AGM 2025 predictions: DEI battles amid a stewardship ‘recession’

This year’s annual general meeting (AGM) season could be a fork in the road moment for the future of shareholder engagement. 

“It’s a genuine inflection point,” says Lindsey Stewart, director of stewardship research and policy at Morningstar Sustainalytics.

Last year was the first time ESG shareholder resolutions were primarily driven by ‘anti-ESG’ proponents, according to Morningstar research. A sentiment that appears to be growing stronger going into this year’s AGM voting season.

“The favourable regulatory environment we saw around 2020 and 2021 when there was an enthusiasm for the Paris Agreement and reporting on climate emissions all seems to have changed, particularly in the US, which has turned openly hostile. While in Europe, it’s turned reluctant,” Stewart says.

For Stewart, much of the volatility he predicts this season will come from regulatory and political pressures, such as the Securities and Exchange Commission (SEC) reinstating barriers on shareholder proposals – something he expects will lead to fewer resolutions and more no-action requests being granted.

DEI backlash

A key emerging battleground this AGM season will be around diversity, equity, and inclusion (DEI) policies, according to Stewart, who says he is seeing an increasing amount of activity from conservative activists challenging companies’ diversity practices.

“For the first time, we’re actually seeing them [activists] openly call for the cessation of these [DEI] activities.”

His comments come as the ‘war’ on DEI policies by. the Trump administration has further emboldened so-called ‘anti woke’ activists.

However, these anti-DEI proposals have so far received low shareholder support, despite mounting political pressure.

Last month, over 97% of Apple shareholders overwhelmingly voted down a proposal from the conservative think-tank National Center for Public Policy Research to “cease DEI efforts”.

ShareAction’s diversity equity and inclusion campaign manager, Kohinoor Choudhury, says she hopes to see shareholders continue to “step up” over AGM season and use their influence to back issues such as tackling workplace inequality.

“The board at Apple and its investors have made it clear that the company’s DEI programmes are valuable for its staff and the business,” Choudhury said in a statement after the vote passed.

“Everyone, regardless of background, ethnicity, class, sexuality or gender deserves to feel supported and included in the workplace. Moreover, it makes good business sense, as DEI policies help businesses to attract and keep talent, and encourage innovation,” she adds.

The increasingly contentious mood surrounding the issue of diversity initiatives has also seen investment managers quietly drop DEI from their proxy voting policies.

State Street removed some key DEI requirements from its proxy voting and engagement policy, including a requirement for companies in its index funds to have boards with at least 30% female directors.

In addition to this, proxy-vote advisor Institutional Shareholder Services (ISS) announced it would stop considering the gender, racial and ethnic diversity of US companies’ boards when recommending election or re-election of directors. Its rival Glass Lewis also announced it is considering making a similar move.

Sharper stewardship focus

Bonnie Groves, senior specialist in stewardship and collaboration at the Principles for Responsible Investing (PRI), believes the current restricted environment could lead to investment managers reassessing their stewardship tactics.

“Investors will be looking for opportunities to engage companies within a restricted environment. Whether that’s voting on board seats and management proposals, or maximising pre-AGM engagement and seeking withdrawals under agreement rather than taking a resolution to vote,” says Groves.

“This year, as investors navigate an increasingly complex filing environment, particularly in the US, proxy season offers investment managers an opportunity to reassess what stewardship tactics are most effective in aligning their activities with asset owner expectations,” she adds.

Looking ahead, Grove predicts there will be an increased focus on governance resolutions, following from the strong levels of support seen last year.

“We expect an increased focus on governance resolutions as shareholders support the foundations that contribute to long-term value creation,” she notes.

“Shareholders are challenging company AGM formats and seeking to move away from virtual AGMs, as well as challenging non-binding votes and companies [that] are seeking to make large, strategic changes without consulting their shareholders,” she says.

Climate and transition plans

It is not yet clear how investors will vote on transition plans this year, according to Nicolas Redon, a senior green finance analyst at French consultancy Novethic.

“Now more than ever, we need public support to get companies to publish credible and useful information on their transition plans,” he says.

His comments come amid an increasingly challenging regulatory environment, including the SEC moving closer to dropping its climate disclosure requirements for financial institutions and companies, as well as the European Union’s recent omnibus proposal viewed by some as a major retreat from its climate agenda.

“There’s a lot of short-termism and rollbacks that show no long-term vision behind sustainability efforts.”

He hopes this season will see investors get the chance to confront companies that have ignored previous climate votes – something he thinks will result in confrontations between investors and companies on climate issues.

One such example being the decision taken by oil major BP not to include a vote on its climate plan at its upcoming AGM on 17 April 2025. The move comes despite investor requests after a major strategy shift, seeing BP ditch its prior commitments to scaling up its renewables business in favour of sticking with fossil fuels.

Asset manager support for shareholder resolutions aimed at tackling social and environmental issues hit a new low last year, driven by the voting behaviour of large US asset managers.

New research from ShareAction revealed the concerning retreat from ESG issues among asset managers in its 2024 proxy voting survey.

Fossil fuel battleground

Speaking to IPE, ShareAction’s head of corporate climate campaigns Penny Fowler says the organisation will be pushing banks to set green financing targets this season, with a focus on stopping fossil fuel financing.

“We are in a stewardship recession”

Catherine Howarth, ShareAction’s CEO

“The reality is that what’s going on in the world in terms of the climate crisis we’re facing are all real things that are going to continue, regardless of the political context,” she says.

“They are financially material, whether we’re talking about physical climate risk or the transition risk that companies are facing.”

A big climate moment this season could be at the Shell AGM this year, following a shareholder resolution filed by local government pension scheme (LGPS) funds to obtain clarity about the basis for the oil major’s plan to grow its liquefied natural gas (LNG) business.

The resolution, filed by Brunel Pension Partnership, Greater Manchester Pension Fund (GMPF) and Merseyside Pension Fund, asks Shell to justify its LNG growth strategy for reasons including that the demand anticipated in the company’s 2024 outlook is higher than in all scenarios published by the International Energy Agency (IEA).

ShareAction supported the filing along with more than 100 individual shareholders.

Speaking about the upcoming resolution at a recent UK Sustainable Investment and Finance Association (UKSIF) event, Catherine Howarth, ShareAction’s chief executive officer, said that Shell appeared to want to “have its cake and eat it”.

“It is saying it will grow its LNG business, make a lot of money in the short term, while still somehow aligning with the Paris Agreement. That’s just not at all credible.”

Speaking on the future role of shareholder engagement, Howarth said: “We are in a stewardship recession.”

Looking ahead, she said: “It’s asset owners that will get us out of this recession, because they have a long-term commitment and client power to insist on really rigorous stewardship standards.”

The latest digital edition of IPE’s magazine is now available