Microsoft, Campbell's shareholders rejected resolutions to make 401(k)s sustainable. What it means for ESG goals

Two recent proposals aimed at adjusting retirement funds to be more mindful of environmental, social and governance (ESG) goals and priorities were widely rejected by shareholders at Campbell's and Microsoft. The votes signal an uphill climb to bring sustainability into 401(k) accounts, even as employee bases express increasing interest. 

As You Sow, a California-based nonprofit that advocates for corporate sustainability, last year submitted official shareholder resolutions to both Campbell's and Microsoft, asking them to prepare a report assessing how the companies' retirement funds and investments may be contributing to climate change. The request was made after investors reached out to engage As You Sow.

In the final weeks of 2022, the proposals at Campbell's and Microsoft passed with an 8.8% and 11.2% vote, respectively, surpassing the 5% threshold of support required to continue talks and resubmit a resolution in 2023. 

"We think that there's a fiduciary duty to consider climate change in employees' [investments]," says Danielle Fugere, president of As You Sow. "The question that we raise with Campbell's is, why does a company that believes in climate risk have a significant amount of its employee retirement funds invested in target date funds that have high levels of fossil fuels and high-carbon companies?" 

Read more: Go green or go home: Employees want their 401(k)s to reflect ESG goals

Campbell's declined interview requests for this story, but directed EBN to its Corporate Responsibility Report, which spotlights its 2022 public commitments to a variety of environmentally-focused initiatives, including reducing greenhouse gas emissions in its operations and supply chain, using renewable energy sources, improving sourcing to reduce environmental impacts and supporting sustainable agriculture. 

Despite those valuable commitments, As You Sow rated the company's default 401(k) retirement option provided by Vanguard — which holds the majority of Campbell's $1.9 billion of employee retirement dollars — as "Poor" based on the nonprofit's sustainability scorecard, due to significant investments in organizations that cause deforestation risk. 

"Part of what we ask companies is, how are you looking at this? What are you doing, if anything, to adjust?" Fugere says. "Are you talking to your employees? What we hear is that when employees do express concerns, sometimes all a company will provide is a format to enable them to go out into the market and make their own investment — which isn't particularly useful to the vast majority of employees who may not have the time, energy or knowledge to do that." 

Only 37% of 401(k) and 403(b) plan participants said they were offered ESG-related investment options by their employer, according to the Schroders 2021 U.S. Retirement Survey. When ESG-focused options were available, nine out of 10 employees chose to invest in them, the survey found, and 69% said they would or might increase their overall contribution rate if ESG options were offered.

As You Sow's work takes those shifting consumer wants and needs into consideration. The organization is committed to promoting sustainability and social awareness in business across several metrics, including gender diversity and gun control, though climate change remains its primary focus. In 2022, the nonprofit filed 99 shareholder resolutions after spending the year engaging with 156 individual companies, according to their annual shareholder impact review. Thirty-two of those resolutions went to a shareholder vote — including those submitted to Google, Chevron and McDonald's — and garnered enough support to at least formally keep the conversation going with As You Sow in 2023.  

Read more: Going green: This startup is bringing sustainability to retirement plans

The nonprofit will continue to work alongside the companies; the purpose, Fugere says, is to empower these organizations to do much of the legwork themselves should they choose to shift their retirement plans. Roughly 90% of studies find a non-negative relationship between ESG funds and financial planning, according to the Journal of Sustainable Finance of Investment. In fact, the majority of studies see a positive trend.

"They have to change the way they're doing business, and that is not necessarily a straightforward task," Fugere says. "They need to bring some expertise to the table, they need to ask the folks who are setting up their funds to do a better job and they need to make sure that climate risk is really being addressed."

Still, the barrier to keep the discussion ongoing is slim, and the majority of shareholders rejected the resolution at both Campbell's and Microsoft. As You Sow and similar organizations are aware of the challenges that come with inspiring change, though Fugere speaks with optimism: When As You Sow started its work, approaching oil and gas companies to talk about climate change was a foreign concept; with time and effort that began to change, and she she suspects the conversations will continue to evolve.

"Part of the role of us as investor advocates is to address hidden problems and to provide information so decisions can be made with full information," Fugere says. "Everybody is still learning that we need to think through these issues and find processes to address them and indications are that companies are certainly looking into these issues. And we'll see what happens as a result."