The new administration in Washington, DC is engaged in a headlong rush to trash rules protecting people and the planet they live on. This creates a significant long-term risk for investors: in the absence of common sense regulation, companies will feel pressure to engage in irresponsible practices that lower their costs, but that also externalize social and environmental risks that threaten all of us. If critical systems are destabilized, overall investment returns will suffer in the long run.
This leaves shareholders with an increased responsibility to use their governance rights to oppose practices that cause portfolio-wide damage: when a company creates social or environmental costs that threaten overall investment returns, shareholders should use their governance rights to protect their own system-wide interests.
System stewardship as a defense against deregulation
The idea that shareholders should protect critical systems has been developing for some time and is known as “system stewardship.” Some have suggested that shareholder stewardship should be limited to urging governments to adopt adequate regulations and making sure that companies maximize their returns within those regulatory boundaries.
But such limited stewardship ignores an uncomfortable reality: the interests of individual companies are not always aligned with the interests of their diversified shareholders. Sometimes a company action designed to improve its own prospects can create significant risks to macroeconomic factors that drive portfolio returns. Strategies that maximize cash flow for a company but that also externalize social or environmental costs threaten diversified portfolios, which depend upon healthy systems. Current political circumstances in the United States make this reality particularly salient for investors, because the government seems disinclined to temper business practices that threaten the economy.
This can be seen in the race to roll back efforts to protect (among other things) the environment and marginalized groups. In such a deregulatory situation, system stewardship becomes a critical line of defense for protecting common resources, whether they be social institutions or ecological reserves. With stripped back regulation, capital market leadership may provide the last line of defense to protect the economy from the pressure companies feel to externalize costs in order to grow profits.
Will the voice of capital be squelched?
But the current administration may not be content to let the free market pick up where regulators are abandoning the field. The administration is not just excising government protection of critical systems; it is silencing voices raised to preserve those systems—the voices of scientists, lawyers, students, professors, and workers. It also seems poised to silence investors.
There are multiple efforts to limit investors’ exercise of governance rights to address systemic concerns. The SEC has released new regulatory interpretations making it harder for shareholders to act on social and environmental concerns. Legislation is moving through Congress that would limit shareholder voice. Cases working through the courts may impose further limits, and increasingly aggressive action from state attorneys general may make it harder for shareholders to address legitimate sustainability concerns.
Stewardship campaigns in the 2025 proxy season
Despite these increasing challenges, investors are actively opposing corporate behavior that damages crucial economic systems. About 40 proxy initiatives that address the portfolio-wide effects of individual company choices are currently underway this proxy season, with more expected to emerge in the next few weeks. For example, a proposal at UnitedHealth Group (UNH) is asking for a report on the public health-related costs and macroeconomic risks created by company practices that limit or delay access to healthcare. It is currently being challenged at the SEC. Other proposals at General Motors (GM) and Tesla (TSLA) challenge deep-sea mining practices, which can reduce the ocean’s ability to absorb carbon dioxide and result in environmental impacts that affect diversified shareholders.
Additional campaigns that address the systemic concerns of diversified investors include:
- Shareholder engagements highlighting the costs to the economy from workplaces that allow cigarette smoking indoors such as Wynn Resorts (WYNN) and Caesars (CZR).
- Proposals designed to safeguard biodiversity and ecosystem services like Kroger (KR) and Target (TGT).
- Vote-no campaigns against board committee chairs to support paying employees a living wage, including initiatives at Walgreens Boots Alliance (WBA) and Walmart (WMT).
- Campaigns addressing the abuse of antimicrobials in supply chains for companies like Yum! Brands (YUM) and McDonald’s (MCD).
- Proposals incorporating system stewardship into racial equity audit requests at Walmart (WMT) and Mastercard (MA).
These initiatives and others—which address climate transition finance, tax transparency, paid family leave policies, and lobbying—are detailed in the recently released edition of Portfolios on the Ballot (POTB), an annual guide for investors published by The Shareholder Commons. POTB flags campaigns supported by systemic, portfolio-level arguments.
When diversified investors vote their proxies on these initiatives, they need to consider how the company practice in question affects their overall return from the market, because overall returns are what allow investors to meet their financial goals and liabilities. If they make the connection between systemic risks and the overall, long-term returns they can expect from their portfolios, they will use their power to protect the environment and social institutions. Moreover, by clearly articulating the investment case for protecting these critical systems, investors can amplify the message that a trajectory set by thoughtless deregulation puts everyone at risk.
For investors, silence is not an option.
Frederick Alexander is CEO of The Shareholder Commons
