The momentum surrounding environmental, social, and governance (ESG) issues has clearly shifted in recent years. Once at the forefront of corporate discourse, ESG has recently become more muted in both language and action. Just a few years ago, its champions ranged from major financial leaders like BlackRock’s Larry Fink to local media outlets emphasizing its strategic and moral imperative. Today, however, companies − particularly in North America − are increasingly avoiding the term ‘ESG’ due to concerns about political backlash. Regulatory bodies, too, appear to be retreating. In the United States, the Securities and Exchange Commission (SEC) has refrained from defending its climate disclosure rules, and in the European Union, the Corporate Sustainability Due Diligence Directive is facing considerable resistance. Simultaneously, prominent financial institutions have begun distancing themselves from high-profile ESG initiatives like the Net-Zero Banking Alliance.

These developments have prompted some to declare ESG “dead on arrival.” But this obituary may be premature. While public rhetoric has softened, meaningful interest in ESG, particularly in relation to its social and climate-related dimensions, remains robust. Central to this continued engagement is the growing emphasis on the concept of a “just transition.” This idea, which calls for climate action to be implemented in a manner that is equitable for workers and communities, is gaining traction as an essential component of corporate sustainability, not just a moral add-on.

A just transition recognizes that the shift to a low-carbon economy, though necessary, will inevitably disrupt jobs, industries, and communities. Accordingly, such a transition should be done in a “fair and inclusive” manner that does not leave anyone behind. Ensuring that this transition does not disproportionately harm vulnerable populations is both an ethical and economic imperative. Yet, many companies have yet to integrate this thinking into their governance frameworks or strategic planning. Increasingly, it is shareholders who are stepping in to push these issues forward.

One of the primary tools at their disposal is the shareholder proposal. These proposals allow shareholders to place specific requests on a company’s proxy statement for discussion and vote at the annual general meeting. In doing so, they provide a structured mechanism for shareholders to communicate their views not only to corporate leadership but to the wider investor community. Described as a type of corporate town hall, shareholder proposals foster transparency and open dialogue. More importantly, they serve as pressure points or strategic levers through which shareholders can encourage companies to act on matters they might otherwise delay or ignore.

In recent years, the scope of shareholder proposals has expanded significantly. Initially focused on baseline requests such as carbon emissions disclosures, proposals have become more ambitious and creative. Today, they call for disclosures on Scope 3 emissions—indirect emissions that occur throughout a company’s supply chain—and demand the establishment of credible carbon reduction targets. Many go further, urging the adoption of comprehensive transition plans that include specific measures for supporting workers and communities affected by the energy transition.

Shareholder proposals have also raised concerns about biodiversity, water usage, human rights in global supply chains, and reductions in single-use plastics and food waste. In addition, the sectors being targeted are shifting. Whereas earlier proposals focused primarily on extractive and high-emission industries such as oil and gas, today financial institutions are increasingly in the spotlight. This reflects a growing recognition that banks, asset managers, and insurers play a critical role in shaping the pace and direction of decarbonization through their capital allocation decisions.

Filing a proposal, however, is only the beginning. For those seeking real change to corporate behaviour, the question remains are such proposals successful. Yet success can take multiple forms. Simply having a proposal included on a company’s proxy statement may be a meaningful first step, as it raises awareness and places pressure on management to engage with the issue. While such inclusion may not immediately alter corporate behavior, it often sets the stage for future shifts in behaviour.

More significantly, when a proposal garners strong shareholder support, it signals broad-based concern and enhances the legitimacy of the issue at hand. This, in turn, can compel boards and executives to take action. Proposals can also lead to negotiated settlements. In these cases, the company agrees to implement some, or all, of the requested measures without the need for a vote. Such settlements can be an effective form of shareholder engagement, if they result in concrete corporate commitments, as they avoid the adversarial nature of contested resolutions.

Yet, just as shareholder proposals have matured as instruments of change, they now face a range of serious challenges. One of the most visible threats is the rise of anti-ESG proposals, particularly in the United States. In 2024, the number of such proposals that are aimed at halting or reversing ESG-related initiatives has nearly doubled. Although these proposals typically attract little support from shareholders, they can still exert influence. When backed by high-profile or activist investors, even minority positions can sway corporate decisions. A recent example involves BP, which faced a shareholder proposal urging it to scale back its investments in wind energy. While the company reaffirmed its public commitment to decarbonization, it later spun off its wind energy project, suggesting that it may have been persuaded by shareholder pressure.

A second, and arguably more troubling, development is the growing use of litigation by corporations to deter shareholder engagement. This was exemplified in late 2023 when ExxonMobil responded to a shareholder proposal from Arjuna Capital and the non-profit, Follow This, by suing the investors outright. The proposal had asked Exxon to accelerate its greenhouse gas reduction efforts. Rather than engage with the request or pursue the SEC’s routine “no-action” process for excluding proposals, Exxon took the unprecedented step of initiating legal proceedings. Even after Arjuna withdrew the proposal and pledged not to refile, Exxon continued the lawsuit, claiming that the shareholder proposal process was being abused by activists pushing agendas that did not serve the interests of investors. Although the court ultimately dismissed the case as moot, the company’s CEO has since vowed to pursue further legal action against activist investors. This shift toward litigation signals a potential chilling effect on future shareholder advocacy, raising concerns about whether the space for shareholder engagement is being deliberately narrowed.

Finally, recent changes at the SEC itself may further complicate shareholder activism. The SEC has issued new guidance that tightens the criteria for shareholders engaging with companies on ESG issues without being classified as seeking to influence control over the company. Under the new rules, if a shareholder applies pressure on a company to adopt specific ESG measures—for instance, by linking support for board nominees to ESG measures—they may be deemed to be influencing control, which triggers more burdensome filing obligations. These rules will likely dissuade shareholders from engaging on ESG issues. Already, asset managers, such as BlackRock, have reportedly cancelled meetings with companies to avoid potential violations. If sustained, this rule could further erode shareholder engagement on ESG issues, compounding an already concerning trend of disengagement from climate and social governance.

Nevertheless, while these developments suggest that the scope for shareholder activism is being narrowed, particularly in the United States, shareholder proposals remain a vital and effective tool. In the absence of robust legislative frameworks, particularly under a political environment that may downplay or deny climate science, shareholder proposals offer an important avenue for pushing companies toward responsible and inclusive climate action. They may not be a perfect solution, but they provide a crucial mechanism for raising issues, shaping debate, and securing incremental yet meaningful change.

Overall, it seems, ESG is not disappearing, but rather it is adapting to a new political climate. The rhetoric may be cooling, and the road may be harder, but the underlying drivers of ESG − climate risk, social inequality, supply chain transparency − have not gone away. If anything, they are becoming more urgent. Shareholder proposals, especially those centered on a just transition, remain one of the most practical and principled tools for ensuring that corporate governance reflects not only the interests of shareholders but also the needs of workers, communities, and future generations. As the tides shift, the challenge will be not to abandon ESG, but to redefine and defend it.