Policy Supports Investors Choosing to Integrate Climate Performance & Disclosure into their Proxy Voting
ROCKVILLE, Md. (March 9, 2020) — Institutional Shareholder Services Inc. (ISS), the leading provider of end-to-end corporate governance and responsible investment solutions to the global financial community, has announced the launch of a new thematic specialty Climate Voting Policy, providing investors with a solution to integrate climate-related factors into their voting decisions, and starting in March 2020 to coincide with the kick-off of annual shareholder meeting seasons in most major global markets. The specialty Climate Voting Policy is the latest of ISS’ thematic specialty voting policies available to investors, adding to the existing suite comprised of SRI, Sustainability, Faith-Based, Taft-Hartley, and Public Fund policies. All ISS thematic specialty voting policies are publicly available on ISS’ website here.
Many investors who are concerned about climate change risks are looking to incorporate climate-related considerations systematically into their engagement and proxy voting strategies across their portfolios. The new ISS specialty Climate Voting Policy provides an actionable, transparent framework for investors to exercise their voting rights with reference to their portfolio companies’ climate disclosures and performance.
The Climate Voting Policy is based on principles developed from widely recognized international frameworks, such as the TCFD’s disclosure requirements, consistent with good stewardship and incorporates specific climate change-relevant information, flags, and voting recommendations, to provide subscribing investors with an informed, consistent, climate-related voting approach. The new policy uses a scorecard approach reflecting varied climate-related risk factors, resulting in insightful research and subsequent vote recommendations. When called for under the policy framework, ISS’ Climate Voting Policy may recommend adverse votes on the re-election and/or discharge (in applicable markets) of board members responsible for climate-related risk oversight or for failures to sufficiently oversee, manage, or guard against material climate change-related risks.
“Many of our institutional investor clients are increasingly placing climate change as a priority issue among their investment stewardship initiatives, but it can be challenging to incorporate climate change considerations systematically into proxy voting and engagement workflow,” said Georgina Marshall, ISS’ Global Head of Research. “By leveraging the rich climate data and expertise of ISS ESG, in tandem with ISS’ market-leading governance capabilities, the ISS Climate Voting Policy provides investors with a high-quality solution to apply a consistent climate-focused lens to inform their voting decisions.”
Five key topical pillars undergird the Climate Voting Policy, drawing on data and analytics from ISS ESG:
- Sector-specific materiality using ISS’ Carbon Risk Classification (CRR).
- Disclosure signals based on climate disclosure indicators aligned with TCFD disclosure requirements.
- Norms violations, based on any violations of globally recognized climate norms.
- Current climate performance signals, such as greenhouse gas (GHG) emission intensity, following GHG Protocol’s carbon accounting methodology for Scope 1-3 GHG emissions.
- Future climate performance signals, drawing from ISS’ Carbon Risk Ratings (CRR).
The Climate Voting Policy coverage universe will initially span approximately 3700 companies globally, across more than 20 capital market main indices, including: the U.S. (S&P 500 & Russell 1000); U.K. (FTSE 100); Germany (DAX 30); Australia (ASX 200); France (CAC 40); OMX Copenhagen 20; OMX Stockholm 30; and the STOXX Europe 600. The coverage universe will be regularly increased over time.
The specialty Climate Voting Policy guidelines are publicly available on ISS’s website and can be found here.
ISS also offers a full Custom Climate Voting Service and has enhanced its market-leading benchmark proxy research reports to include ISS’ Climate Awareness Scorecard for all companies in the climate policy coverage universe.