Climate proposals: ESG shareholder activism sidestepping board authority

Investors have in recent years attempted to add climate-related proposals to the ballot of shareholder meetings. However, many corporate law systems view environmental (and social) issues as matters of strategy and statutorily attribute substantive competence for such matters to the board of directors. As a consequence, boards can often refuse to put environmental proposals to a shareholder vote. While shareholder competence to submit such proposals is relatively unrestrained in the United Kingdom, other jurisdictions - especially the Netherlands - are much more restrictive, to the point that climate activism in the form of shareholder proposals is mostly destined to fail. Such differences undoubtedly help explain the disparity in the number of proposals submitted in those jurisdictions. This insight also points to an inconsistency between the calls for ESG engagement - in European company and financial law and in various soft law initiatives - and the distribution of powers in national corporate laws.