Winter is Coming for Environmental and Social Shareholder Proposals

US public companies are gearing up for the 2026 proxy season. In this post, we take a look at some of the legal and other developments that will influence environmental and social proposals and company responses. 

2025 in the Rearview Mirror

The 2025 proxy season was not kind to environmental and social proposals. 

According to Alliance Advisors data, approximately 470 E&S proposals were submitted by shareholders during 2025. Although a sizeable number, this was down from more than 600 proposals submitted in each of the previous two years. 

Based on various data sources, approximately 220 to 240 E&S shareholder resolutions made it into proxy statements and were voted on in 2025. According to Morningstar data, this was a 40% decline from the 2024 high-water mark. 

In addition to the reduction in number, in 2025 there was less support for E&S resolutions. According to Morningstar, average support for pro-E&S resolutions dropped to 16%, from 20% the prior year, and the number of these resolutions achieving support from at least 30% of independent shareholders fell precipitously, from 107 in 2024 to 30 in 2025. Alliance Advisors data indicates that only five E&S proposals received majority support. These statistics reflect less support for E&S proposals in 2025 from both large institutional investors and ISS and Glass Lewis. 

“Anti-E&S” proposals also did not fare well. According to Morningstar, the number of these proposals brought to a vote in 2025 dropped to 58, from 84 in 2024. The proposals continued to receive minimal support, with average support of 2.7% in 2025 according to Morningstar. This was largely in line with the previous two years.

Developments over the last several months, including as recently as the last couple of weeks, are likely to lead to a further decline in the number of E&S proposals submitted and voted on in 2026, as well as continuing low levels of support for those proposals that come to a vote. Some of these developments are discussed below.

Citing Backlog, the SEC Backs Away From Reviewing Most Requests to Exclude Shareholder Proposals

On November 17, the SEC’s Division of Corporation Finance released a statement indicating that it will not respond to most no-action requests submitted by companies seeking to exclude shareholder proposals from their 2026 proxy materials. Corp Fin staff will, however, continue to review requests to exclude shareholder proposals on the basis that they are not a proper subject for shareholder action under state corporate law (Exchange Act Rule 14a-8(i)(1)).

According to the SEC, this change is being made to enable SEC staff to focus on clearing the large backlog of pending registration statements and other filings resulting from the recent government shutdown. The SEC’s statement also indicates that there is a sufficient body of applicable guidance for companies and proponents to rely on, which suggests that the change in approach may not be limited to 2026. As discussed later in this post, earlier in the year, the SEC issued updated guidance providing companies more leeway to exclude E&S proposals.

Companies that exclude shareholder proposals from their proxy materials will still be required to notify the SEC and the proponents no later than 80 calendar days before filing their definitive proxy statement (Rule 14a-8(j)).

The SEC statement notes that, if a company includes with its Rule 14a-8(j) notification an unqualified representation that it has a reasonable basis to exclude a proposal based on the provisions of Rule 14a-8, prior published guidance and/or judicial decisions, Corp Fin will respond with a letter indicating that, based solely on the company’s or counsel’s representation, it will not object if the company omits the proposal from its proxy materials. The SEC already has started to issue these letters.

For a further discussion, see this Ropes & Gray Alert.

ISS Announces 2026 Changes to its Proxy Voting Guidelines

Last week, ISS announced Benchmark Policy Changes for 2026 to its US proxy voting guidelines. Among other changes, ISS is updating its policies with respect to the following types of shareholder proposals from a “vote for” to a “case-by-case” approach:

• Climate change/greenhouse gas emissions disclosures: resolutions requesting that a company (1) disclose information on the climate change-related financial, physical or regulatory risks it faces to its operations and investments or on how the company identifies, measures and manages such risks or (2) report on its GHG emissions from company operations and/or products and operations.

• Diversity/equality of opportunity: proposals requesting that a company disclose its diversity policies or initiatives, or proposals requesting disclosure of a company’s comprehensive workforce diversity data, including requests for EEO-1 data.

• Human rights: proposals requesting a report on company or supplier labor and/or human rights standards and policies. 

• Political contributions: proposals requesting greater disclosure of a company's political contributions and trade association spending policies and activities.  

The updates generally will apply to shareholder meetings taking place on or after February 1, 2026. 

The SEC Updates Guidance, Allowing More E&S Proposals to be Excluded from Proxy Statements

In February, Corp Fin issued Staff Legal Bulletin No. 14M. SLB 14M clarifies the application of the “economic relevance” and “ordinary business” exclusions under which companies may omit shareholder proposals from their proxy statements.

SLB 14M replaces SLB 14L. The latter SLB was issued by the Democratic-led SEC (Gensler) and in turn replaced SLBs from the immediately prior Republican-led SEC (Clayton).

For a further discussion of SLB 14M, see this Ropes & Gray Alert.

Economic Relevance

Under the “economic relevance” exclusion (Rule 14a-8(i)(5)), a company may exclude a shareholder proposal if it relates to operations that account for less than 5% of the company’s total assets at the end of its most recent fiscal year, or for less than 5% of its net earnings and gross sales for that year, and it is not otherwise significantly related to the company’s business.

The SEC’s position under rescinded SLB 14L was that proposals that did not exceed the economic thresholds but that raised issues of broad social or ethical concern were not excludable. Qualifying the prior guidance, SLB 14M indicates that whether a proposal can be excluded depends on whether the social or ethical issue raised is significant to the company’s business. 

According to SLB 14M, proposals that raise issues of social or ethical significance may be excludable, notwithstanding their importance in the abstract. SLB 14M indicates that the mere possibility of reputational or economic harm alone will not demonstrate that a proposal is otherwise significantly related to the company’s business.

Ordinary Business

Under the “ordinary business” exclusion (Rule 14a-8(i)(7)), a company may exclude a shareholder proposal if it deals with a matter relating to the company’s ordinary business operations. According to the SEC, the general underlying policy of the exception is to confine the resolution of ordinary business problems to management and the board of directors, since it is impracticable for shareholders to decide how to solve these problems at an annual shareholders meeting.

The SEC has been of the view that proposals relating to management’s ability to run a company on a day-to-day basis but focusing on significant social policy issues generally are not excludable as “ordinary business.” Rescinded SLB 14L considered significance through a societal impact lens. SLB 14M guidance reverts back to the pre-Gensler approach of assessing significance on a company-specific case-by-case basis.

SEC Updates Guidance on ESG-related Engagement by Large Shareholders

Also in February, the SEC updated its guidance on when investors engaging with issuers on ESG and other matters can file a short-form Schedule 13G as a passive or institutional investor, rather than a long-form Schedule 13D. Prior guidance provided clearer support for investors engaging on ESG topics to file a Schedule 13G rather than a Schedule 13D in many cases. The changes made to that guidance have impacted the engagement practices of some institutional investors, including around annual meetings.

As part of the guidance issued in February, in the response to Question 103.12 in the SEC’s Compliance and Disclosure Interpretations on Section 13(d) and Section 13(g) of the Exchange Act, the SEC indicates that a shareholder who discusses with management its views on a particular topic and how its views may inform its voting decisions, without more, generally is not disqualified from reporting on Schedule 13G. However, the response goes on to state that a shareholder who goes beyond such a discussion and exerts pressure on management to implement specific measures or changes to a policy may be influencing control over the issuer and therefore lose its eligibility to report on Schedule 13G. 

As examples, CDI 103.12 indicates that Schedule 13G may be unavailable to a shareholder who:

• Recommends that the issuer undertake specific actions on a social, environmental or political policy and, as a means of pressuring the issuer to adopt the recommendation, explicitly or implicitly conditions its support of one or more of the issuer’s director nominees at the next director election on the issuer’s adoption of the recommendation; or

• Discusses with management its voting policy on a particular topic and how the issuer fails to meet the shareholder’s expectations on that topic, and, to apply pressure on management, states or implies during any such discussions that it will not support one or more of the issuer’s director nominees at the next director election unless management makes changes to align with the shareholder’s expectations.

For a further discussion, see this Ropes & Gray post.

Looking Ahead

SLB 14M had limited impact on the number of E&S proposals included in 2025 annual meeting proxy statements since it did not come out until February. This year, the full impact of SLB 14M will be felt. Coupled with the SEC’s November statement reducing the red tape needed to exclude 2026 shareholder proposals, the number of E&S proposals that will be submitted and brought to a vote are likely to fall further. 

Those E&S proposals that make it onto the ballot also are likely to receive low levels of support. It remains to be seen if there is much further to fall in 2026.

Looking at the bigger picture, although these developments are expected to reduce annual meeting noise and expense, they are unlikely to meaningfully impact corporate practices or disclosures or the stakeholder pressures that US public companies face. Notwithstanding the direction of travel of US regulation, larger US-based multinationals will continue to report on sustainability matters both voluntarily and pursuant to various regulatory mandates around the world. 

As a general matter, the quality of reported information continues to improve, with companies reporting more hard data that is being used to measure and drive business performance. Furthermore, social media, podcasts, influencers, political commentators and grass roots initiatives have become a more potent force – on both the left and the right – than E&S proposals ever were and the impact of these channels on corporate behavior will continue to increase as stakeholder engagement techniques and pressure points are further honed. 

About our Practice 

Ropes & Gray has a leading ESG, CSR and business and human rights compliance practice. We offer clients a comprehensive approach in these subject areas through a global team with members in the United States, Europe and Asia. Senior members of the practice have advised on these matters for more than 30 years, enabling us to provide a long-term perspective and depth and breadth of experience that few firms can match. 

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