State Street Global Advisors released its annual letter to board members of portfolio companies outlining the engagement issues that SSGA will prioritize this year. The letter indicates that SSGA’s main focus for 2022 “will be to support the acceleration of the systemic transformations underway in climate change and the diversity of boards and workforces.”
On the climate change front, SSGA states that, for the 2022 proxy season, it will expect companies in major indices in the US, Canada, UK, Europe, and Australia to align with climate-related disclosures requested by TCFD, including whether the company discloses: (1) board oversight of climate-related risks and opportunities; (2) total direct and indirect GHG emissions (Scope 1 and Scope 2 emissions); and (3) targets for reducing GHG emissions. SSGA will take voting action against directors if companies do not meet SSGA’s specific disclosure expectations. Further, SSGA will launch a targeted engagement campaign with “the most significant emitters” in its portfolio to encourage disclosure aligned with SSGA’s disclosure expectations for climate transition plans, and in 2023 SSGA will hold companies and directors accountable for failing to meet those disclosure expectations.
On diversity, SSGA has enhanced its diversity policy to provide that, beginning in the 2022 proxy season, SSGA will expect all of its portfolio companies to have at least one woman on their boards. Additionally, beginning in the 2023 proxy season, SSGA will expect boards to be comprised of at least 30% women directors for companies in major indices in the US, Canada, UK, Europe, and Australia. In each instance, SSGA will vote against the Chair of the board’s Nominating Committee or the board leader should a company fail to meet these expectations.
The letter also notes that SSGA has expanded its focus on diversity to include race and ethnicity, and for the 2022 proxy season SSGA will take voting action against responsible directors if: (1) companies in the S&P 500 and FTSE 100 do not have a person of color on their board; (2) companies in the S&P 500 and FTSE 100 do not disclose the racial and ethnic diversity of their boards; and (3) companies in the S&P 500 do not disclose their EEO-1 reports.
– Dave Lynn