This spotlight explores key ESG-related market developments and their implications for corporates and investors.
ESG in the News
BlackRock’s support for ESG shareholder proposals fell to 4.1% during the 2024 proxy season, dropping from 47% support in 2021. BlackRock cited the declining quality of the shareholder requests, saying they were “overly prescriptive, lacking economic merit or asking companies to address material risks they are already managing.” On the anti-ESG proposals front, shareholder support remained at a minimal level despite a surge in volume. Out of the 81 voted on by June 30, 2024 – ranging from limiting corporate environmental or diversity programs to reducing climate disclosures – support averaged only 1.9%, less than half what they earned in 2021.
- Teneo Takeaway: BlackRock’s declining support may not translate directly to an abandonment of ESG principles. The asset manager cited that 61% of its negative votes in 2024 were because portfolio companies “already had a process in place to address the business risk,” implying the manager’s cautious approach to evaluate requested actions based on shareholder value rather than the title of proposals.
A U.S. federal judge struck down a Biden Administration FTC rule that banned non-compete agreements, citing the FTC’s lack of authority. The FTC had approved the ban on non-compete agreements in a 3-2 vote in May, saying the agreements are an unfair restraint on competition that violate U.S. antitrust law and suppresses workers’ wages and mobility. Notably, many States have passed laws limiting non-compete agreements, including Minnesota, California, North Dakota and Oklahoma – which have all issued blanket non-compete bans.
- Teneo Takeaway: The ruling highlights the ongoing legal battles on workers’ rights from an ESG perspective. The Texas court decision will likely face appeal, potentially setting up a Supreme Court battle. The court’s recent reversal of the Chevron Doctrine is likely leaning on a decision towards limiting the FTC’s authority to issue a nationwide ban.
A South Korean court ruled that the nation’s measures for fighting climate change are insufficient and violate citizen’s constitutional rights. The country’s Carbon Neutral Act required South Korea to set a goal of cutting carbon emissions by at least 35% by 2030 compared with 2018 levels. The Constitutional Court declared that since the law failed to specify carbon-emission reduction targets for the years between 2031 and 2050, the constitutional rights of future generations had been violated. The court gave the National Assembly until the end of February 2025 to revise the law.
- Teneo Takeaway: South Korea’s ruling follows the decision from the European Court of Human Rights, which declared that the Swiss government acted in violation of human rights by taking insufficient actions to limit the detriment of climate change to its society. We note that similar lawsuits have been filed in Taiwan and Japan, which may establish a set of precedents in Asia. The impact of these rulings on both the government and companies is to be observed in coming years.
Australia’s Senate has passed landmark climate resilience assessments and disclosures, which still awaits passage from the country’s House of Representatives and Royal Assent. Starting in 2025, the bill will require large Australian companies to provide standardized climate information as well as deliver climate resilience assessments based on both 1.5°C and 2.5°C warming scenarios. Following the bill’s final approvals, the Australian Accounting Standards Board will release guidance on new reporting duties. The framework largely follows international ISSB standards.
- Teneo Takeaway: Australian financial watchdog ASIC has strongly advocated for improved sustainability-related disclosures while maintaining one of the world’s most strict enforcement of greenwashing in the last two years.
The Global Reporting Initiative and Taskforce on Nature-related Financial Disclosures (TNFD) released a joint interoperability mapping resource that helps reporters align the two sets of standards. The tool aims to ensure consistency between TNFD core global disclosure metrics and GRI stands, as well as provide businesses with a robust framework for consistent biodiversity reporting. Executive Director of the TNFD Tony Goldner said the new tool “will further support market participants needing, or wanting, to report on their nature-related dependencies and impacts leveraging GRI Standards and metrics and in line with the TNFD Recommendations.”
- Teneo Takeaway: Support for biodiversity disclosures has gained increasing stakeholder support since the 2022 Kunming-Montreal Global Biodiversity Framework. More companies have introduced voluntary biodiversity disclosure standards as regulators being to integrate TNFD standards into potential disclosure requirements – including within the SEC’s proposed climate disclosure rules.
They Said It: ESG Influencers Speak Out
U.S. Deputy Defense Secretary Kathleen Hicks said, “Climate change is a global security issue. It knows no borders, nor boundaries. It respects no sovereignty, and it can't be reasoned with … One thing is clear … None of us can tackle the climate challenge alone. We have a better chance [of] tackling the threat when we find ways to confront it together … The U.S. national security community has been clear-eyed about these challenges for decades.”
