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Investors representing over $2 trillion in assets under management are urging ISS to take a stricter stance on climate progress in its upcoming policy updates, according to this LinkedIn write-up from Majority Action’s co-founder. Zevin Asset Management, Boston Common Asset Management, ICCR and the Nathan Cummings Foundation were among the signatories.

As Dave blogged last month, ISS has proposed policy updates that would recommend against the re-election of directors that aren’t meeting expectations around climate-related disclosures or that haven’t set quantitative GHG reduction targets. The investors are saying that those policy guidelines – if adopted – would give too much leeway for under-performance and that they are more focused on the quality of disclosure than on assessing decarbonization activities. Here are the changes that the investors want ISS to incorporate into its benchmark voting guidelines for the 2022 proxy season:

1. Expand and disclose the analysis on company climate performance to assess whether a company’s current and future business plans, capital allocation, and political activity are aligned with a 1.5°C scenario and/or science-based sectoral decarbonization plans (e.g., IEA Net-Zero Roadmaps, Science-Based Targets Initiative).

2. Incorporate company climate performance into vote recommendations, including:

– Recommend votes against directors for failure to adequately manage or mitigate ESG risks, including failure to align business plans, capital allocation, and policy influence (political spending and direct/indirect lobbying activities) with a 1.5°C scenario. Clarify that when information is unavailable to make that determination, ISS will recommend votes against directors.

– Recommend votes in favor of shareholder proposals that call for the reduction of greenhouse gas emissions, disclosure of lobbying and political activity, and/or reports on greenhouse gas emissions, instead of taking a case-by-case approach to proposals, unless the company has demonstrated meaningful alignment of its business activities with a 1.5°C scenario.

3. When recommending votes be cast against management’s recommendations for climate-related reasons, incorporate into the rationales for climate-related votes whether the company’s business strategy and operations align with a 1.5°C scenario.

Last year, ISS published its updated proxy voting guidelines in mid-November, so it’s likely that the 2022 updates will be coming soon. Mark your calendars now for our January 13th webcast with Marc Goldstein, Head of US Research at ISS, along with Davis Polk’s Ning Chiu and Gunster’s Bob Lamm. We’ll be discussing the 2022 policy updates – as well as what to prepare for when it comes for director elections, shareholder proposals, say-on-pay and sleeper issues. CLE credit is also available!

– Liz Dunshee