What Sustainability Reporting Really Looks Like in 2025

As a new policy landscape emerges in North America, are companies scaling back on sustainability reporting? And will investors go with the flow? Join us as we look at live trends in company disclosures and where the 2025 proxy season is headed. 

Host: Bentley Kaplan, MSCI ESG Research

Guests: Julia Morello & Jonathan Ponder, MSCI ESG Research

Transcript

Sustainability Now Podcast

The Baseline for Sustainability Reporting is Shifting
Transcript: 01 August 2025

 Bentley Kaplan              

Hello and welcome to the weekly edition of Sustainability Now, the show that explores how the environment, our society and corporate governance affects and are affected by our economy. I'm Bentley Kaplan, your host for this episode. And on today's show we're going to look at the dynamic relationship between companies and their investors when it comes to reporting of non-pecuniary data. And what the heck does that mean? Well, both the US and Canada have seen recent policy changes that could affect the pressure that companies feel to report on things like their emissions, their workforce, and a bunch of other sustainability data. The key question is, with less pressure to report, will companies happily scale back their sustainability disclosures, and will shareholders be just fine with that or will they bang their plates on the AGM table to make sure they don't lose access to that sweet, sweet data? Well, thanks for sticking around. Let's go find out.

This is going to be our last episode before the summer break. And it’s going to be a meaty one. But fear not, because I’m a nice guy. I’m going to give away the ending right up front. And then my lovely guests are going to show you how we got there. So here’s the deal. There are some pretty big markets where policy is suddenly changing. In some places, we have a new administration, market regulators are rolling back reporting requirements on things like climate or workforce data. In others, the burden of proof is being shifted more heavily onto companies if they want to use specific environmental or sustainability terms. So we wanted to know, with this kind of volatility, are companies kind of sticking their heads back into their shells, and saying less, reporting less, because it’s just safer to not lay out something like say, their climate ambitions?            

Well, in some aspects, yes that is happening, but in some definitely not. In part one of this episode, we’re going to look at very recent trends in how companies are reporting on their climate targets, and their workforce inclusion targets. We’ll see how more companies continue to report climate targets, but how we see the reverse for workforce-related ones, which have actually been falling away for the past couple of years, well before January 2025. In part two of this episode, we’re going to scoot over to the other side of the table, to sit with company shareholders. And we’re going to have a teency weency peek at what this season’s proxy voting can tell us about the data and action investors are looking for from their companies. And guess what? Investors do want to see more climate and workforce data from companies, but they do not want to tell companies how to achieve their sustainability objectives. It seems that the 2025 proxy season is all about cool, collected and discerning shareholders. 

And when we tie part one and part two together, we can see some early signs that companies and their shareholders are moving towards a consensus, a kind of sustainability baseline. One that might help both parties safely navigate the blustery, changing winds of policy. So without, further ado, here’s part one, where my colleague Julia Morello, out of MSCI’s Boston office is going to walk us through how company reporting on climate and workforce inclusion targets has, or hasn’t changed. And Julia will touch on global data, but then she’s really going to home in on the US and Canada – two key markets, where companies may be having second thoughts on what and how to report. 

Julia Morello

One of the key questions is if and how policy changes can really lead to unintended consequences related to companies' disclosures, companies reporting less or reporting in more fragmented manners. And data here is critical because it's used by the investment community to assess companies' future performance. So the lack of that data can really inhibit investors' ability to assess companies' value creation and also risk mitigation measures. So first on carbon setting, the key question here that we asked ourselves was really, are companies pulling back on their climate disclosures and also their targets? The short answer is, no, they're not pulling back. And in fact, companies are steadily plowing forward in reporting of climate disclosures, really across all regions.

Climate targets are increasing globally, on aggregate. That's an increase of 7% year-over-year since last year this time, so June, 2024, to July, 2025. There are of course regional differences. So the EU-based companies are leading the pack in terms of sheer volume of carbon targets that they're setting, and that's about 40%. Next is Asia-Pacific-based firms, and those are companies based in Japan, Australia are setting the next highest number of carbon targets, and there you have that 35% chunk. And then also the Americas-based firms, so Canada, Brazil, Chile, US, collectively account for that, about 25%, slightly less I would say, of carbon and climate targets.

We wanted to zoom into Canada and the US specifically. For Canadian domiciled companies, they're disclosing a greater number of active climate targets. More companies are disclosing carbon targets, given issuers may have multiple targets, and that's the same with the US-based companies as well. So US-based companies are disclosing more climate targets and more companies are setting carbon targets. So the key here is that on a unified global basis, what we're really seeing is that there continues to be this global momentum on the setting of carbon targets by companies. They're steadily moving forward, they're setting carbon targets as part of their material key risk matrices, and reporting frameworks of course to the investment community.

Bentley Kaplan              

Okay, so as Julia mentions, there may be some shifts in regulatory direction, but companies are showing no signs of scaling back their ambition to reduce emissions. Quite the opposite. Broadly, it seems that this is information that companies still want their investors to have and maybe that's understandable. A survey of 350 institutional investors and risk managers from banks, insurers, and investment firms by MSCI Sustainability Institute and Stanford University, found that 93% of respondents thought that climate issues are most likely to affect the performance of investments over the next two to five years. But only 4% believe these risks were currently priced into assets.

The investor community may well be viewing a shift to a low-carbon economy as a source of financial risk or opportunity, and companies may see it as being in their best interests to show investors how they are preparing for the shift, to make sure that they're reporting on data points that might connect to future financial outcomes. But Julia also touched on a separate cluster of data points specifically relating to a company's workforce. You see, while investors may have long been interested in a company's workforce on measures like how big it is, how much it's growing or shrinking and what it costs, company reporting over the past few years has expanded into more niche aspects to things like targets for better employee engagement and inclusion. And in this area, trends are differing quite markedly from how companies are reporting their climate ambitions.

Julia Morello

On workforce inclusion data, we're seeing what I would say is the opposite trend, at least in the US versus what we're seeing in a really global, unified way in terms of carbon setting. Now, we don't ask companies for workforce composition data. It's not factored at all into our own models. So it's workforce inclusion and composition, it's purely data, right? And for workforce inclusion targets, when looking at US companies on the ground, we saw this very real steady increase in workforce inclusion target setting by companies across all sectors in 2019, 2020 and 2021. Then in 2023, we saw this really incredible real dip or drop in workforce inclusion target setting across all sectors. For example, just to bring this to life a little bit, for US consumer staples companies, nearly one quarter, 25% of companies had set targets on workforce inclusion in 2021, and that dropped to about 10% in 2023.

What was initially surprising was that we were seeing the dip in workforce disclosures really as early as 2023 versus more recently, which is what we were perhaps expecting. Yet when we do look back on the key events and shifts, notably in 2023, many of us will remember really key developments, most notably taking shape. So the first was the Supreme Court ruling in 2023 in Students for Fair Admissions v. Harvard. And then the second one was the Nasdaq Board Diversity Rule, which introduced ongoing uncertainty in reporting and disclosures. It was SEC approved yet vacated in December, 2024, and it was officially withdrawn in late January this year, 2025.

Today, the SEC has had human capital transparency and disclosures as a core focus based on a principles-based approach. Companies have discretion in determining which human capital metrics are considered material. There are of course some studies out there that have indicated that more inclusive workforces may be correlated with higher enterprise value growth rates, ROE, free cash flow per share across many sectors. Yet disclosures, as mentioned, are up to companies' own interpretations of their material risks.  

Bentley Kaplan

Okay, so let's take a beat right there. That is part one, ding ding ding, done and dusted. Julia has seen that trends in company reporting on climate targets vs. workforce inclusion targets are going in opposite directions. On the one side, there are climate targets, a way companies can signal their ambition to respond or adapt to climate transition risk. A risk that you could argue is systematic, affecting all companies, albeit differing in magnitude depending on what business lines you're operating in. And then on the other side, we have workforce engagement and inclusion, and how that particular metric or those metrics affect a company's bottom line is much more nuanced, harder to standardize, and possibly harder to measure. Climate target reporting has been sticky, persistent, but we've seen targets on workforce engagement and inclusion seemingly peak and then decline over the past couple of years. 

But now, we move on to part two of this episode, ding ding ding. Where we look at the type of climate and workforce information shareholders are calling for from companies, and how that has changed over time. To help me answer those questions, I'm going to bring in Jon Ponder out of MSCI's Toronto office. Jon and my other governance colleagues get weirdly excited about this time of year because it means proxy season in the US, a massive market that offers a front row seat to the interplay between shareholder engagement, regulatory shifts, and evolving investor priorities. The team tracks each and every shareholder proposal submitted at US companies in our coverage. That's who's filing them, who they're targeting, what issues they address, and how much support they receive at AGMs. And with around a decade of this data already under their belt, our governance analysts have some great insight into both long-term trends and shorter term pivots. So I asked Jon how things were looking in 2025.

Jonathan Ponder          

While proxy season obviously hasn't fully wrapped up, we've reached a point where the data is rich enough to share some initial takeaways. And so far, I would say, it's been an intriguing season. Just over 400 proposals have been submitted, down by roughly 200 compared to last year. Despite the lower volume, 46 proposals have already passed, which matches last year's total. Support is also marginally up, averaging 23% compared to 22% in 2024. With most annual meetings now behind us, the numbers suggest a quieter season but one with stabilizing support levels. I would say this aligns with what many expect in the wake of Staff Legal Bulletin No. 14M, which was issued by the SEC in February. The guidance here reshaped how companies interpret Rule 14a-8, which essentially gives them more leeway to exclude proposals from their proxies for a variety of reasons.

That change may be influencing shareholder behavior. Some may be holding back to reassess their chances of making it onto the ballot or even exploring whether direct engagement might be a more productive route when it comes to speaking to companies. Julia mentioned how more companies are reporting on their climate targets. So let me start with what we're seeing in terms of climate proposals filed by shareholders to be precise, when we say, "Climate proposals," we are including resolutions that touch on a company's governance, oversight or operational response to climate related issues, including but not limited to GHG emissions, carbon transition risk or energy management practices. We recorded 42 climate proposals so far this year, down from a high of 78 in 2024, and commensurately, average support ticked down to 12% compared to 19% last year.

However, that drop is likely less about investor sentiment and more about how the proposals themselves have changed in the last year. Many are becoming more prescriptive, asking companies not just for things like transparency, but for very specific actions or third-party validations. Take Ameren Corporation for an example. In 2025, it received a proposal calling for an independent audit of the alignment between its short and median-term emission targets, and the goals of the Paris Agreement. This is clearly a far more technical and demanding ask than the proposal it faced just two years earlier, which simply asked for disclosure of scope one and two emissions.

The 2025 proposal earned just 7.98% support, suggesting that the complexity and perceived feasibility of a proposal can significantly affect voting outcomes. But importantly, support remains notably stronger for more modest-focus proposals. For example, BJ's Wholesale was asked to publish a report on how it could scale up emission reduction efforts. That proposal earned 30% support, while PulteGroup received a request to adopt Paris-aligned GHG goals, garnering 23.5% support. While these numbers might not necessarily sound high, these cases still illustrate that investors continue to back climate-related resolutions when proposals are viewed as reasonable, measurable, and well-aligned with company operations. Rather than indicating climate fatigue, I would hazard to say that the current trend actually suggests investors are simply being more discerning, favoring constructive disclosures over prescriptive demands.

Bentley Kaplan

Okay, so as Jon tells it, when it comes to support for climate-related proposals, there are some lines in the sand. Those that get too prescriptive or too technical are not well-supported. But in general, it seems that shareholders continue to be in favor of climate-related disclosures, and that mirrors what Julia saw with respect to recent trends in what companies are reporting on their climate targets. So next I asked Jon to tell me what the team has seen in terms of share of the proposals that relate to workforce engagement and inclusion.

Jonathan Ponder

We're seeing a similar dynamic to what we observed with climate-related resolutions. Both the number of proposals and their average support have declined year-over-year. In 2025, we've recorded just 34 workplace-related proposals going to a vote, compared to 79 in 2024. Support averaged 11%, down from 18% last year. These proposals span a wide range of workforce inclusion issues from collective bargaining and pay equity to LGBTQ+ policies and workplace safety.

The example of IDEX Corporation helps to understand why we think we're seeing this shift. The company received nearly identical proposals on fair chance hiring in both 2024 and '25. While the 2024 proposal focused on simple disclosure, asking whether company hiring practices align with public commitments, the 2025 version went further. It added language, asking IDEX to consult with a third-party expert and actively seek opportunities to expand hiring of formerly incarcerated individuals. That expanded scope may explain the four percentage point dip in support between the two years. Investors may not have objected to the issue itself, but rather to the expanded expectations around execution.

By contrast, more narrowly defined proposals continued to perform well. At Texas Roadhouse, a resolution simply requesting the company disclose its EEO-1 Report, which of course is a basic workforce demographic disclosure, earned 28% support. At Deere, a proposal to commission a civil rights audit also performed strongly, gaining 29% support. This proposal followed a settlement with the US Department of Labor over alleged discrimination in its hiring practices, context that probably made the proposal more compelling to shareholders despite its broader scope. So at this early stage, it seems investors are still very much engaged with workforce topics. What matters is whether the proposal is seen as reasonable, actionable, and proportional to the company's circumstances.

Bentley Kaplan              

Okay, so what Jon and the team are seeing is that like with climate-related proposals, shareholders are backing more reasonable and less overbearing or prescriptive requests, and that suggests that there are aspects of workforce-related issues that still matter to shareholders at US companies.

Now, Jon was ready to scuttle off and get back to his precious proxy data, but I pushed him on one more point, because up until now we've been talking about proposals that ask companies to do more or to disclose more. But there's also a different type of proposal in the mix, what the governance team calls contrarian proposals, and proxy data emerging from these proposals really enriches the shareholder trends that the team is seeing at the moment.

Jonathan Ponder

Sure. So in this context, contrarian refers to resolutions that push back against established sustainability norms. Rather than advocating for stronger action in these areas, these proposals typically challenge the legitimacy, utility or cost of existing company policies. This might include, for example, questioning the business case for emissions targets or opposing sustainability-linked executive compensation. Despite their novelty, contrarian proposals have grown to represent a significant share of total submissions. In 2025, 41 such proposals made it to a vote, but support levels remained consistently low, averaging just 1.4% with none receiving double-digit support. Of these, seven were climate-related while 32 focus on workplace issues.

A few examples help illustrate the range and the limitations of traction for these proposals. At UPS, a resolution requesting a report on the risks of carbon reduction commitments received 6.13 support, and at Target, a proposal questioning the company's affirmative action program garnered 7.07%. These were the highest performing contrarian proposals of the year, still well, well, well, below the thresholds for significant shareholder engagement, and even the highs that we witnessed in the climate and workforce-related proposals I mentioned previously. 

Bentley Kaplan

Okay, mini high-five. You’re through parts one and two. That was a lot, I know, but forgive us because this is still very much live data, and we really wanted to share what we're seeing, unvarnished, because many will be wondering how companies are responding while this policy landscape is in flux. It's happening in the US and Canada, but other markets might be seeing similar trends. Mandatory and voluntary frameworks are cropping up regularly and some are rolled out, then scaled back, others are delayed, or challenged and that raises questions about what companies will be compelled to report on and for how long.

With Julia and Jon's help, what we see is that despite this uncertainty companies and shareholders are reaching common ground on what non-pecuniary data to report on. This year’s proxy season makes it clear that investors want the information that they need to help them accurately price assets, they want companies to take action where there's a clear economic rationale, but they won't tolerate ideological overreach (in either direction) that they think will just add costs but no benefit.  To quote Jon, "It seems that it's not so much a question of doing more sustainability, but rather doing sustainability better." 

And that is it for the week. A massive thanks to Julia and Jon for their take on the news with a sustainability twist. A special shout out to Yoon Young Chung, Bhavana Naik and Harlan Tufford, who were instrumental in collecting and analyzing the data in this episode. And finally, I also do want to say, thank you very much for tuning in. If you like what we're doing then let us know. Drop us a review, rate the show on your platform of choice and tell a friend or a colleague about this episode. And just a little heads up, it's been a long and busy year for us, so we'll be taking a short summer break with our next episode dropping fresh near the beginning of September. Thanks again, and until then, take care of yourself and those around you.

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