TheCorporateCounsel.net

Weil recently issued “The Big Three & ESG,” a report that provides guidance on BlackRock, State Street & Vanguard’s voting policies on key ESG issues. The report also addresses important policy changes announced by the Big Three in 2024, summarizes the expectations of these asset managers concerning company practices and disclosures around selected ESG topics, and highlights areas where failing to meet expectations may result in votes against directors. Here’s an excerpt with some practice pointers for public companies:

Refine Approach to Shareholder Engagement. Companies should review agendas and goals for engagement meetings with the Big Three, to ensure they reflect shareholder engagement priorities and can address as appropriate areas where the company may not be currently meeting expectations. Companies should ensure that directors and senior management participating in engagement meetings are well-briefed on material ESG-related risks and opportunities, current disclosures and practices relating to ESG topics, and do’s and don’ts of shareholder engagement.

Identify Vulnerabilities. Companies should review their disclosures and practices in light of the Big Three’s policies and guidance, to help identify where one or more of the Big Three may vote against directors and/or support shareholder proposals. Companies may work with proxy solicitors to determine the expected support of the Big Three and other major shareholders on ballot items, as well as the expected recommendations of proxy advisory firms. To reduce the risk of significant votes against directors, companies should assess director vulnerabilities and may wish to conduct additional shareholder outreach.

Refresh Materiality Analysis as to ESG-Related Risks and Board Oversight. Given significant recent ESG developments, companies should refresh their materiality analysis relating to ESG-related risks, and how ESG-related risks are integrated into the company’s enterprise risk management framework that facilitates risk identification, assessment, mitigation and monitoring. Companies should also review how the board provides oversight of material ESG-related risks and opportunities, and how this is reflected in board committee charters and related disclosure.

The report also recommends that companies confirm that their ESG narrative is cohesive across SEC filings, sustainability reports, company websites and other materials. In planning ESG disclosures for the year ahead, the report suggests that companies consider refining their ESG disclosures on certain ESG topics to better address the Big Three’s expectations.

– John Jenkins