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In Whose Best Interest? Why Investors Are Demanding More Transparency on Companies' Lobbying Activities

Posted on September 12, 2023

Salome Isabelle Leonti
Salome Isabelle Leonti
Analyst, ESG Risk Research

In February 2023, a train operated by Norfolk Southern carrying toxic chemicals derailed in Ohio, United States. Thirty-eight cars left the tracks and burst into flames, devastating nearby towns and posing long-term health risks for residents. The industry association representing Norfolk Southern and other train operators in the U.S. had previously lobbied against a federal proposal to replace the rail industry’s outdated braking system as well as other safety measures. While a modern braking system may not have prevented this tragic incident, the situation does highlight the risks associated with lobbying against safety regulations. 

Lobbying is a part of the democratic process, insofar as it enables various stakeholders to participate in the forming of public policy. While it allows voices to be heard and legislators to be better informed, it can also lead to the disproportionate influence of companies or organizations on governments’ decision-making processes, potentially resulting in inefficient or even inadequate public policies. The current lack of transparency into companies’ lobbying activities makes it difficult to know whether those activities reflect organizations’ stated goals and long-term best interests.

Investors Are Calling for More Lobbying Transparency

Investors are now increasingly vocal about corporate lobbying practices and at Morningstar Sustainalytics we’ve observed a growing interest in lobbying transparency at annual general meetings (AGMs). Corporate lobbying transparency lets investors know whether their portfolio companies have strategies aligned with expected future regulations, and whether their business models are prepared for the future market environment.

According to Morningstar’s proxy voting database, the number of shareholder resolutions in the U.S. on political influence and activity increased by 33% between 2018 and 2022 (Figure 1).       

Figure 1. U.S. Shareholder Resolutions on Political Influence and Activity from 2018 to 2022 

Figure 1. U.S. Shareholder Resolutions on Political Influence and Activity from 2018 to 2022

Source: Morningstar proxy voting database. Data for proxy years ended June 30. The resolutions are mostly comprised of lobbying and political contribution transparency requests. For informational purposes only.  

In  particular, investors are calling for more alignment between companies’ goals or values and their lobbying practices, especially regarding corporate climate lobbying. We cover a few examples below.

In March 2022, a group of 10 major investors including the Swedish pension scheme AP7, BNP Paribas Asset Management and the Church of England Pensions Board, stated in their global standard for corporate climate lobbying that they would not hesitate to resort to resolutions at the AGMs of firms engaged in delaying or blocking climate actions by governments.2  

In May 2023, a group of three major investors submitted a shareholder proposal calling on Toyota Motors to improve disclosure of its climate change lobbying activities, fearing that the company would miss out on the benefits of soaring electric vehicle sales.3 Although the proposal was not approved, it received 15% of the votes,4 a significant message for the company. 

Also in 2023, the Church of England Pension Board and AP7 announced their intention to vote against National Grid’s chairman and CEO at the AGM on the grounds that the company failed to disclose its lobbying activities. A week later, National Grid pledged to disclose its climate lobbying activities, leading investors to revise their votes at the AGM.5 

These examples highlight a trend towards increased shareholder vigilance regarding lobbying activities, which can pose reputational, operational and transition risks for companies.  

Excessive Lobbying Can Put Enterprise Value at Risk  

The influence of lobbying sometimes causes bias in public officials, which may result in inefficient or inadequate public policies. But beyond the potential negative impact of lobbying on society, these practices can also represent a risk for companies. 

Reputational Risk

Lobbying practices can damage trust in companies and lead to “name and shame” actions, especially when lobbying activities conflict with stated company goals or commitments. For example, an asset manager may officially support ESG investment, yet simultaneously fund a trade association campaign for less stringent sustainable finance policies. 

Such behaviors can embroil companies in public controversies. In 2022, a former Uber lobbyist leaked confidential documents revealing how the company ignored local labor regulations and used intense lobbying of parliaments and governments in various countries to prevent the reclassification of Uber drivers from independent workers to employees.6 The company maintained that its drivers and delivery personnel were not employees.7 And it continued to promote its business model that could be viewed as detrimental to drivers for offering no social protections. 

On top of its reputational risks, Uber also faces legal risks, as it continues lobbying to protect the status of independent workers, at a time when more courts are ruling in favor of granting those workers employee status, such as in the United Kingdom or in the Netherlands.8 Consequently, the company is facing multiple lawsuits for allegedly breaching labor laws in various jurisdictions.9   

Operational Risk

But lobbying risks are not solely reputational. When a company exerts considerable influence over governments or legislative bodies to prevent the introduction of new safety or quality regulations, it may expose itself to operational risks. 

The February 2023 derailment of the Norfolk Southern train carrying toxic chemicals also put the company’s lobbying activity in the spotlight.10 The company had been fiercely criticized for allegedly contributing to the failure of a federal safety rule to replace the rail industry’s Civil War-era braking systems with electronically controlled pneumatic (ECP) brakes, which would allow all cars to be stopped simultaneously. A former senior official from the Federal Railroad Administration claimed that if the train had been equipped with ECP brakes, the severity of the event would have been significantly reduced.11 Norfolk Southern reported that the derailment had cost it US$387 million, dragging its 2023 first quarter profits down by around a third.12   

Since the derailment incident in February, two other Norfolk Southern trains have derailed in Ohio and Virginia.13, 14  While these trains did not carry hazardous materials, these occurrences highlight the gaps that exists in Norfolk Southern's product governance risks management.15 According to Sustainalytics ESG Risk Rating, the company's product and services safety program lacks key components, such as product safety risk assessments, regular external product safety audits or regular product safety training for employees. In addition, although the company's sites have received external quality management system (QMS) certification, the scope of these certifications is unclear. This demonstrates that while lobbying against industry-wide safety standards, some companies are not willing or able to effectively manage the risks themselves.   

Climate Transition Risk

Furthermore, companies may focus their lobbying efforts to protect their current business model that does not align with the Paris Agreement, avoiding diversification of their activities or developing solutions to support their energy transition – thereby increasing their climate transition risks. In 2022, ConocoPhillips spent a historic amount on federal lobbying in the U.S., mainly to receive final approval for an oil drilling project in the Alaskan Arctic.16 While the company supports the Paris Agreement,17 according to Sustainalytics Low Carbon Transition Ratings as of April 2023, ConocoPhillips was not aligned to a net-zero pathway. If all companies had the same investment alignment and transition preparedness as ConocoPhillips, it is estimated that the world would warm by 3.4 degrees Celsius above pre-industrial levels.

More Lobbying Regulation on the Horizon

Over the past 15 years, more countries have implemented lobbying regulations than in the previous 60 years.18 Nevertheless, many jurisdictions still lack a regulatory framework. As of 2022, only 18 jurisdictions globally had lobbying regulations in place.19 An OECD study also points out that, as of 2020, 16 OECD countries had lobbying laws, and six additional OECD countries provided some level of transparency over lobbying activities.20 

Still, the trend towards stricter regulations continues. In February 2023, Finland adopted its Transparency Register Act, establishing transparency requirements for lobbyists working at the parliamentary and ministerial levels,21 and several other countries such as Spain are currently considering draft legislation to regulate lobbying activities, suggesting that pressure for greater transparency from companies will continue to intensify.22

Holding Companies Accountable on Lobbying Activities 

To improve transparency around companies’ lobbying activities, investors can engage with their portfolio companies through a wide range of tools, from informal discussions and participation in collaborative campaigns to requesting ad-hoc meetings. If necessary, investors can resort to escalated measures, such as issuing a public statement prior to an AGM, submitting a proposal for transparency of lobbying activities at the AGM, or even calling for a vote against the re-election of a board member.

For investors, the importance of transparency in lobbying activities cannot be denied. Companies that engage in lobbying practices that conflict with their publicly stated goals and values can face significant risks, potentially harming their investors. As such, a growing number of investors are prioritizing lobbying transparency in their portfolio and holding companies accountable for their actions.



  1. Duncan, I., Lazo, L., and Laris, M. 2023. “Before Ohio Derailment, Norfolk Southern Lobbied Against Safety Rules.” The Washington Post. February 18, 2023.  
  2.  Jessop, S. 2022. “Investors launch global standard for corporate climate lobbying.” Reuters. March 14, 2022.
  3. Dolan, D., Leussink, D. 2023. “Toyota shareholders submit proposal on climate disclosure, in test for new CEO.” Reuters. May 10, 2023.
  4. Toyota Motor Corporation. 2023. Extraordinary Report.
  5. Climate Action 100+. 2023. “Investors Welcome Climate Lobbying Review From National Grid Following Engagement.” June 30, 2023.  
  6. 2022. “Uber Files: Massive leak reveals how top politicians secretly helped Uber.” BBC News. July 10, 2022.
  7. Uber Technologies, Inc. 2022. Annual Report.
  8. Deutsch, A., Sterling, T. 2021. “Uber drivers are employees, not contractors, says Dutch court”. Reuters. September 13, 2021.
  9. Uber Technologies, Inc. 2022. Annual Report.
  10. Hauser, C. 2023. “After the Ohio Train Derailment: Evacuations, Toxic Chemicals and Water Worries.” The New York Times. June 23, 2023.
  11.   Sirota, D., Rock, J., Burns, R. and Cunningham-Cook, M. 2023. “Rail Companies Blocked Safety Rules Before Ohio Derailment.” The Lever. February 8, 2023.
  12. Norfolk Southern. 2023. “Norfolk Southern reports first quarter 2023 results”. April 26, 2023.,compared%20to%20first%20quarter%202022.  
  13. Brooks, B. 2023. “Another Norfolk Southern train derails in Ohio; railroad says no toxins aboard.” Reuters. March 5, 2023.  
  14. Funk, J. 2023. “Rail union says Virginia derailment renews questions about Norfolk Southern’s safety practices.” AP News. July 8, 2023.
  15. Under Morningstar Sustainalytics’ ESG Risk Ratings methodology, product governance is a material ESG issue focused on how companies manage risks related to product governance issues such as product quality and safety, service safety and responsible marketing practices. For more information see
  16. Cloutier, J. “ConocoPhillips increased lobbying spending in 2022 ahead of Biden-approved oil project.” Open Secrets. March 16, 2023.
  17. ConocoPhillips Co. Climate Change Position.
  18. OECD. 2014. Lobbyists, Governments and Public Trust, Volume 3. Implementing the OECD principles for transparency and integrity in lobbying.  
  19. Hogan, J., Bitonti, A. 2022. “Lobbying Regulation.” Technical University Dublin. May 27, 2022.  
  20. OECD. 2021. Lobbying in the 21st Century: Transparency, Integrity and Access.   
  21. Ministry of Justice Finland. 2023. Transparency Register Guide.
  22. Gobierno De Espana. 2022. Resumen Consejo de Ministros: El Gobierno regula las actividades de los grupos de interés para garantizar su transparencia. November 8, 2022.

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