Proxy voting is playing a bigger role in institutional investors’ environmental, social and governance strategies, according to Christie Stephenson, executive director of the Peter P. Dhillon Centre for Business Ethics at the University of British Columbia’s Sauder School of Business, speaking during the Canadian Investment Review‘s 2023 Global Investment Conference.
Long viewed as a value driver for investors, when wielded appropriately, proxy voting can be leveraged to steward capital effectively, she said. noting that, in the face of changing regulatory requirements around proxy voting, the practice is taking shape to carve out transparency surrounding ESG investment policies.
Proxy voting also holds opportunities to manage portfolios, particularly when it comes to systemic risk mitigation and ESG leadership. In this area, she suggested investors need to prove to stakeholders that they’re walking the talk by demonstrating how they’re addressing ESG issues. Through proxy voting, investors can tell stakeholders a tangible story, while signalling to the markets exactly where their priorities lie.
This year, the volume of shareholder proposals for proxy voting has increased, said Stephenson, noting the U.S. Securities and Exchange Commission narrowed the grounds for the exclusion of proposals, leading to more shareholder proposals on the proxy ballot, with the lion’s share in the ‘E’ and ‘S aspects of ESG.
“There are new proponents popping up all the time [with] folks that you really wouldn’t expect to be mobilizing — or working together — to advance proxy votes and shareholder proposals [on hot-button issues]. . . . We’re seeing . . . strategies of . . . activist investors,” she added.
And that harmonization of agendas isn’t watering down disclosure proposals like they have in the past, she said. Last year, key environmental and social shareholder proposals, climate risk and the energy transition were front and centre in proxy voting. But despite the current challenging economic climate, she doesn’t foresee pullback from the prevalent ESG focus of the last few years — certainly not when the planet is facing an existential threat. Rather, she said she believes new areas are showing up in proxy voting practices, such as scrutiny around executive compensation. “We’re just at a point . . . where we’re . . . starting to expand the conversation.”
Indeed, Stephenson predicted there will be a much richer conversation about a much broader range of ESG issues, such as biodiversity, diversity, equity and inclusion and the transfer of wealth from older men to women and younger people. Tying these types of issues to proxy voting isn’t a zero-sum game, she noted, since the value shift these policies represent is inevitable and will be all-encompassing under corporate political responsibility.
“I don’t think we’re going to be talking about the why, about DEI. It’s really about . . . action.”
Increasingly, there will be more pressure by pension plan beneficiaries to hear how pooled assets are being used, she added. Now, with proxy voting, there’s a mechanism that pension plan sponsors can use to carve out a direction that ties into the values of their plan members.
Read more coverage of the 2023 Global Investment Conference.