ESG considerations continue to impact the landscape of corporate accountability, with stakeholder (especially shareholder) activism emerging as a key mechanism for change. In Canada, this trend continues to gain momentum as diverse stakeholders demand greater transparency and action on ESG issues such as climate change, diversity and corporate governance. With evolving regulatory standards and societal norms, ESG activism continues to shape the way Canadian companies operate and communicate with their stakeholders.
RISE OF ESG SHAREHOLDER ACTIVISM
Building upon a decade of an increasing trend in stakeholder activism globally, 2024 set a record in terms of the total number of public campaigns launched.1 Seventy-six shareholder activism campaigns were launched in Canada in 2024 and many of the top campaigns launched in 2023 are still ongoing.2 While record amounts of activism were seen on both sides of the Canada-U.S. border, the growth rate in Canada is much more significant than that of the United States, having increased by 10% in 2024 alone.3
While activist activity continues to be primarily focused on board change, there has been a rise in ESG-themed activism campaigns in the past three years.4 For example, ESG-related shareholder proposals have increased steadily, with some groups notably now sponsoring "anti-ESG" proposals. Between January 2021 and June 2024, shareholders were invited to vote on 238 ESG-related shareholder proposals.5
ESG factors also increasingly shape investment decisions, driven largely by institutional investors with ESG mandates. Although there has been a slight decline in reported responsible investment assets under management over the past couple years,6 a recent study found 70% of limited partners already incorporate ESG considerations into their investment policies.7
ENVIRONMENTAL
Climate change continues to be one of leading topics in environmental activism, with shareholders, governments and the public increasingly urging companies to take meaningful steps to reduce their climate impact. Shareholder proposals are frequently used to raise environmental matters with corporate management and directors, by leveraging the soapbox afforded by annual meetings. Canadian companies have been subject to environmentally motivated shareholder proposals targeting net-zero commitments, emissions disclosure and say-onclimate proposals, among others
Environmental activism in Canada may also be influenced by global trends supporting climate disclosure. For instance, the Canadian Sustainability Standards Board (the "CSSB") adopted final climate-related disclosure standards in December 2024 applicable to Canadian companies modeled off the International Sustainability Standards Board's IFRS S1 and IFRS S2 standards. Until the CSSB's standards are adopted by a Canadian regulator, they are voluntary for Canadian companies, and it remains to be seen whether shareholder proposals will emerge demanding companies to adopt the standards.
SOCIAL
As activism relates to social issues, the most prominent continue to be shareholder calls for increased diversity and inclusion on boards and in management. The Canadian Securities Administrators and institutional proxy advisory firms have also updated their voting guidelines on board diversity to align with growing stakeholder expectations regarding diversity. For instance, Institutional Shareholder Services ("ISS") now recommends voting against or withhold from chairs of nominating committees (or equivalent) of S&P/TSX Composite Index issuers that have boards with no apparent racially or ethnically diverse members, subject to certain exceptions.8
GOVERNANCE
As activism relates to governance, shareholders often target companies to push for enhanced transparency, shareholder rights and executive compensation reforms. Following the COVID-19 pandemic, there has been a dramatic increase in shareholders demanding companies to host their annual meetings in-person or in a hybrid format. Moreover, shareholder scrutiny of executive compensation has increased in recent years, which has led to more opposition to "say-on-pay" proposals.9 With economic challenges and market volatility impacting corporate performance in 2024, we expect investors to continue pursuing activist campaigns to secure strong returns.
Footnotes
1 Kingsdale Advisors, 2024 Proxy Season in Review.
2 Kingsdale Advisors, 2024 Proxy Season in Review.
3 Kingsdale Advisors, 2024 Proxy Season in Review.
4 Sodali & Co's 2024 Canadian Proxy Season Review.
5 Sodali & Co's 2024 Canadian Proxy Season Review.
6 Laurel Hill Advisory Group, 2024 Trends in Corporate Governance Report.
7 Bain & Company, Sustainability and ESG in 2023.
8 ISS, Canada Proxy Voting Guidelines for TSX-Listed Companies Benchmark Policy Recommendations, (January 2024).
9 Sodali & Co's 2024 Canadian Proxy Season Review.
This article appeared in ESG and Sustainability: Key Trends in Canada
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