Nuveen Sees Climate Disclosure, ESG-Linked Executive Pay as Key 2021 Proxy Season Issues
Nuveen, the $1.2 trillion AUM investment manager of TIAA, announced the release of its 2021 Proxy Season Preview, highlighting its expectations for the key shareholder proposal themes that will drive the corporate agenda this year. As ESG issues come increasingly into focus for investors, stakeholders and regulators, the manager anticipates more willingness from mainstream investors to use their votes to promote action on topics ranging from climate change to diversity & inclusion.
Nuveen sees 2021 potentially becoming a watershed year for environmental proposals receiving majority support, based on recent trends in investor ownership concentration and the stewardship activities of the largest global investors. The investment manager also notes, however, that as investors increasingly add pressure on ESG issues, companies have been turning to the SEC, seeking approval to omit shareholder proposals from ballots through no-action requests, arguing that requests are either too narrow, constituting micromanagement, or too broad, enabling companies to claim that current ESG reporting constitutes “substantial implementation.”
One of the key trends in the evolution of shareholder actions highlighted by Nuveen is the increase in climate-related proposals, and the shift in focus of those proposals from a focus on transparency to action and accountability on climate risks. Of the 126 climate proposals filed this year, only 36% focus on traditional transparency requests, while the most popular topics include GHG reduction targets and strategy, lobbying disclosure requests, and board oversight of climate and sustainability strategies.
According to Nuveen, diversity and inclusion is now the most common human capital management issue addressed in proxy statements. The investment manager also highlighted the evolution in shareholder action on diversity and inclusion, with boardroom diversity initiatives extending beyond gender and increasing focus on racial and ethnic diversity. Nuveen points out that while less than 10% of boards in the Russell 3000- and none in the S&P 500- lack gender diversity, nearly 40% of the Russell 3000 lack apparent racial/ethnic diversity. The diversity focus is also extending past boardroom issues, with growing interest by shareholders into diversity and inclusion within a company’s workforce.
Another key issue highlighted by Nuveen is the push by shareholders for executive compensation to promote management accountability for executing on ESG strategies and commitments.
Peter Reali, Nuveen’s Head of Engagement, said:
“Proxy voting is shareholders’ primary means of communicating views to companies and demonstrating conviction on how an investors’ values align with corporate practices. This year’s proxy season is representative of the key issues that dominated social media engagement and news headlines in 2020 and through the start of this year. Companies who are able to demonstrate that they are making long-term, positive changes related to climate change, diversity, and employee health benefits will prove their long-term sustainability to investors.”
Click here to view Nuveen’s 2021 Proxy Season Preview