By Ira Srivastava
1. Governance proposals are more popular than social and environmental policies. This proxy season, 38 out of 154 governance-related shareholder proposals that went to a vote were successful. This is approximately a 25% success rate, which is significantly higher than ‘E’ and ‘S’ proposals. Only two environmental and one social proposal were passed by shareholders in the first half of this year. Most of the governance proposals that passed were centred around removing supermajority voting requirements. A likely explanation for this is that the backlash against ESG over the last 18 months has largely been focused on emissions and DEI-related issues rather than board governance.
2. ESG fund outflows are slowing down. ESG funds have often been caught in the crossfire of political backlash, leading to significant outflows from such funds. However, that trend may be starting to turn around as outflows are beginning to decrease. Q1 of this year saw outflows of US$4.3 billion from passive ESG funds, but Q2 saw significantly lower outflows of US$960 million. Political backlash against ESG has slowed in the last few months, and the upcoming focus on the U.S. presidential election will likely have an impact on the next two quarters. Interest rates are also expected to begin coming down in the fall. Finally, poor performance of technology stocks that make up a large proportion of ESG funds is not permanent. Once that trend turns around, ESG funds will begin gaining value again.
3. Deloitte’s Technology Trust Ethics survey. Deloitte surveyed C-suite executives on ethical AI governance. Here are some key takeaways.
- 77% of respondents felt confident that their company is able to make ethical decisions about AI, but at the majority of organizations only those at director-level or above can make those decisions
- Striking a balance between innovation and complying with regulations is a top priority for executives
- 76% of companies surveyed had ethical AI training in place for employees and 63% have the same training for board directors
- More than half of executives surveyed said their company will be hiring AI researchers and policy analysts in order to make more ethical AI decisions.Read the full report here.
4. Climate Action 100+ sees more departures. The fund division of Goldman Sachs is the latest American organization to leave the Climate Action 100+ coalition. Such coalitions have been attacked for running afoul of antitrust laws. The company shared that “we’ve made investments in our ability to meet the sustainable investing needs of our clients and remain committed to leveraging our global capabilities”. It is choosing to engage with stakeholders on climate issues on its own independently from the coalition. The coalition has been accused of violating antitrust rules by encouraging companies to reduce climate-damaging emissions. A Climate Action 100+ spokesperson defended the coalition last week sharing that the withdrawal of Goldman Sachs and others are a clear result of recent attempts to deter investors from climate action.
5. The evolving role of the board. Helle Bank Jorgensen, Competent Boards’ founder and CEO, sat down with AccessWire to discuss the changing role of the board. Today, boards are finding themselves needing to address a huge array of issues including human rights, AI, talent acquisition, environmental sustainability, employee wellbeing, geopolitical tensions, and more. Directors increasingly need to be agile thinkers, capable of navigating complex issues. Keeping up with such a dynamic landscape, however, is a challenge. New issues and trends emerge constantly, making it difficult for board members to stay sufficiently informed of risk and opportunities that affect value. Helle’s forthcoming book, The Future Boardroom, will delve deeper into this vision, emphasizing the board’s role as stewards of the future, responsible for making decisions that help build resilience and ensure long-term success for their companies and overall well-being for the societies in which they operate.umps. The importance of high-quality carbon credit methodologies cannot be overstated as companies around the world are relying on voluntary carbon markets to reduce their emissions.
Ira Srivastava is Competent Boards’ Program Coordinator. Follow Competent Boards on LinkedIn.