ESG Shareholder Resolutions: SEC Swings the Axe but the “Fail Tail” Survives

There were a fair few surprises in the 2025 proxy season. The largest by far was the SEC’s decision to implement new restrictions on permissible shareholder resolutions in the middle of an ongoing proxy season. This permitted companies to throw out many proposals already submitted under the prior rules, irritating many resolution filers.

The new SEC guidance heralded a sharp fall in the number of environmental and social proposals that made it to the corporate ballot box this year. But, in another surprise, the proportion of failed proposals with near-zero shareholder support has continued to increase. Meanwhile the number of proposals with significant shareholder support is down over 70% this year.

Overall, the results indicate a worrying decline in the quality of signal being sent from shareholders to companies on financially material sustainability issues.

“Fail tail” of poorly supported proposals lives on

The graphic below, based on Morningstar data, shows the distribution of independent shareholder support for environmental and social (E&S) shareholder resolutions in the US for the last four proxy years: 2022 to 2025. The most successful resolutions appear at the bottom, with poorly supported ones toward the top.

Support for environmental and social shareholder resolutions

Voted resolutions in the US market, 2022 to 2025 proxy years

We can clearly see the effect of the SEC’s Staff Legal Bulletin 14L in 2021, which expanded the scope of permissible shareholder resolutions and prompted steep growth in the number of proposals in subsequent years.

We subsequently saw a growing cohort of failed resolutions with close to zero shareholder support. That’s the long string of resolutions you can see at the top of the graphic from 2023 onwards – I call this the “fail tail”. The overwhelming majority of these resolutions are “anti-ESG” proposals filed by conservative activists, alongside a handful of pro-ESG proposals that failed to resonate with even some of the most sustainability-focused institutional shareholders.

Late last year, I argued that the fast-growing fail tail was a sign things had gone too far as regards how many low quality resolutions were making it onto the corporate proxy ballot. A reduction in the sheer number of resolutions with no demonstrable relevance to investors would be, in my opinion, a healthy outcome for the market.

“The quality of signal being sent by shareholders to companies on material sustainability and governance issues via the shareholder resolution process is worsening. And that’s a worrying sign.”

The SEC made its move in February by issuing Staff Legal Bulletin14M. Its guidance largely reversed the 2021 expansion of permissible resolutions. Due to its timing and immediate effective date, it also drew criticism from resolution filers for effectively changing the rules of a game that was already underway, coming as it did during an ongoing proxy season.

Looking at the graphic for the 2025 proxy year, there has certainly been a reduction in the overall population of voted shareholder resolutions following SLB 14M. As we discussed in the last Stewardship Snapshots, the population of voted ESG resolutions is 28% smaller this year. And the population of E&S resolutions is down a huge 42%.

Environmental and social shareholder resolutions, volume and support

Voted resolutions in the US market, 2016 to 2025 proxy years

But it looks like the fail tail survived the cut. In fact, the proportion of poorly supported E&S proposals as a percentage of the whole population stands higher than at any point in the last 10 years.

As the chart below shows, only 7% of E&S shareholder resolutions in the 2021 proxy year achieved less than 5% shareholder support. That figure steadily increased to 25% in the 2024 proxy year. This was primarily driven by the proliferation of anti-ESG proposals – mostly net zero-skeptic and anti-DEI resolutions that institutional shareholders almost unanimously opposed.

Poorly supported environmental and social shareholder resolutions

Voted resolutions in the US market with <5% support, 2016 to 2025 proxy years

The percentage of poorly supported proposals increased further in the 2025 proxy year, to 27%. And the absolute number of poorly supported resolutions in 2025 (62) was still the second highest in the last ten proxy years, exceeded only by the 100 such resolutions in 2024, according to Morningstar data.

Shrinking number of strongly supported proposals

Looking at the other end of the spectrum, there’s been a sharp drop in the number of significant environmental and social shareholder proposals – those that achieve at least 30% support from the company’s independent shareholders. (We call this “adjusted support” – it excludes votes by company insiders like founders, company executives, and board members with large shares of the vote.)

Those proposals are shown as the gold-, silver-, and bronze-coloured squares toward the bottom of the first graphic above. You can clearly see the sharp reduction in their population from 2024 to 2025. As shown on the chart below, there were at least 100 such resolutions in each of the five proxy years to 2024, with over 150 in the 2022 proxy year.

Significant environmental and social shareholder resolutions

Voted resolutions in the US market with ≥30% adjusted support, 2016 to 2025 proxy years

However, in 2025 there are less than 30 such resolutions. Only five such proposals gained majority support, and all five addressed a single topic: political spending transparency.

Trends indicate serious communication challenges for investors and companies

Why does that matter? A few important trends are combining here.

1. New regulatory obstacles: Changes to SEC guidance this year have had the effect of creating barriers (both real and perceived) to open engagement dialogue between companies and their shareholders on financially material ESG themes.
2. Smaller population of voted resolutions: There are considerably fewer shareholder resolutions actually going to a vote. And there are much fewer significant resolutions to provide companies with high quality feedback on the market’s view of financially material sustainability matters. tackle a much narrower range of topics.
3. Average resolution quality continues to fall: The decline in the average quality of sustainability-focused shareholder resolutions, according to the market’s perception, has continued. This is evidenced by the greater proportion of poorly supported resolutions, the much smaller cohort of resolutions with significant shareholder support, and lower average support for proposals overall.

All this means that the quality of signal being sent by shareholders to companies on material sustainability and governance issues via the shareholder resolution process is worsening.

And that’s a worrying sign, because in an increasingly complex world with more volatile markets, open communication between investors and the companies they invest in has never been more important.