The opinions expressed here are those of the author, a columnist for Reuters. This column is part of the weekly Reuters Sustainable Finance newsletter, which you can sign up for here
By Ross Kerber
Jan 8 (Reuters) - Executives' concerns for environmental, social and governance $(ESG.NZ)$ factors seems in retreat by many measures. Banks have withdrawn from climate groups, companies are toning down diversity efforts, and boardroom demographics get a lower priority in director searches.
But investors still seem interested in trends like how environmental and workforce factors affect corporate performance, and voters in various states sided with environmental programs like keeping Washington State's carbon market. Here are some topics to watch in the coming year to track the balance of power among shareholders, corporate leaders and politicians.
Apologies this is not a complete list but as Ropes & Gray attorney Michael Littenberg wrote in his own 2025 look-ahead: "It's tough to make predictions, especially about the future."
* Will asset managers face new restrictions?
In late December Vanguard struck a deal with the U.S. Federal Deposit Insurance Corporation giving the banking regulator more power to monitor the top mutual fund firm, and top asset manager BlackRock BLK.N is under similar pressure. FDIC director Jonathan McKernan cited academic concerns about the competitive risks of concentrated ownership as consumers flock to the firms' low-fee index funds.
But the research about the exact harm of the trend still looks a little fuzzy. Unlike the FDIC, the U.S. Federal Energy Regulatory Commission has taken a slower approach in reviewing potential new rules about top funds' ownership, amid concerns about removing capital from big utilities or disrupting fund operations.
* Proxy Voting Trends
For all the attention on the backlash to ESG, "pro-ESG" shareholder resolutions still drew 21% support on average at corporate annual meetings last year, down from 33% in 2021 but about 10 times the average support rate for resolutions filed by conservative groups.
This year's springtime shareholder meeting season will show if the trends continue. BlackRock this month revised its voting guidelines to remove what had been a clear statement that boards should be 30% diverse, but noted that 98% of S&P 500 boardrooms meet that goal.
Andrew Behar, CEO of advocacy group As You Sow, a frequent resolution filer, says it and partners have filed 55 resolutions so far this year asking companies for things like plans to cut greenhouse gas emissions or plastic packaging. Behar said many companies are making policy changes without much prodding in the face of new sustainability disclosure rules from the European Union.
* CEOs as heroes or villains
A number of online posters have contributed to legal defense fees and questioned the terrorism charges against the suspect in the brazen shooting of the CEO of a UnitedHealth Group unit in December, in a mass venting of anger at insurance companies' power over medical payments. The perspective couldn't be different from that of Salesforce CEO Marc Benioff's declaration in 2021 that during the coronavirus pandemic, "it was CEOs ... who were the heroes" for making resource decisions that weren't always about profit.
A big differentiator of course is that CEOs make so much more money. Last year the AFL-CIO, the largest federation of American labor unions, said the average S&P 500 CEO made $17.7 million in total compensation in 2023. For companies surveyed the ratio of CEOs' pay to that of median employees was 268:1, down from 272:1 in 2022 and 324:1 in 2021. In theory a lower ratio could sap some of the popular anger against CEOs but it would have to be a significant drop.
* Republicans dominate in Washington, D.C.
Regulatory pendulums swing with every new administration, and Republicans' control of the White House and Congress suggests that agencies like the U.S. Securities and Exchange Commission will look unfavorably on ESG efforts.
Depending on its appointees for example the SEC could reverse current guidance and make it harder for shareholders to bring resolutions to the floor at annual meetings.
What looks to be different for corporations under the second administration of President-elect Donald Trump is his tendency to single out companies and his record of suing individuals as well as their employers. Let's see how far executives will go to defend their people.
The opinions expressed here are those of the author, a columnist for Reuters. This column is part of the weekly Reuters Sustainable Finance newsletter, which you can sign up for here.
(Reporting by Ross Kerber in Boston; Editing by David Gregorio)
((ross.kerber@thomsonreuters.com; (617) 412 0093;))
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