Stockholm (NordSIP) – Institutional investors’ stewardship of United States (US) investee companies has been thrown into disarray by changes in Securities and Exchange Commission (SEC) policies instigated by the Trump administration. The new guidelines signal a shift in power away from shareholders back to company boards and are likely to stymie the investor engagement process on sustainability matters.
President Trump’s appointee as SEC Chair Mark Uyeda has previously expressed his scepticism about environmental, social, and governance (ESG) related corporate engagement, arguing that it is not the intended purpose of shareholder meetings. He has therefore taken steps to make it more difficult for investors to maintain a dialogue with company management, while allowing the latter greater scope to block shareholder resolutions. This will allow corporate behaviour similar to that already exhibited last year by ExxonMobil to spread throughout the US corporate community. The Texan oil producer has been taking an increasingly aggressive stance against activist shareholders, including resorting to lawsuits when faced with certain types of resolution.
While uncertainty over the exact scope of the new SEC rules remains, several large asset management firms such as BlackRock and Vanguard have suspended their planned meetings with portfolio companies. US managers had already been significantly rowing back on their support for shareholder resolutions pertaining to environmental or social matters. This downward trend has taken place against the backdrop of the politically driven backlash in the US against ESG policies, which has now been boosted by the Trump presidency. Vanguard, the world’s second largest asset management firm, has gone from supporting a quarter of ESG resolutions in 2021 to voting against all of them in 2024.
13-D: a spanner in the works
Large passive asset managers with shareholdings in excess of 5% of a US firm have benefited from a simplified ‘fast track’ filing process known as 13-G. The SEC has now mandated the use of the more complex 13-D filings, which are far more resource-intensive and are likely to make it far harder to managers to press companies on matters of climate disclosure, board composition, or other sustainability-related issues.
While the SEC’s moves have been welcomed in some circles, concerns have also been expressed over the potential implications of a breakdown in communication between companies and investors. Despite the political backlash against ESG, many of the risks and opportunities these factors are intended to capture are considered financially material to many asset managers and investors in the US. The loss of these types of insights and data may be considered regressive. Moreover, companies will have fewer opportunities to gauge the attitudes of their largest shareholders before submitting their own proposals for votes at annual general meetings.
Image courtesy of Gerd Altmann from Pixabay
Stockholm (NordSIP) – Institutional investors’ stewardship of United States (US) investee companies has been thrown into disarray by changes in Securities and Exchange Commission (SEC) policies instigated by the Trump administration. The new guidelines signal a shift in power away from shareholders back to company boards and are likely to stymie the investor engagement process on sustainability matters.
President Trump’s appointee as SEC Chair Mark Uyeda has previously expressed his scepticism about environmental, social, and governance (ESG) related corporate engagement, arguing that it is not the intended purpose of shareholder meetings. He has therefore taken steps to make it more difficult for investors to maintain a dialogue with company management, while allowing the latter greater scope to block shareholder resolutions. This will allow corporate behaviour similar to that already exhibited last year by ExxonMobil to spread throughout the US corporate community. The Texan oil producer has been taking an increasingly aggressive stance against activist shareholders, including resorting to lawsuits when faced with certain types of resolution.
While uncertainty over the exact scope of the new SEC rules remains, several large asset management firms such as BlackRock and Vanguard have suspended their planned meetings with portfolio companies. US managers had already been significantly rowing back on their support for shareholder resolutions pertaining to environmental or social matters. This downward trend has taken place against the backdrop of the politically driven backlash in the US against ESG policies, which has now been boosted by the Trump presidency. Vanguard, the world’s second largest asset management firm, has gone from supporting a quarter of ESG resolutions in 2021 to voting against all of them in 2024.
13-D: a spanner in the works
Large passive asset managers with shareholdings in excess of 5% of a US firm have benefited from a simplified ‘fast track’ filing process known as 13-G. The SEC has now mandated the use of the more complex 13-D filings, which are far more resource-intensive and are likely to make it far harder to managers to press companies on matters of climate disclosure, board composition, or other sustainability-related issues.
While the SEC’s moves have been welcomed in some circles, concerns have also been expressed over the potential implications of a breakdown in communication between companies and investors. Despite the political backlash against ESG, many of the risks and opportunities these factors are intended to capture are considered financially material to many asset managers and investors in the US. The loss of these types of insights and data may be considered regressive. Moreover, companies will have fewer opportunities to gauge the attitudes of their largest shareholders before submitting their own proposals for votes at annual general meetings.
Image courtesy of Gerd Altmann from Pixabay
