ISS and Glass Lewis Add E & S to Voting Reports (Newsletter 4/2)
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Ratings & Frameworks
ISS and Glass Lewis Include “E” and “S” in 2021 Voting Reports
As the 2021 proxy season pushes forward, here are a few reminders to keep in mind regarding ESG ratings data in Glass Lewis and ISS proxy reports.
- Glass Lewis’ 2021 proxy papers include a section titled “SASB Materiality” under the Company Profile section of the report. While this section of the report does not impact proxy voting, data on the company’s current level of SASB alignment is being collected and widely reported by Glass Lewis. The “SASB Materiality” section notes whether the company reports to SASB and the extent of the SASB disclosure. In addition, topline corporate ESG data and ratings are provided by Sustainalytics and printed in the proxy paper. This includes the company’s overall risk level (negligible, low, medium, high, or severe), as well as relative performance against industry and sub-industry peers and controversy reports.
- ISS’ 2021 proxy reports include ESG ratings data sourced from ISS’ proprietary ISS E&S QualityScore data as well as ISS’ Climate Awareness Scorecard. Note, each company’s ISS E&S QualityScore (and ISS Governance QualityScore) is printed on page 1 of the ISS Proxy Analysis & Benchmark Policy Voting Recommendations report. While ISS E&S QualityScore data is proprietary data owned and collected by ISS, the ISS E&S QualityScore framework is built based off of GRI, SASB, and TCFD standards.
Net Zero Asset Managers Initiative Totals $32 trillion in AUM
BlackRock and Vanguard joined the Net Zero Asset Managers initiative, partaking with over 40 other investment firms to cut emissions to net zero by 2050. Tim Buckley, Vanguard Chairman and CEO, stated climate change is a long-term and material risk to their investors’ portfolios, and feels a responsibility to drive progress on the risks over time. Overall, this coalition signifies the environmental pillar is an even bigger deal for all companies.
Chevron Denied by SEC
The SEC rejected two no-action requests from Chevron, opening up the votes on reducing the company’s Scope 3 greenhouse gas emissions and publishing a report to explain how a reduction in fossil fuel demand could impact its financial position. The agency did accept two no-action requests from Chevron on more detailed proposals regarding specific emissions data related to its businesses and operations.
Preparing for TCFD
Waste collection company Republic Services followed the logical order for framework alignment. In 2014 the company started to fill out the CDP Climate Change Survey and continued annually, in 2016 it reported GRI, and in 2017 it published its first SASB report. All that reporting has set up the company to then report aligned with TCFD and set a Science Based Targets initiative (SBTi) goal to reduce Scope 1 and 2 greenhouse gas emissions consistent with the Paris Agreement.
Mid-cap chemicals company Quaker Houghton published a 2020 CSR with a combined GRI and SASB table towards the back of the report, also accessible from a Sustainability Data report. In the CEO letter, Michael Barry says the core elements of TCFD are included in the strategy and discussion within the report and states that Quaker supports the organization, however, it does not report in alignment with TCFD nor has the company completed the CDP questionnaire.
Prudential’s ESG Summary Report
Prudential Financial released an ESG Summary Report, which discloses details from its EEO-1 and pay equity data, diversity and inclusion commitments, and environmental footprint progress. The summary is separate from its CSR and much shorter, published with 18 pages. By issuing the shorter update, the company did not have to wait until it was ready to publish a new CSR to get the information in the public realm. The summary discusses Board oversight of corporate governance, corporate strategy, environmental sustainability, human capital, and corporate culture. Of the 13 Directors, 10 are considered diverse. To explain Prudential’s path to achieve its goals in advancing racial equity at the company, the report lists the specific commitments and actions taken. Similarly, the environmental goals are laid out in an easy-to-follow format, providing status updates with what the company has accomplished towards the stated goals.
H&M, Nike, and Other Retail Companies Crack Down on Human Rights
The New York Times shared details covering H&M’s entanglement around human rights practices in the Xinjiang region in China, which produces about one-fifth of the world’s cotton. Last year, after reporters called out the forced labor issues with minority groups, many brands revisited relationships with cotton suppliers in the area. After reports stating its stores in China have been boycotted, some locations disappeared off of maps, and products were taken down from popular Chinese e-commerce sites, H&M issued a statement reaffirming its long-term commitments to China. As stakeholders request more transparency within the supply chain, the criteria suppliers must meet in order to work with global companies will become stricter.
Selecting SASB Metrics
When looking at the SASB standards for your industry, you have options. By using the Find Your Industry search, you can see which industry SASB has any company categorized as. After reviewing the standards for your industry, and potentially other relatable industries, you can then determine which metrics to report. For further reading see the SASB Implementation Primer. Below are examples of both partial and full SASB disclosures based on the companies’ industry standards.
- American Water (pg. 113, full disclosure)
- Conduent (partial disclosure)
- Cummins (partial disclosure)
- Deere Company (full disclosure)
- Oshkosh Corporation (full disclosure)
- Ulta (pg. 33, full disclosure)
- BlackRock Appoints Paul Bodnar as Global Head of Sustainable Investing
- Vanguard is beefing up its ESG staffing – are more sustainable-investing funds on the way?
- What does delivering a net zero investment portfolio actually entail?
- The SEC’s Fund Proxy Voting Disclosure Isn’t Helping ESG Investors
- Loomis Sayles Announces Three New Roles Focused on Environmental, Social and Governance (ESG)
- Majority Action Issues Proxy Guide on Companies’ Climate-Change Actions
- The pandemic has proved the viability of ESG metrics, and the business world may be changed for good.