Stewardship | ~4 min read
Why now is the time to double down on engagement
While several core sustainability priorities have come under the spotlight in the US, we believe engaging with companies on material sustainability-related risks and opportunities is more important than ever.
Targets for the US administration’s pushback on sustainability commitments include climate concerns and diversity, equity and inclusion (DEI). Furthermore, new regulatory direction from the Securities and Exchange Commission (SEC) – for example, on investors’ filing requirements – have had an immediate impact on the dynamics of shareholder engagement. While it is too early to assess the impact in full, here are our initial observations:
- DEI initiatives: Although pushback on DEI in the US began before the current administration took office, a significant number of companies have subsequently reconsidered their approach to DEI. This follows President Donald Trump’s executive orders ending several sustainability-related priorities including federal agencies’ DEI-related policies, programmes and activities. While responses vary from company to company, we observe that the language used in formal reporting has changed and voluntary reporting has been cut back. Notably, while 95% of Russell 3000 companies reported at least one board diversity indicator at the end of March 2024, twelve months later this figure had fallen to 72%.1
- Shareholder resolutions: By late February this year, early indications show that the number of shareholder resolutions filed at US companies dropped by about a third. This is likely driven by institutional investors acting more cautiously when addressing environmental, social and governance (ESG) issues, and by the SEC’s stricter materiality requirements for shareholder proposals allowing more companies to exclude such resolutions from the ballot.
Despite these trends, sustainability risks remain pressing – as indicated by the physical implications of global warming. Our clients’ interest in these risk areas remains high and encompasses numerous issues extending from climate and biodiversity to social topics, reflecting the broad range of their convictions and local priorities.
Increasing transparency and conviction
In our view, asset managers’ fiduciary duty to assess material sustainability-related risks and opportunities makes company engagement essential, particularly in times of market disruption, for several reasons:
- Engagement helps long-term shareholders better understand companies in which they are invested when disclosure is less transparent. It allows them to assess whether companies are scaling back on their formal, public disclosures and narratives, rather than their ambitions or implementation.
- Two-way communication between investors and US companies might seem more onerous in times of higher regulatory scrutiny. However, to us it remains key to conveying our clients’ convictions and, for example, challenging companies on any gaps between their practice and commitments.
- In any case, we are finding companies are eager to retain the two-way dialogue on investor convictions and voting intentions.
For more on how we engage with companies, download our Sustainable Investing and Stewardship Report 2024
1 Source: DiversIQ weekly newsletter 2 April 2025 – company data collected at the end of March in both years.
