The landscape of Stewardship is evolving rapidly, specifically voting rights have become a focal point for both investors and corporations in 2024. With a heightened awareness of social and environmental issues, stakeholders are increasingly leveraging their voting power to influence corporate behaviour. This year, several key trends have emerged in the realm of voting rights and stewardship. Most notably, rising differences in the adoption and power of Voting rights between Europe, UK and the US.

Voting Trends in 2024: 

• In the US:

In 2024, there’s a notable trend indicating a significant decline in the success rate of ESG shareholder proposals. According to reports, the number of ESG proposals receiving majority support is set to drop by 50% compared to previous years. This decline is attributed to increasing resistance from corporate boards and a shift in voting patterns among large institutional investors​​.

Several factors contribute to this trend. Firstly, there is a growing backlash against ESG initiatives, with some investors questioning their financial impact and relevance. This has led to a more critical assessment of such proposals. Particularly those perceived as overly prescriptive or not directly tied to financial performance​. In fact, a Former Head of Global Sustainable Investing at Blackrock recently said “Sustainable investing has outgrown the catch-all ‘ESG’ label and the financial world should move beyond it” 

Secondly, there is an increasing emphasis on the quality and specificity of ESG proposals. Investors are now demanding more detailed and actionable plans rather than broad and generalized commitments. This shift means that only well-crafted and strategically significant proposals are likely to gain majority support​.

Additionally, some high-profile investors and asset managers have scaled back their support for ESG proposals. For instance, notable exits from initiatives like Climate Action 100+ highlight a growing caution among investors regarding the long-term benefits and feasibility of aggressive ESG targets​ (Responsible Investor)​.

Overall, the 2024 trend reflects a more discerning and, in some cases, skeptical approach to ESG voting. This emphasises the need for proposals to demonstrate clear financial and strategic value to gain support.

• In the UK:

UK investors are raising concerns about the Financial Conduct Authority’s (FCA) proposal to simplify the adoption of dual class share structures (DCSS). These structures, which provide disproportionate voting rights to certain shareholders, are feared to reduce accountability and performance pressure on company management. Institutional investors argue that embracing DCSS could undermine shareholder democracy and governance standard. They caution against following the U.S. example where such structures are more prevalent​ (ESG Investor)​.

Possibilities for Change:

Although there has been growing backlash and challenges around the effectiveness of Voting as an instrument for change. Voting Rights are still a crucial tool for investors, especially in a climate with growing anti-ESG sentiments. 

The trends in voting rights and stewardship in recent years reflect a growing commitment among investors to influence corporate behaviour positively. With a strong emphasis on ESG issues, the rise of retail investor power, technological advancements, regulatory support, and a focus on long-term value. The landscape is set for more accountable and transparent corporate governance. These trends not only empower shareholders but also drive companies toward more sustainable and ethical practices.

Conclusion:

In 2024, the landscape of Stewardship and Voting Rights is undergoing significant changes, with notable differences emerging between the US, UK, and Europe. In the US, there’s a marked decline in the success of ESG proposals. This has been driven by resistance from corporate boards and critical reassessment by investors. High-profile investors are also scaling back support for ESG initiatives, demanding more specific and actionable plans. In the UK, concerns over the FCA’s proposal to simplify dual class share structures highlight fears about reduced accountability and governance standards. 

Despite these challenges, voting rights remain a crucial tool for investors. They reflect a commitment to positive corporate influence and sustainable practices. These trends indicate a push towards more accountable and transparent corporate governance. Ultimately benefiting the broader society and global environment.