The 2021 proxy season carries numerous lessons for companies, in particular indicating broadening interest by shareholders on several key ESG issues, and an increasing willingness by investors to take action on those issues through voting and engagement, according to a new report published by professional services firm EY.

According to the EY study, the most recent proxy season saw significant growth in shareholder proposals on sustainability issues including climate and diversity, equity and inclusion (DEI), as well as record levels of support for the proposals. As ESG engagement and action increasingly take center stage, many companies are responding with initiatives targeting improved oversight, accountability and transparency.

Steve Klemash, leader of EY Center for Board Matters, said:

“As social and environmental issues become more important to investors, they are driving board decisions around disclosures. In 2021, we saw unprecedented support for environmental and social shareholder proposals. Investors want to see progress happen now and companies are taking notice. Proxy statements can be an opportunity for companies to clarify how environmental and social matters are addressed and highlight new ambitions and commitments to climate and DE&I.”

The new report from EY aligns with numerous actions and statements from some of the largest global investors. Last month, investment giant BlackRock released a report highlighting its proxy stewardship and proxy voting activities over the past year, indicating a more active stance on climate risk and diversity. Similarly, in Nuveen’s recent 2021 Proxy Season Preview, the $1.2 trillion AUM investment manager predicted increased support for ESG proposals, and growing demand for transparency on accountability on sustainability-related risks.

On both the climate and DEI fronts, EY reported growth in the number of proposals submitted, and a significant jump in voting support. EY recorded 70 shareholder proposals regarding climate risk and opportunities, up from 60 last year, and 130 DEI-related proposals submitted through June, up from 90 in all of 2020. Overall, EY found that in the current season, 20% of environmental and social shareholder proposals that went to a vote received greater than 50% support, increasing sharply from 12% last year, and only 3% five years ago. For votes relating specifically to climate and DEI, majority support was secured on 41% (33% prior year), and 31% (18% prior year), respectively.

As investor interest in ESG issues continues to grow, board and management oversight of these risks is coming increasingly into focus. Accordingly, EY found that companies are more often assigning responsibility of ESG issues at the board level, with 85% of Fortune 100 companies disclosing that specific board committees have been charged with oversight for environmental sustainability or corporate social responsibility matters.  Accountability has also become a key consideration, according to the report, with thirds of Fortune 100 companies having either incorporated ESG factors into executive compensation structures or planning to do so, compared to only half last year.

The report also highlights improved transparency by companies on key sustainability issues, most notable on DEI topics. According to EY, more than 90% of Fortune 100 companies used their proxies to disclose initiatives or commitments related to workforce diversity, compared to only 61% in the prior year. Climate-related transparency also improved, with 78% of proxy statements disclosing initiatives or commitments related to climate risk, and 57% including GHG emissions reduction goals, compared to 67% and 35% last year, respectively.

Klemash said:

“The social upheaval that occurred in 2020 reenergized a focus on DE&I, shown in our report. Boards are focusing on increasing diversity and are being urged to do so from their investors. On average, DE&I proposals, like addressing board diversity, received more support this year than before. Based on our findings, we expect diversity-related disclosure expectations and diversity thresholds will play a stronger part in institutional investors’ proxy voting policies moving forward.”

Click here to read the EY report.

Two days before ExxonMobil’s annual general meeting (AGM), the energy giant has made a last-minute commitment to add two new directors over the next year, as a group of major investors, led by sustainability-focused activist investment firm Engine No. 1, pushes for a broader board change to enable the company to better manage the emerging global energy transition.

In December 2020, Exxon announced a series of emissions reduction initiatives, it has yet to set a long-term net zero goal, and the company has met criticism for blocking a shareholder resolution asking it to report if and how it intends to bring its operations in line with the Paris Agreement’s goal of maintaining global temperature rise well below 2 degrees Celsius.

Engine No. 1 has proposed 4 new directors for the company, with significant experience across the energy sector, as well as in policy and strategy. The proposed slate includes Greg Goff, former CEO of refining and marketing company Andeavor, Kaisa Hietala, Former EVP of Renewable Products at Neste, Andy Karsner, Senior Strategist at X (formerly Google X) and former U.S. Assistant Secretary of Energy, and, Anders Runevad, former CEO of wind turbine company Vestas Wind Systems.

The activist investor’s initiative has received support from several major investors, including CalPERS, CalSTRS and the New York State Common Retirement Fund. A report today from Reuters indicates that investment giant BlackRock will vote for three of the nominees as well, adding significant momentum to the move.

In a new proxy statement filing, Exxon stated:

“Over the next twelve months, we will work with the Board to secure two new directors, one with energy industry experience and one with climate experience.”

Unimpressed with the last-minute tactic, Engine No. 1 filed its own proxy statement, indicating that Exxon’s board has refused to meet with any of the investor’s proposed nominees, and calling for the addition of “directors with experience in successful and profitable energy industry transformations who can help turn aspirations of addressing the risks of climate change into a long-term business plan, not talking points.”

In its filing, Engine No. 1 said:

“This vote is too important to be influenced by this type of cynical, last minute maneuvering, and business as usual is not going to better position ExxonMobil for long-term value creation.”

JetBlue announced a series of new sustainability initiatives, adding a new link between executive compensation and ESG performance, as well as introducing new emissions reduction targets, including a goal to achieve net zero carbon emissions by 2040.

According to JetBlue, the company’s senior leaders’ 2021-2023 long-term incentive plan (LTIP) compensation will be tied to an index that determines payout based on a series of key ESG metrics, including percent reduction in company emissions per available seat mile (ASM), volume of sustainable aviation fuel used, spend toward underrepresented business partners, long-term efforts to engage and work with minority and women owned businesses (MWBE), and a more diverse slate of officers and directors.

JetBlue announced in August 2020 that it had achieved carbon neutrality on domestic flights, primarily through carbon offsets. With the launch of its new 2040 net zero target, the airline also announced a series of interim goals aimed at emissions reduction, encompassing fuel-efficient operations, aircraft, and usage of sustainable aviation fuels. These include decreasing aircraft emissions 25% per ASM by 2030 from 2015 levels, converting 10% of total jet fuel to be from blended sustainable aviation fuel (SAF) by 2030, and converting 40% of three main ground service equipment vehicle types to electric by 2025 and 50% by 2030. Other environmental goals announced by the company include eliminating single use plastics within service ware where possible or ensuring plastic is recyclable if it can’t be eliminated, and maintaining at least an 80% recycling rate for audited domestic flights.

Joanna Geraghty, President and Chief Operating Officer, JetBlue, said:

“Our vision is to lead the way to a lower-carbon future for aviation. To get there, we are focused on innovations that offer meaningful reductions in emissions – and are setting clear targets along the way. We’re facing climate change head on and are seeking opportunities to reduce natural resource consumption, such as increasing use of renewable energy and minimizing waste produced.”

The company’s new ESG initiatives also follow a series of Diversity, Equity and Inclusion (DEI) goals recently introduced by JetBlue. In February, the airline announced set new DEI commitments, including doubling race and ethnic minority representation at the officer and director level, from 12.5% today to 25%, and increasing representation of women at the officer and director level, from 32% today to 40% by the end of 2025.

Robin Hayes, Chief Executive Officer, JetBlue, said:

“JetBlue’s reinforced DEI strategy includes an increased investment in crewmembers’ development, retention and growth, focusing on a more inclusive workplace that drives better decision-making and innovation. We’re mobilizing our senior leadership team to create a more equitable workplace that better reflects the diverse communities we serve in all aspects of our airline. To ensure our success and strengthen shareholder value, ESG metrics will be tied to compensation and goals for JetBlue’s officers and directors.”

The World Business Council for Sustainable Development (WBCSD) announced today the launch of Vision 2050: Time to Transform, laying out a vision of a world in which more than 9 billion people are able to live well, within planetary boundaries, by 2050. The report centers on 3 key challenges facing the world, including the climate emergency, nature loss and mounting inequality.

The WBCSD is a global, CEO-led organization of over 200 leading businesses, representing combined revenue of more than USD $8.5 trillion and 19 million employees, working together to accelerate the transition to a sustainable world.

WBCSD President and CEO Peter Bakker, said:

“Vision 2050: Time to Transform should not be read with the idea that tomorrow is going to be much the same as today. This is a report for change, starting now, outlining how business needs to play a leading role. We have no time to waste. Achieving this vision requires a wholesale transformation of everything we have grown up with: energy needs to decarbonize; materials need to go circular; food needs to be produced sustainably and equitably and provide healthy diets.

“Our future depends on transformation. One of the keys to success will be a mindset shift around capitalism. Our economic systems, incentives, global accounting standards and capital market valuations can no longer just be based on the financial performance of businesses: we must integrate our impact on people and planet as part of how we define success and determine enterprise value.”

Developed with more than 40 leading businesses, including Microsoft, PwC, Nestlé and Toyota, the vision offers a framework to guide business action over the next decade in order to ensure a more sustainable and prosperous future. The framework centers on the transformation pathways for the key transitions required in nine essential areas of business activity, including energy; transportation and mobility; living spaces; products and materials; financial products and services; connectivity; health and wellbeing; water and sanitation; and food.

Colm Kelly – Global Leader, Purpose, Policy and Corporate Responsibility, PwC, said:

“Market economies have the potential to help to address the most profound challenges faced by our societies and by our planet. But this requires fundamental change. Our economic and business models, which are designed to deliver financial performance as a priority, must urgently change so that they also address the needs of broader stakeholders and environmental sustainability. Vision 2050 is an important contribution to highlight how this can happen.”

Vision 2050 calls for a reinvention of capitalism that rewards value creation rather than value extraction, for businesses to focus on building long-term resilience to upcoming disruptions, and to think regeneratively, moving beyond a “doing no harm” mindset.

Signatories to Vision 2050 include CEOs, Chairs and Sustainability executives representing 42 companies, including 3M, ACCIONA, Arcadis, ArcelorMittal, BASF, Bayer, Chanel, DNV, DSM, EDF Group, ENGIE, ERM, EY, Fujitsu, Givaudan, Godrej Industries, Henkel, IFF, Inter IKEA Group, Microsoft Corporation, Mitsubishi Corporation, Natura, Neste Corporation, Nestlé, Olam International, PwC, Rabobank, Banco Santander, Shell, Sompo Japan Insurance Inc., SONAE, Syngenta, The Navigator Company, Toyota Motor Corporation, Unilever, Vale, Volkswagen, and Yara.

In the report, the signatories stated:

“Business can lead. Business can forge the collaborations required to drive change. It can… but more than that, it must. It is in business’s interest to pursue the transformations set out in Vision 2050 – because its long-term success depends on thriving societies to trade with, and a healthy planet for us all to exist on.”

Leading industry and healthcare-focused gases, technologies and services company Air Liquide announced the launch of ACT, a new set of sustainability initiatives covering a range of environmental, social and governance commitments.

The new sustainability strategy is based on the three key elements of Abatement of CO2 emissions, Care for patients, and Trust regarding engagement with employees and corporate governance.

On the decarbonization front, Air Liquide is aiming to begin reducing absolute emissions around 2025, and has set goals to reduce Scope 1 and 2 emissions by 33% by 2035 (vs 2020 emissions). The company outlined some of the initiatives it will pursue to reach its targets, including accelerating low-carbon hydrogen production through electrolysis or by using renewable feedstock such as biomethane, focusing on increasing energy efficiency and low carbon electricity consumption, and deploying a broad range of low-carbon solutions for its clients to help them decrease their CO2 footprint.

Air Liquide highlighted plans for investments of 8 billion euros in the low-carbon hydrogen supply chain, aiming to bring electrolysis capacity to 3 GW by 2030, and to triple its hydrogen revenues by 2035.

Under the “Care” pillar, Air Liquide is aiming to improve the quality of life of chronic patients at home in mature economies and to help facilitate access to medical oxygen for rural communities in low and middle income countries.

Other goals under the new sustainability program include providing a common basis of CARE COVERAGE for 100% of its employees, introducing an inclusion and diversity target to reach 35% of women among Managers & Professionals by 2025, and to implement best practices in terms of ethics, responsible dialogue and close relations with all shareholders.

Benoit Potier, Chairman and CEO of Air Liquide, said:

“States, individuals and companies : we all share a responsibility in building the future. Economic performance and sustainable development are therefore at the heart of Air Liquide’s growth strategy. Our expertise, backed by a diversified and deeply resilient business model, enables us to deliver sustained growth today while resolutely preparing the future. In that context we are introducing new ambitious Sustainability commitments, aiming at making a meaningful difference. Not only do we intend to reach carbon neutrality by 2050 and harness Climate change and energy transition with hydrogen playing a key role in our roadmap, but we also include healthcare, human resources and governance as part of our ESG objectives. With this global ambition, Air Liquide is making the commitment to ACT today for a sustainable future.”

Logistics giant Deutsche Post DHL announced today the launch of its new Sustainability Roadmap, representing a significant ramp in the company’s decarbonisation and environmental sustainability commitments. In addition to introducing more ambitious climate targets, the new plan aims to link executive compensation to performance on these ESG efforts.

As part of its new commitments, DHL is committing investments of €7 billion in opex and capex over the next ten years in measures to reduce its CO2 emissions, with a focus on alternative aviation fuels, the expansion of the zero-emission e-vehicle fleet and climate-neutral buildings.

In 2017, DHL became the first global logistics company to set a net zero greenhouse gas (GHG) emissions target. Under the new roadmap, the company is committing to new interim targets with the Science Based Targets initiative (SBTi), to reduce its GHG emissions by 2030 in line with the Paris Climate Agreement. DHL has committed to limit Group CO2 emissions to 29 million tons by 2030, compared to the 46 million tons that would have been created with out the new measures.

The company outlined a variety of initiatives it will pursue as it seeks to achieve these goals. On shorter routes and last-mile, DHL will focus largely on electrification, with plans to have 60% of global delivery vehicles for the last mile to be electrically powered by 2030. On longer routes, where electrification is not yet an option, the company is seeking to have at least 30% of fuel requirements in aviation and line haul to be covered by sustainable fuels.

Frank Appel, CEO of Deutsche Post DHL Group, said:

“Sustainable, clean fuel alternatives are elementary for climate-neutral logistics in a globalized world. In air transport in particular, these could help reduce CO2 emissions. That’s why we will engage even more intensively in initiatives and strengthen cross-industry exchange to develop a global strategy and standards here.”

The company is also introducing more ambitious social and governance sustainability goals under the new roadmap, including a new diversity target to grow the proportion of female executives in management to 30% by 2025, from 23.2% today.  DHL stated as well that it has updated its Code of Conduct for Suppliers to align more closely with sustainability criteria.

Thomas Ogilvie, Chief Human Resources Officer and Labor Director at Deutsche Post DHL Group, said:

“Our motivated diverse workforce is the key to excellent service quality and high customer satisfaction. Satisfied customers are the basis for economic success. This is another reason why we are convinced that it is worth actively promoting equal opportunities.”

Importantly, the new roadmap highlights transparency and accountability, linking executive compensation to ESG. DHL will propose to shareholders at its upcoming AGM that the remuneration system for the Board of Management will be aligned more closely with sustainable business development, with the achievement of ESG targets to be taken into account when calculating the management remuneration.

Appel, said:

“As the world’s largest logistics company, it is our responsibility to lead the way and guide the logistics industry into a sustainable future. We are turning our yellow Group into a green company and making an important contribution to our planet and society. I am convinced that by focusing even more on our ESG goals, we will remain the first choice for customers, employees and investors – and thus lay the foundations for long-term economic success.”

Spanish bank BBVA announced the launch of two new social and governance-themed indices, the Solactive BBVA ixS Global Inclusive Growth and Solactive BBVA ixG Global Governance & Board Diversity indices.

Solactive BBVA ixS Global Inclusive Growth tracks leading reasonably priced growth companies while incorporating a social approach that follows the UN Sustainable Development Goals (SDGs). Solactive BBVA ixG Global Governance & Board Diversity Index focuses on companies’ corporate governance, ranking companies by their overall Corporate Governance Score, with better scores awarded for board diversity generating greater weight in the final index.

With the new launches, BBVA said that its  Quantitative Investment Strategies (QIS) business has completed its first family of sustainability-focused indices, aimed at to generating above-market returns through various ESG factors, and accompanying the bank’s clients in the transition toward a more sustainable future. Other products in the series include the climate-focused Solactive BBVA Climate Action PAB Europe and Solactive BBVA Climate Action CTB Europe indices, and the ESG leader-themed Solactive BBVA ixESG Global Leaders index.

BBVA designed the indices with index engineering company Solactive.

Timo Pfeiffer, Chief Markets Officer at Solactive, said:

“The latest release marks the completion of a very meaningful index range that gives investors the full spectrum of ESG investing. Solactive accompanied the creation of BBVA’s Quantitative Investment Strategies’ since its initial stages, and despite a challenging year 2020, we are happy that we’ve been BBVA’s well-trusted partner in this project.”

Chipotle Mexican Grill announced a new initiative linking executive compensation with the company’s sustainability goals, with the introduction of a new metric tying ten percent of officers’ annual incentive bonus to the company’s progress toward achieving its ESG targets.

According to the company, executive leadership team will be evaluated on the Chipotle’s progress toward its overarching sustainability goals in the categories of Food & Animals, People, and the Environment.

Under the Food & Animals category, the company’s goals include increasing pounds of organic, local, and/or regeneratively grown/raised food used in its restaurants year over year. Chipotle ended 2020 at 31 million pounds of local produce and has a goal of reaching 37 million pounds of local produce by the end of 2021.  

Chipotle’s People goals include maintaining racial and gender pay equity, and the company is also implementing a program to accelerate the development of its diverse field organization and support center employees for promotion to above restaurant and next level roles.

The company’s environmental targets include a new goal to publish Scope 3 emissions this year, pushed up from its prior 2025 goal. This target is aimed at contributing to transparency efforts, which include the launch, announced in October 2020, of Real Footprint, a sustainability tracking platform, aiming to provide guests with information about the impact of their orders.

Chipotle’s new initiative is part of a growing trend among companies across a variety of industries to tie compensation to ESG progress. Recently, Apple revealed that it will introduce an ESG modifier to its executive bonus payouts, Deutsche Bank announced that it plans to link top level executive and management compensation to ESG and sustainable finance criteria, and Marathon Oil restructured its incentive programs to prioritize issues including environmental performance and safety.

Laurie Schalow, Chief Corporate Affairs & Food Safety Officer, said:

“We are passionate about inspiring real change in people, food, and the environment every day. The compensation plan ensures our leaders continue to set the right example for our more than 88,000 employees while fulfilling our mission to drive change and Cultivate a Better World.”

BNP Paribas Asset Management (BNPP AM) announced today the launch of BNP Paribas Inclusive Growth, a fund aiming to generate returns through investment in companies with a proactive approach to reducing inequalities in income, education, gender, ethnicity, geographic origin, age or disability. The new fund was created through the restructuring and renaming of the BNP Paribas Human Development fund, and refocusing on a strategy focused on inclusive growth.

BNPP AM stated that the new fund is based on the strong conviction that inclusive growth creates sustainable financial performance and better management of long-term risk. The strategy invests in companies that contribute positively to diversity and inclusion, based on five key social challenges identified as major causes of inequalities. These include protecting the most vulnerable members of society, promoting social mobility, developing a quality offering accessible to the greatest number of people, respecting business ethics, and promoting decarbonisation and biodiversity.

Delphine Riou, ESG Analyst at BNP Paribas Asset Management, said:

“The BNP Paribas Inclusive Growth fund is a continuation of BNPP AM’s work on the social theme and responds to the demands of our clients.  We believe that companies that implement the best practices of diversity and inclusion with their employees, their customers or their suppliers can achieve better financial results.  This finding resonates all the more strongly during the Covid-19 crisis, which accelerated the emergence of social considerations in investment decision-making.”

BNP Paribas Inclusive Growth builds a high conviction portfolio of 40-60 stocks out of a universe of approximately 1,000 companies. Company selection is based on an ‘inclusion score,’ rating companies based on a specific range of inclusion criteria, ranging from, working conditions, to equal pay, employee diversity, and percentage of female managers, among others. According to BNPP AM, the fund meets all of the UN Sustainable Development Goals, with priority given to SDG 1 (no poverty), SDG 5 (gender equality), SDG 8 (decent work & economic growth) and SDG 10 (reduced inequalities).

Maria Luz Diaz Blanco and Anne Froideval, Portfolio Managers of the Inclusive Growth fund, comment:

“By integrating specific performance indicators, such as employee turnover rate or board diversity, our proprietary model allows us to filter the investment universe to identify the leaders.  Our selective approach means that we can build a high conviction equity portfolio of 40-60 stocks from around 1,000 companies initially analysed.  This allows us to meets the expectations of our clients who are looking to generate a positive impact on tomorrow’s society while generating long-term value.”

U.S. office portfolio company EQ Office announced the launch of EQ Impact, its new social responsibility program. The company stated that the new initiatives are aimed at regenerating urban spaces, preserving local culture, and driving humanity into the workplace.

Lisa Picard, CEO and President of EQ Office, said:

“As an owner and operator of buildings that are part of our cities across the country, at EQ Office we really want to humanize work and our workplaces – and this is not just the physical spaces, but largely the neighborhoods that surround us. We want to give back in meaningful ways that truly shape and support our local communities through actions that enliven culture, foster community and increase our environmental initiatives, in the spirit to cultivate great talent. This is an evolving effort for me and all our people at EQ, as we want this to commence our reporting of progress each year.”

The company announced that it is partnering with opportunity youth skillset program provider YouthBuild USA, on expanding job skills training, offering hands-on mentoring, and providing internships to young adults between the ages of 16 and 24 who are neither in school nor employed who want a career in real estate or construction-related fields.

YouthBuild USA President and CEO John Valverde, said:

“Our young people are strong and resilient. We’re grateful for EQ’s financial commitment and ongoing employee mentoring engagement. It’s a tremendous support for us and our programs as we partner with opportunity youth to earn the knowledge, training, and opportunities that lead to long-term professional and personal success.”

Other initiatives included in EQ Impact include investing resources in local culture and creating effective workspaces, making quantifiable changes to the way it invests in and manages its properties in order to advance sustainability-based management and lower operating costs, and formalizing new operating and management processes with a continued focus on listening to diverse voices and inclusive customer engagement. EQ also said that it has integrated ESG into its acquisition process, invested in tracking technology that will continue to strengthen the operations and safety of portfolio properties, and implemented reporting systems that sustain ethical management and loss reduction.

Picard added:

“Nurturing talent and growing skills are at the core of our ESG initiatives. Our goal is to give back to our customers, partners and communities – value that comes from job creation and training, supporting local businesses, investing in art, driving tourism – essentially all of the ingredients that help EQ’s communities thrive.”