The changing political climate and economic uncertainty in the U.S. led to an increase in anti-ESG shareholder proposals and shareholder activist campaigns last year, and corporate board members should expect more of the same in 2025.
New research from The Conference Board, ESGAUGE, Russell Reynolds Associates and The Rutgers Center for Corporate Governance found that anti-ESG proposals and anti-DEI proposals saw significant increases in 2024:
- Among Russell 3000 companies, anti-ESG proposals more than quadrupled, from 23 in 2021 to 112 in 2024.
- The number of anti-DEI proposals grew from 1 to 13 during the same period.
The research report also found that the number of shareholder activism campaigns doubled from 206 in 2021 to 411 in 2024.
During the 2025 proxy season, these trends are expected to continue. Diversity, equity and inclusion initiatives have come under greater scrutiny since the Trump administration has come into office, which may encourage anti-DEI activists to file more shareholder proposals this year. Similarly, the political climate around environmental issues and climate change may be shifting, which might place certain companies at risk for activist campaigns. The author of the report suggests that corporate board members should “prepare to navigate the balance between implementing ESG and DEI initiatives while addressing investor concerns about potential legal and financial risks.”
Corporate directors should also pay close attention to how the economic uncertainty that the Trump administration’s trade/tariff wars have created may affect their company’s financial performance over the next year. Corporate directors of companies that entered 2025 on questionable financial footing may find themselves at higher risk of re-election challenges from activist investors looking to claim board seats. The recent ouster of Unilever CEO Hein Schumacher after just two years suggests that corporate directors are under greater pressure to produce positive financial results faster than usual. That would be more difficult in a challenging economic environment that could include a recession or stagflation. In light of these challenges, corporate board members should consider the following:
Review and refine strategies to deal with anti-DEI and anti-ESG proposals. More companies are making hard choices about their commitment to DEI programs and clean energy initiatives. Proactive communication can help prevent any shareholder proposal filings, but some proposals will be filed by activists who have an agenda. Support for many of these proposals has been declining, so companies may just have to withstand some “noise” and a vote on the proposals to get to a resolution. Companies should be certain that they are not violating any laws.
Communicate the board’s strategy to deal with the potential effects of tariffs and recession. A strategy detailing the board’s approach to maintaining positive financial results during the worst possible scenarios will build shareholder trust and give investors confidence that the company has the right leadership in place. How does the company plan to mitigate higher costs and lost revenue due to tariffs and/or recession?
Provide financial forecasts detailing how DEI programs and ESG initiatives enhance company growth. Showing how these initiatives are currently contributing value to the company and how they will continue to do so into the future can provide a strong argument against anyone who opposes them.
