Investor engagement reached new heights in 2024 as individual shareholders took an active stance. In the US, for example, according to Broadridge’s ProxyPulseTM report, individual investors owned 31.7% of shares held beneficially in street name, and their voting participation increased to 29.8%, the highest in nine years. We also saw retail investors were more supportive of board recommendations, in comparison to institutional investors. Notably in the US, corporate director proposals and say-on-pay support rose, with approval rates reaching 91% and 88%, respectively.

As we look toward 2025, several significant trends are shaping the proxy voting landscape, and it is becoming increasing clear that the needs of institutional and retail investors are far from identical. While institutional investors are continuing to push for greater transparency, those serving the retail segment are needing to expand their market coverage and offer a far more retail-focused voting user experience, that allows quick and easy digestion of key information that they care about.

This year, institutional asset managers began offering pass-through voting options (allowing investors a say in how their assets are voted) to their investors, and this trend is likely to persist as asset owners continue to demand oversight and greater stewardship influence. We have also seen the use of AI starting to have an influence on provider offerings to both issuers and investors. Here the focus has been on predicting behaviours, engagement and extrapolating outcomes.

There are five five major trends expected to shape proxy voting in the coming year.

ESG focus will remain–but for different reasons

ESG will retain a high profile within the sphere of proxy voting, but its impact will not be uniform across segments. Institutional investors and asset owners are not necessarily expected to have a growing overall focus on ESG in its entirety. However, they will continue to dial up their interest and commitment in the core area of governance as they strive to increase demonstrable transparency and efficiency throughout the vote processing lifecycle, and optimise the overall standard of stewardship—in the knowledge that such best practices will ultimately lead to stronger leadership and higher shareholder returns.

Turning to the retail investor, and those who serve them, all ESG elements will remain important—but noting that there will be instances when “E” and “S” specific events and themes will trigger a disproportionately strong reaction that will need to be duly supported by scalable services matching the needs of the individual investors.

Voting on funds: aka “pass-through voting”

One of the top trends to watch is the rise of pass-through voting, the practice of giving investors a voice in how their asset managers vote the proxies on the underlying equities that make up the fund in which they have a position. Because the asset manager is the legal owner of the securities in each fund, fund investors do not have the right to vote on the underlying issuer meetings. However, new innovations are now making it possible to give fund investors a greater voice in the proxy process.

In 2025, this trend is likely to continue as large asset managers strive to offer more pass-through voting options, giving fund shareholders additional transparency and control – even for the more complex fund structures such as fund of funds. To support this, asset owner platform solutions are likely to continue to evolve to provide the capturing and communication of stewardship preferences, combined with elements of research and data analysis.

The growing influence of retail investors

In 2025, retail investors in Europe are likely to become an even bigger driving force, creating an increased demand for platforms that can cater to their needs. Regulations such as the EU Shareholder Rights Directive (SRDII) opened up EU markets to them, mandating equities share dealing intermediaries to offer voting services that cater to their needs. However, those intermediaries that opted for minimum compliance (for example, excluding a voting service for US equities), will need to move quickly to meet retail investor expectations. High profile meetings such as Tesla in the summer of 2024 raised awareness across the EU retail investor community and a gap was exposed that remains for many today.

Those that have reviewed retail investor participation since SRD II have noted also that, unlike institutional investors, retail investors typically want to vote when there is an issue that they really care about. The frequency of their voting may be once a year or multiple times based on themes that they hold dear. It is also becoming increasing clear that retail participation in voting is directly linked to the user experience. The less user friendly and intuitive, the less voting participation is observed.

Enhanced engagement from issuers

Transparency and proactive engagement with shareholders—both institutional and retail—are growing priorities for issuers as they work to meet investors’ expectations and foster trust. The ultimate objective is attracting long-term ownership in their stock. Companies are increasingly interested in understanding shareholder perspectives on governance, social responsibility and performance. Disclosure tools and services became increasingly available in response to SRDII in Europe, enabling shareholder identification, and looking ahead open communication channels between issuers and investors, supported by technology, will become essential to meet these expectations.

For retail shareholders, digital engagement tools and platforms are expected to play a key role in effective communication. With the increased accessibility of these tools and the ability to engage with individual investors on the investors’ terms, issuers can more easily identify exactly who their underlying shareholders are, better understand their preferences, and use this information to develop more informed engagement strategies.

And, of course, AI is a game changer

Generative AI is revolutionising proxy voting by analysing large datasets to deliver insights into shareholder behaviour and preferences. By using predictive analytics, investor relations teams can identify patterns and segment investors, creating more targeted engagement strategies. AI-powered tools will play a larger role in helping issuers understand what matters most to investors, including insights on ESG priorities, and can anticipate voting trends that enable issuers to communicate effectively with both retail and institutional shareholders.

There are, of course, many areas of investor services that are introducing new AI use cases that will have an impact on governance and proxy voting, either directly or indirectly. Witness the continued emergence of digital brokers offering trading solutions to underlying investors and looking to AI to help drive portfolio selection and management options. Another example is the impact that AI is already having on operational process efficiency, potentially paving the way for future pricing competitiveness and investment growth.

Looking ahead

2025 promises to bring increased levels of transparency and efficiency, accessible digital platforms, and a continued stream of innovation across the proxy voting landscape. As retail investors gain more influence, it is vital that their service providers are ready to support their specific needs, not only in terms of their underlying access to ease-of-use voting tools but also to the growing desire of Europe-based individual investors to exercise their stewardship entitlements in the US. Voting on funds and collective investment vehicles also represents a step change in governance opportunities, and an area in which I anticipate further growth. These continued advancements of corporate governance through proxy voting should, in turn, continue to help drive improved shareholder returns.

Demi Derem, SVP of International Investor Communication Solutions at Broadridge.