August 28, 2020
At NEI, we believe thoughtful voting is not just a matter of fulfilling a responsibility to our investors, but also an important tool for active ownership and corporate engagement. Each year we seek to vote the proxies of every holding in NEI’s funds. This effort makes a statement to investors that we recognize our obligation to give them a voice in how the companies they invest in are managed.
Though most 2020 Annual General Meetings were held in the virtual space due to COVID-19, we were able to fulfill our responsibility to voting thoughtfully – on governance matters related to board elections and compensation issues, and on approximately three hundred shareholder proposals.
If proxy season is a bellwether for investor attitudes and company direction, 2020 was particularly telling. While we continued to use our votes to call companies to account on issues like executive compensation and board independence and composition (these remain stubborn issues to shift), we also saw a significant rise in climate- and human rights-focused proposals.
Contrary to what you might expect, NEI voted against or abstained from 56% of climate-related proposals. Not because our commitment to mitigating climate change has wavered. Rather our concern was with how these proposals were targeted – particularly when they failed to acknowledge the progress that companies had made in this area. Mitigating climate risks is no simple matter. We don’t believe in supporting proposals that target oversimplified solutions, or that fail to fully consider company responses to the climate crisis.
For example, we chose to abstain on shareholder proposals filed at Equinor and Shell that sought targets in line with the Paris Climate Agreement. In our view, both companies have been highly responsive to investor engagement on this topic. Conversely, we supported proposals requesting that JPMorgan and TD Bank prepare reports on climate risks, despite the positive efforts both organizations have taken on this issue. We saw the added value of having more information on their Greenhouse Gas reduction goals, and therefore supported the ask.
We applied the same thoughtful approach to every vote we cast in 2020. For example, on issues of human rights in the technology sector we supported proposals that asked for stronger oversight of the risks between technology and human rights. Unlike climate risks, which all companies face, human rights in the digital space is largely restricted to a single sector. In this proxy season it was tech giants Facebook, Alphabet (Google) and Amazon that attracted the most proposals. Approximately half of the proposals filed at the big three encouraged these companies to better address the human rights risks associated with their platforms and their businesses. We supported each proposal, as did many investors. Of the 12 resolutions put to vote at Amazon, five received support in excess of 30%. These included proposals directed at customer due diligence, hate speech, human rights impact assessments, lobbying and food waste.
We still have a long way to go in embedding human rights considerations in the business activities of Big Tech. Corporate engagement will be an important part of that journey, but the trend is clearly moving in the right direction.