By Roraj Pradhananga, CIO of Veris

This is the third installment of a multi-part series by Veris CIO Roraj Pradhananga exploring the State of Impact Investing in 2025. 

At Veris, we believe lasting change in public markets is achieved not by exclusions, but through active shareholder engagement. Shareholder resolutions – when strategically applied – can prompt corporations to implement meaningful improvements in governance, policy, and transparency. But today, shareholder advocacy is facing significant regulatory and political headwinds. Recent regulatory shifts, particularly from the Securities and Exchange Commission (SEC) and state-level restrictions, are reshaping the rules of engagement and altering the landscape for sustainable investors.

Regulatory Shifts and New Restrictions

Staff Legal Bulletin No. 14M (SLB 14M), issued in February 2025, reversed previous guidance making it easier for corporations to exclude ESG-focused shareholder resolutions, making engagement more challenging.¹ It appears that one result of this was a sharp uptick in no-action requests submitted to the SEC, with such requests up 38% over the 2024 season.² No-action requests allow companies to seek permission to omit a shareholder proposal from their proxy statements. While actual exclusions have only slightly increased, companies are having greater success arguing that proposals related to “ordinary business,” involve “micromanagement,” or contain “procedural errors.” The chilling effect of this change can be seen in the data:, ESG-related shareholder resolutions in 2025 dropped by 34% from 2024 levels.³ 

New SEC guidance on Schedule 13G vs. 13D filings – has introduced greater scrutiny of engagement strategies by passive investors. Under the SEC’s revised interpretation, passive investors (filing Schedule 13G) might be deemed an active investor (requiring the more burdensome Schedule 13D) if their engagement places “conditions” on support for directors or pressures management on specific changes including “specific actions on a social, environmental, or political policy.” ⁴ This has led to concerns among large passive investors, many of whom are now reevaluating their engagement strategies and potentially resulting in reduced levels of investor-initiated engagement.⁵

At the state level, Texas Legislation (SB 1057 and SB 2337) will make it more challenging for shareholders to file proposals for Texas-based corporations.⁶ Starting September 1, 2025, shareholders must own at least $1 million in market value or 3% of voting shares for at least six months, and secure support from 67% of shareholders to file a proposal with a Texas-based company. Additionally, SB 2337 (which was signed into law in June of 2025 by Texas Governor Greg Abbott) will require proxy advisory firms to disclose if their advice prioritizes non-financial goals over financial interests.⁷ Critics have objected that this law potentially violates the First Amendment and lawsuits have been filed.⁸ On August 29, the US Western District Court of Texas granted ISS and Glass Lewis preliminary injunction from enforcement action after they filed lawsuits arguing that the law violated the First Amendment; however, all other entities that provide proxy advice will still need to follow the law. 

Despite these regulatory headwinds, investors continue to successfully engage companies directly. In many cases, effective engagement has led to improved corporate disclosures, reducing the need for formal shareholder resolutions.⁹

The Advocacy Road Ahead

The regulatory landscape is evolving and growing more complex, and we believe both companies and investors must adapt in order to ensure successful engagements. 

For companies, we believe this means proactively engaging shareholders and clearly articulating how long-term value is being created. For investors, we believe it means honing the strategic focus of proposals, demonstrating financial materiality, and navigating regulatory scrutiny with precision.

The era of broad-based ESG proposals may be giving way to more focused, nuanced advocacy. But our fundamental belief in the power of shareholders to drive change remains. Amid political pushback and regulatory shifts, we believe that shareholder proposals and bondholder engagements that support environmental and social initiatives are more important now than ever.

This is an excerpt. To read the full article, including Roraj’s analysis of shareholder engagement trends drawn from the 2024 – 2025 proxy season, read Shareholder Advocacy: Engagement Under Pressure published by Family Wealth Report.  

Author

Roraj Pradhananga is a Partner and the Chief Investment Officer at Veris, an investment advisory firm that helps families and foundations align their financial assets with their values. He also serves on Veris’ Executive Committee and management team and as Chair of the firm’s Board of Managers. Roraj is a Certified Investment Management Analyst (CIMA®) and a Certified Public Accountant (CPA). Bio.

Sources

1. https://www.sec.gov/about/shareholder-proposals-staff-legal-bulletin-no-14m-cf

2.  https://corpgov.law.harvard.edu/2025/06/14/2025-shareholder-proposal-season-a-first-glimpse-at-key-no-action-request-results/

3. https://corpgov.law.harvard.edu/2025/07/22/proxy-season-highlights-shareholder-and-management-proposals/

4. https://www.sec.gov/rules-regulations/staff-guidance/compliance-disclosure-interpretations/exchange-act-sections-13d-13g-regulation-13d-g-beneficial-ownership-reporting

5. https://www.whitecase.com/insight-alert/under-pressure-walking-fine-line-section-13d-passive-investor-status#

6. https://capitol.texas.gov/tlodocs/89R/billtext/html/SB01057F.htm; https://capitol.texas.gov/tlodocs/89R/billtext/html/SB02337F.HTM

7. https://corpgov.law.harvard.edu/2025/07/13/texas-enacts-new-law-to-regulate-proxy-advisory-firms/

8. https://www.crowell.com/en/insights/client-alerts/Proxy-Advisors-Glass-Lewis-and-ISS-Continue-Fight-Against-State-Attorney-General-Challenges-to-Nonfinancial-advice-in-Challenge-of-Texas-Law

9. https://corpgov.law.harvard.edu/2024/11/18/u-s-shareholder-proposals-a-decade-in-motion/

IMPORTANT DISCLOSURES

The information contained herein is provided for informational purposes only, represents only a summary of topics discussed, and should not be construed as the provision of personalized investment advice, or an offer to sell or the solicitation of any offer to buy any securities. Rather, the contents including, without limitation, any forecasts and projections, simply reflect the opinions and views of the authors. All expressions of opinion reflect the judgment of the authors as of the date of publication which are subject to change without notice. Certain information contained herein is derived from third parties. While we believe the sources of such information to be reliable, we have not independently verified the accuracy of such information.