, Municipal and County Employees (AFSCME) coordinated another 49 resolutions calling for corporate disclosure of lobbying expenditures. Of the 38 votes recorded at the time of the report's publication, three resulted in majority support. Overall, 16 of the 22 resolutions that have gained at least 40% support address corporate political and lobbying expenditures.

While the unchecked flow of money into elections threatens the fabric of the nation�s democratic system, unchecked climate change threatens civilization at the global level. Given that sustainable investors and environmental advocates such as As You Sow have been addressing climate change with corporations for years, it�s somewhat surprising to read in Si2�s report that the number of resolutions filed in 2014 actually increased quite dramatically: 72 were filed this year, 29 more than in 2013.

On average, almost a quarter of shareowner votes supported a number of climate-related measures: 22 companies were asked to establish greenhouse gas (GHG) emissions reduction goals, while other resolutions addressed methane emissions.

An important development in the environmental area this proxy season was a resolution filed with ExxonMobil, requesting that the oil and gas giant report on the financial implications of stranded assets. As You Sow withdrew the resolution when the company agreed to publish such a report, but it said little more than that it plans to burn all the fossil fuel reserves on its books.

Also, about a quarter of shareowners supported resolutions filed with PNC Financial and Bank of America, requesting that the financial institutions report on GHG emissions in their lending portfolios.

Human rights was also a significant issue for shareowners this season, as 14 resolutions were filed requesting that companies conduct human rights risk assessments. Another five resolutions, filed by members of the Interfaith Center on Corporate Responsibility (ICCR), requested that companies in the travel and tourism industries adopt policies to prevent human trafficking; all five resolutions were withdrawn following signs of successful engagement.

The quality of corporate governance has always been a major issue for shareowners at annual general meetings, and 2014 was no different in that regard. Twenty-three resolutions addressing board diversity were filed by investors allied with the Thirty Percent Coalition. Sixteen of the resolutions were withdrawn following engagement, while the three that had come to a vote thus far received as much as 40% support.

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