The mechanisms for holding individual directors, board committees and entire boards accountable for insufficient oversight on environmental, social and governance issues are expanding, and large investors are planning 2022 proxy season votes in advance with ESG in mind.

At the Diligent Modern Governance virtual conference this week, stewardship executives from BlackRock and T. Rowe Price warned that companies and boards that merely pay lip service to ESG without operational and systemic changes and oversight are likely to be exposed. In addition, they will find themselves at odds with investors in director elections, proxy contests with activists and shareholder proposals. Large asset managers are feeling acute pressure on ESG from clients, the press and regulators, explained Donna Anderson, vice president and head of corporate governance at T. Rowe Price. She said the fund firm is developing analytical and tracking tools to help portfolio managers and stewardship teams identify gaps between companies’ stated ESG priorities that are undermined or canceled out by political spending or membership in trade associations that lobby state and federal legislators for regulations contrary to companies’ official positions.

“If you’re doing business as usual but your [corporate social responsibility] departments are generating tons of reports, assertively staking claim to these various goals, but they’re not being operationalized, it’s going to become evident,” said Anderson during the event. “That’s a real problem in our view.”

Agenda – Large Investors Target ESG Skeptics on Boards