The author of this article points out that the regulatory landscape is evolving and growing more complex, which means that companies and investors must adapt to ensure successful engagements. The power of shareholders to drive change remains a major issue.

Roraj Pradhananga is a partner and the chief investment officer at Veris, an investment advisory firm. His work gives him an insight into how to use shareholder market power to encourage change in the companies in which he and his colleagues invest. Shareholder engagement is not just a recent trend, although the rise of ESG investing has added to momentum the “G” element. The ability – or not – of shareholders and other beneficial owners to use their stakes to effect change is important for healthy capitalism. We know that these issues can be complex and invite readers to add ideas and suggestions – please jump into the conversation. Remember that the usual editorial disclaimers apply to views of guest writers. We thank Pradhananga for his contribution. Email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

Roraj Pradhananga

At Veris, we believe that lasting change in public markets is achieved not by exclusions, but through active shareholder engagement. Shareholder resolutions – when strategically applied – can prompt corporations to implement meaningful improvements in governance, policy, and transparency. But today, shareholder advocacy is facing significant regulatory and political headwinds. Recent regulatory shifts, particularly from the Securities and Exchange Commission (SEC) and state-level restrictions, are reshaping the rules of engagement and altering the landscape for sustainable investors.  

Regulatory shifts and new restrictions
Staff Legal Bulletin No 14M (SLB 14M), issued in February 2025, reversed previous guidance making it easier for corporations to exclude ESG-focused shareholder resolutions, making engagement more demanding (1). It appears that one result of this was a sharp uptick in no-action requests submitted to the SEC, with such requests up 38 per cent over the 2024 season (2). No-action requests allow companies to seek permission to omit a shareholder proposal from their proxy statements. While actual exclusions have only slightly increased, companies are having greater success in arguing that proposals related to “ordinary business,” involve “micromanagement,” or contain “procedural errors.” The chilling effect of this change can be seen in the data: ESG-related shareholder resolutions in 2025 dropped by 34 per cent from 2024 levels (3). 

New SEC guidance on Schedule 13G vs 13D filings has introduced greater scrutiny of engagement strategies by passive investors. Under the SEC’s revised interpretation, passive investors (filing Schedule 13G) might be deemed an active investor (requiring the more burdensome Schedule 13D) if their engagement places "conditions" on support for directors or pressures management on specific changes including “specific actions on a social, environmental, or political policy.” (4) This has led to concerns among large passive investors, many of whom are now reevaluating their engagement strategies and potentially resulting in reduced levels of investor-initiated engagement (5).

At the state level, Texas Legislation (SB 1057 and SB 2337) will make it more difficult for shareholders to file proposals for Texas-based corporations (6). Starting September 1, 2025, shareholders must own at least $1 million in market value or 3 per cent of voting shares for at least six months, and secure support from 67 per cent of shareholders to file a proposal with a Texas-based company. 

Additionally, SB 2337 (which was signed into law in June 2025 by Texas Governor Greg Abbott) will require proxy advisory firms to disclose if their advice prioritizes non-financial goals over financial interests (7). Critics have objected that this law potentially violates the First Amendment and lawsuits have been filed (8). On August 29, the US Western District Court of Texas granted ISS and Glass Lewis preliminary injunction from enforcement action after they filed lawsuits arguing that the law violated the First Amendment; however, all other entities that provide proxy advice will still need to follow the law. 

Despite these regulatory headwinds, investors continue to successfully engage companies directly. In many cases, effective engagement has led to improved corporate disclosures, reducing the need for formal shareholder resolutions (9). 

Shareholder engagement in a shifting landscape: Proxy season 2024 and 2025
The 2024 proxy season saw significant global shareholder activist campaign activity. In 2024, the number of campaigns at companies with market capitalizations over $500 million had increased by 40 per cent since 2021 (10). 

While environmental and social concerns remain important, they are facing increased scrutiny and, in some cases, declining support at the ballot box due to a combination of anti-ESG sentiment and stricter regulatory interpretations. The 2025 proxy season has proven to be complicated and saw a notable decline in proposals, falling below 2022 levels (11). 

While the overall volume of ESG-related proposals reduced in 2025 compared with 2024's record highs, we believe this decline doesn’t signal retreat – it signals evolution. From the trends we are seeing in the 2025 data, investors are focusing on more targeted material issues, and we believe that some are seeking engagement behind the scenes rather than through the formal shareholder proposal processes. The 2025 proxy season may prove to be a bellwether for how corporate advocacy adapts and endures.

Environmental focus: Climate still critical, but investor efforts appear to be losing momentum
Climate change remains a significant concern for investors, who continue to push for corporate accountability with some likely driven by the tangible financial impacts of extreme weather events – from crippling supply chains due to hurricanes (12) and flooding to the direct costs of wildfires (13).

Yet the numbers tell a story of declining momentum. According to the 2025 Proxy Preview, the 2025 proxy season saw a notable decline in environmental proposals, with only 139 submitted, down from 173 in 2024 (14). While climate change and greenhouse gas (GHG) emissions reduction disclosures still dominate environmental proposals (over 200 considered this season), median shareholder support for environmental proposals continues a downward trend with none receiving majority support. This dip is partly attributed to large asset managers withdrawing support and increased attacks on integrating material ESG risks. 

Social
The number of social proposals dropped in 2025 by 33 per cent to 225 from 335 in 2024 (15) as Diversity, Equity, and Inclusion (DEI) initiatives have come under attack from well-funded conservative groups, and support for social proposals has also been trending downwards. However, the passage rate for social proposals has increased to 2.9 per cent in 2025 compared with 0.5 per cent in 2024 and 2.4 per cent in 2023, driven by support for proposals related to disclosure of political contributions. 

Several high-profile companies, including John Deere, Tractor Supply Company, Molson Coors, Walmart, Target, and Meta Platforms, Inc, have reportedly eliminated or rolled back certain DEI programs and targets (16). These actions have drawn both support from conservative groups and opposition from DEI proponents including boycotting Target, which has impacted its sales (17). 

Anti-DEI shareholder proposals increased in 2025, but these motions have historically received only about 2 per cent of shareholder votes (18). Approximately 98 to 99 per cent of shareholders voted against anti-DEI resolutions at Costco, John Deere, Apple and Disney, which shows that investors and companies continue to value diverse workforces that have been shown to manage risk and drive financial outperformance (19). An area where support is increasing is disclosures on political contributions, which has increased to 35 per cent from 22 per cent in 2024. Similarly, EEO1 data proposals saw increased support reaching 33 per cent from 8 per cent in 2024. 

Anti-ESG proposals
More than 80 per cent of counter-ESG proposals submitted between 2020 and 2024 dealt with social topics and over 35 "anti-ESG" proposals were introduced in 2025, critical of climate risk or corporate social responsibility. In total, anti-ESG proposals (including DEI-critical ones) increased from 93 in 2023 to over 131 in 2025. These anti-ESG proposals generally receive very low shareholder support (median around 1 to 3 per cent) (20).

Proxy advisory firms and institutional investors are also adjusting. While Glass Lewis has maintained its diversity-focused policies for 2025, ISS announced in February 2025 that it would indefinitely suspend considering racial, ethnic, and gender diversity factors in director election recommendations, citing a January 2025 presidential executive order (21). Similarly, institutional investors like BlackRock, Vanguard, and State Street (22) have adjusted their DEI language, softening explicit emphasis on racial, ethnic, or gender composition. Many companies have adjusted language but continue to support DEI initiatives due to the value of a diverse workforce. 

Focus on governance and operations
Given the attacks on environmental and social initiatives, investors are increasingly prioritizing traditional governance topics, such as executive pay, board composition, and the ethical use of artificial intelligence (AI). Governance proposals are down 5 per cent to 357 in 2025 from 377 in 2024 while passage rate increased to 22.2 per cent in 2025 from 20.8 per cent in 2024 and 9.6 per cent in 2023 (23). Proposals on majority voting for directors have seen strong support.

Conclusion: The advocacy road ahead
The regulatory landscape is evolving and growing more complex, and we believe that both companies and investors must adapt to ensure successful engagements.
 
For companies, we believe this means proactively engaging shareholders and clearly articulating how long-term value is being created. For investors, we believe it means honing the strategic focus of proposals, demonstrating financial materiality, and navigating regulatory scrutiny with precision.

The era of broad-based ESG proposals may be giving way to more focused, nuanced advocacy. But our fundamental belief in the power of shareholders to drive changes remains. Amid political pushbacks and regulatory shifts, we believe that the need for shareholder proposals and bondholder engagements that support environmental and social initiatives are more important now than ever.

Author
Roraj Pradhananga is a partner and the chief investment officer at Veris, an investment advisory firm that helps families and foundations align their financial assets with their values. He also serves on Veris’ executive committee and management team and as chair of the firm’s board of managers. Pradhananga is a Certified Investment Management Analyst (CIMA®) and a Certified Public Accountant (CPA).  

Sources
1. https://www.sec.gov/about/shareholder-proposals-staff-legal-bulletin-no-14m-cf
2. https://corpgov.law.harvard.edu/2025/06/14/2025-shareholder-proposal-season-a-first-glimpse-at-key-no-action-request-results/
3. https://corpgov.law.harvard.edu/2025/07/22/proxy-season-highlights-shareholder-and-management-proposals/
4. https://www.sec.gov/rules-regulations/staff-guidance/compliance-disclosure-interpretations/exchange-act-sections-13d-13g-regulation-13d-g-beneficial-ownership-reporting
5. https://www.whitecase.com/insight-alert/under-pressure-walking-fine-line-section-13d-passive-investor-status#
6. https://corpgov.law.harvard.edu/2025/05/21/texas-corporate-law-changes-challenge-delawares-dominance/ 
7. https://corpgov.law.harvard.edu/2025/07/13/texas-enacts-new-law-to-regulate-proxy-advisory-firms/
8. https://www.crowell.com/en/insights/client-alerts/Proxy-Advisors-Glass-Lewis-and-ISS-Continue-Fight-Against-State-Attorney-General-Challenges-to-Nonfinancial-advice-in-Challenge-of-Texas-Law#:~:text=Texas%20Senate%20Bill%202337%2C%20which,effect%20on%20September%201%2C%202025.
9. https://corpgov.law.harvard.edu/2024/11/18/u-s-shareholder-proposals-a-decade-in-motion/
10. https://corpgov.law.harvard.edu/2024/05/06/ma-developments-hedge-fund-activism/
11. https://www.proxypreview.org/
12. https://www.noaa.gov/news/storymap-supply-chains-damage-claims-hurricanes-and-their-impact
13. https://www.usgs.gov/media/images/annual-cost-wildfires-us
14. https://www.proxypreview.org/
15. https://www.proxypreview.org/
16. https://www.forbes.com/sites/conormurray/2025/04/11/ibm-reportedly-walks-back-diversity-policies-citing-inherent-tensions-here-are-all-the-companies-rolling-back-dei-programs/
17. https://www.newsweek.com/target-facing-permanent-boycott-june-2079736
18. https://corpgov.law.harvard.edu/2025/04/25/the-evolving-landscape-of-dei-shareholder-proposals/
19. https://www.cnn.com/2025/05/02/business/costco-apple-levi-shareholders-dei#; www.asyousow.org/press-releases/2025/2/26/987-of-john-deere-amp-apple-shareholdersnbspreject-anti-diversity-proposals; https://www.usatoday.com/story/money/2025/03/20/disney-investors-reject-dei-proposal/82570923007/
20. https://www.proxypreview.org/
21. https://insights.issgovernance.com/posts/statement-regarding-consideration-of-diversity-factors-in-u-s-director-election-assessments/
22. https://www.esgdive.com/news/state-street-drops-board-diversity-proxy-requirement-dei-retreat-vanguard-blackrock/
23. https://www.proxypreview.org/