The 2021 shareholder season is in full swing and this year — 14 months into a global pandemic and amid a national reckoning over social inequities — publicly traded companies face a new set of pressures from emboldened activist investors.

According to data compiled by the Sustainable Investments Institute, the U.S. Securities and Exchange Commission under President Joe Biden has agreed with just 41% of company efforts to exclude shareholder resolutions focused on environmental, social, and governance, or ESG, policies. That is a drop from 50% in 2020.

The Institute found that in all, 464 ESG-related shareholder proposals have already been filed this year, compared with 461 for all of 2020. Challenges over strictly procedural issues were not included in the data set.

"There are multiple examples on climate, on diversity, on lobbying issues where company arguments seemed to be persuasive at the old SEC and these days they're not cutting it," said Tim Smith, who leads the shareholder engagement program for Boston Trust Walden, which manages about $10 billion in assets. "The companies are not getting … the relief they want."

A policy shift in Washington under President Biden, coupled with a growing global resolve to tackle climate change and other environmental challenges, appears to be fostering a more productive shareholder season than in years past. So does the new focus on social justice following the debate over police brutality, racial discrimination and other equity issues over the past year.

So far this year, according to the Institute, 41 proposals have been withdrawn before the SEC considered them, up from 27 in 2020. This suggests that shareholders and management were able to agree on the issue being raised ahead of a vote or that the matter was settled after companies concluded an SEC challenge would be futile. That still leaves room for some contentious battles in the coming weeks.

82% of shareholders defied management

This proxy season, shareholders are voting on whether companies should disclose greenhouse gas emissions generated when consumers use their products, known as Scope 3 emissions. They also are weighing resolutions requiring companies to conduct racial equity audits, improve worker safety and report on whether food and beverage sales cause obesity, while challenging a host of other corporate practices.

Investor activists are already racking up some notable wins. At DuPont's April 28 annual meeting, for example, 81% of shareholders agreed that every year the company must disclose the amount of plastic pellets it releases into the environment. The percentage of voters who approved the resolution was the most to ever do so for a motion opposed by management.

"When you have 81% in favor you're seeing the largest asset managers starting to vote [consistent] with their stated policies," said Danielle Fugere, president and chief legal counsel for the shareholder advocacy group As You Sow. "This is a watershed moment, I think, for ESG issues."

Shareholders this year are also pushing companies to be more explicit about their ESG goals, while wording proposals more carefully to avoid running afoul of lingering Trump-era guidance from SEC staff that discouraged investor "micro-management" of publicly traded companies. Among resolutions that the agency frowned upon in recent years were ones requiring companies to meet net-zero emission targets by a certain date or align their business goals with those of the Paris climate accord.

On May 4, for example, 98% of General Electric Co. shareholders voted in favor of a climate-related resolution that was also supported by the company's board. Rather than explicitly directing GE to operate in a way that would help achieve the Paris Agreement's goal of limiting global warming to 1.5 degrees Celsius, the proposal asked the company to issue a report explaining how it will meet the target.

Meanwhile, corporate boards of directors appear more open to shareholder ideas they may have balked at in the past. GE executives told participants during the May 4 virtual annual meeting that they view decarbonization of the economy as an economic opportunity.

"The energy transition is a glove fit with our purpose," GE Chairman and CEO Larry Culp explained. "GE generates one-third of the world's electricity today. We equip 90% of utilities worldwide, and we manage 40% of the world's energy with our software. So we do have an important role to play in the energy transition."

Also of note, Duke Energy Corp.'s shareholders on May 6 narrowly pushed through a resolution requiring the utility to release a public report twice a year detailing its political contributions and payments to trade and lobbying groups. The proposal by the New York State Common Retirement Fund, which passed with a 52% vote, followed criticism of Duke Energy’s support for associations and lawmakers opposed to ambitious climate policies.

Oil companies in the spotlight

For the first time, the SEC in March upheld proposals requiring oil producers Occidental Petroleum Corp. and ConocoPhillips to disclose in greater detail scope 3 emissions from customers. Such end-user emissions are the most difficult ones to measure and control, especially for fossil fuel businesses. As such, the companies fought to block the resolutions.

The pressure on oil companies comes as some industry players begin to hop cautiously onto the climate bandwagon. Occidental, for instance, in November 2020 became the first U.S. oil major to announce that it will reach net-zero emissions by 2050 — from its operations as well as the products it sells.

That pledge was not enough, countered a shareholder proposal that As You Sow filed on behalf of Benta B.V. in late January. The Dutch investor asked Occidental shareholders to vote during its May 7 annual meeting to require the company to add interim scope 3 emission goals to its long-term target of achieving net-zero emissions by mid-century. Although it initially opposed the measure, Occidental said the parties ultimately engaged in "productive conversations" that led it to agree to an interim reduction goal for around 2030. The resolution was then withdrawn.

Meanwhile, another group of 6,000 green shareholders, Follow Me, took ConocoPhillips to task for not setting any scope 3 emission targets at all. The company argued that those emissions should instead be addressed through carbon pricing or other national climate policies.

ConocoPhillips "does not control the products its crude oil is transformed into, nor how those products are made, marketed and used," Shannon Kinney, the company's deputy general counsel wrote in January when petitioning the SEC to exclude Follow Me's proposal. She also warned that including emissions from such products would cause emissions to be double-counted because ConocoPhillips Scope 3 emissions "are someone else's Scope 1 or 2 emissions."

SEC staff was unconvinced and refused to block the resolution.

Were 2021 proposals too modest?

Also in March, the agency gave a nod to requests from Chevron Corp. and ExxonMobil shareholders to vote on whether the companies should issue audited reports in January 2022 on how they will perform in a decarbonized economy. The investors want to know whether a significant reduction in fossil fuel demand would affect their "financial position and underlying assumptions."

The resolutions broke new ground by focusing on the companies' financials rather than on emissions targets, said Sanford Lewis, director of the Shareholder Rights Group. Corporate financial risk is of key interest to all investors, regardless of how they feel about climate change. And most shareholder proposals were penned and filed before Biden was elected president and made climate a top priority for his new administration, Lewis said.

"Things are moving very quickly especially with a lot of the mainstream investors," Lewis said. "When I look at these proposals I think they're too modest for where we are today. I think people's ambition is colored by their national leadership."