ESGJanuary 10, 2024

New York City Pension Funds Report Calls 2023 ‘Difficult Year’ for Shareholder Proposals

Climate-related initiatives struggled due to a ‘well-funded backlash’ from conservative interest groups.

Reported by Michael Katz

The proxy voting season proved less fruitful in 2023 than in previous years for New York City’s five pension funds, particularly their climate-related proposals, in large part due to a “well-funded backlash” from conservative groups, according to the New York City Retirement System’s annual shareholder initiatives report.

The Office of the New York City Comptroller, which released the report and acts as an investment adviser to the NYCRS, submitted shareholder proposals to 32 portfolio companies in 2023 “that address[ed] a broad range of risks.” According to the report, the city’s pension funds withdrew approximately 47% of their shareholder proposals after successfully getting the companies to agree to take steps to implement the proposals. However, that is a significant drop from 85% in 2022.

“It was a difficult year for shareholder proposal proponents, whose efforts faced a well-funded backlash from conservative interest groups, Republican attorneys general, and state and federal legislators,” the report stated. “Republican presidential candidates made opposition to ESG [environmental, social and governance factors] and ‘woke investing’ a central pillar of their campaign messaging in 2023.”

Support for the New York City pension funds’ proposals that made it to a vote averaged 27%, down from 35% the previous year, which reflected declining support for shareholder proposals in general, according to the report. Climate change-related proposals were the least successful for the city’s pension funds, garnering only 13% support on average, while its proposals related to corporate governance and a fair and equitable workplace earned average support of 32% and 35%, respectively.

“Generally, average support for proposals seeking corporate action or disclosure decreased significantly, to 21.8% in 2023, down from a high point in 2021 of 33.3%,” the report stated, citing the Sustainable Investments Institute. “Consistent with the Systems’ experience, ‘the erosion in support hit surging climate change proposals the hardest.’”

However, the report touted as a success the city’s shareholder proposal requesting the board of Starbucks commission and oversee a third-party assessment of the company’s adherence to its stated commitments to workers’ rights, including freedom of association and collective bargaining, which received 52% of the vote.

The report also cited a proposal requesting that the Wells Fargo board of directors prepare an annual public report on the effectiveness and outcomes of the company’s efforts to prevent harassment and discrimination, which received 55% of the vote.

“New York City’s pension funds are longtime leaders in meaningfully engaging with some of the largest companies to achieve real progress,” New York City Comptroller Brad Lander said in a release. “By pushing companies like Starbucks to respect workers freedom of association, Wells Fargo to prevent harassment and discrimination, and Fox to stop defaming people, we are helping to raise corporate governance standards and ensure a more inclusively thriving economy.”