Meta Platforms Inc. must give investors the opportunity to hold a shareholder vote over concerns around its metaverse vision, according to U.S. regulators.

The U.S. Securities and Exchange Commission said the parent of Facebook and Instagram, LLC is required to give investors an opportunity to consider and vote on a shareholder proposal that calls into question the company's "social license to operate an emerging technology like the metaverse" without fully understanding the potential risks or impact the vision has on consumers. The SEC decision means a shareholder resolution will be voted on at the company's annual meeting later this year.

The proposal was first filed in December 2021 by activist investor firm Arjuna Capital LLC, alongside several co-filers, surfacing concerns of potential psychological, civil and human rights harms within the metaverse. The proposal looks to weigh whether such harms can be mitigated or avoided.

"The same issues Meta is reckoning with on Facebook and Instagram — discrimination, human and civil rights violations, incitement to violence, and privacy violations — will only be heightened in the metaverse. Investors need to understand the scope of these potential harms and weigh in on whether [CEO Mark] Zuckerberg is throwing good money after bad," Arjuna Capital Managing Partner Natasha Lamb said in prepared remarks.

Meta had asked to exclude the proposal from its meeting ballot through the SEC's "no-action" process to keep the proposal from coming to a vote, arguing that the metaverse project was "ordinary business." However, the SEC said the matter "transcends" typical business.

Following the SEC's decision, a Meta spokesperson told S&P Global Market Intelligence, "We value the views of our investors and regularly engage with them to get their perspective. We look forward to continuing the dialogue, including at our annual shareholder meeting in May."

Zuckerberg announced the company's name change in October 2021. At the time, Facebook faced allegations that it knew its platforms harmed users but failed to make any changes. While some questioned the timing of the rebrand to Meta, the name change signaled it was pivoting its focus to developing the metaverse — the next iteration of the internet in which people partake in everyday tasks in a fully virtual world.

Arjuna's proposal comes as various outlets cite real-world harms from early iterations of metaverse offerings.

Experts said the unmoderated environments of Meta's Horizon Worlds virtual reality game, for instance, can serve as a hunting ground for child predators, The Washington Post reported in February.

Societal harms in the metaverse were called into question by non-Meta affiliated metaverse executives at CES 2022 in January. One executive told Market Intelligence that it was up to users to "choose wisely" about where they go, while another said that if visionaries really want the metaverse to mirror the real world, then people must realize it will not be a utopia.

Analysts previously told Market Intelligence that tangible metaverse investments will need to be realized before Wall Street can be confident in the company's metaverse vision.

Still, there is an understanding that Meta must look for new growth opportunities as its legacy Facebook platform reaches a global saturation point. The company saw its daily active users drop to 1.929 billion in fourth quarter 2021, down from 1.930 billion in third quarter 2021. After reporting the decline and forecasting weaker-than-expected revenue growth, Meta faced one of the largest share price wipeouts in history, plummeting over 25% in one day.

Meta's annual shareholder meeting will take place May 25.