CamberView Partners' latest interview with State Street Global Head of ESG Investments and Asset Stewardship Rakhi Kumar includes a number of instructive insights for companies on the investor's priorities and expectations.
Key interview takeaways include:
- The company's long-term strategy is SSGA's top engagement priority - more specifically: (i) how boards are effectively helping management achieve their strategic goals, (ii) how companies are integrating sustainability into long-term strategic planning, and (iii) how compensation is aligned to strategy.
- Effective engagement allows SSGA to evaluate how the board operates, and how the board oversees governance & sustainability in the context of the company's business and strategy (i.e., context is key).
- SSGA is looking for lead or responsible director participation in its engagements to build rapport with the board and understand the board's perspective, and - where relevant - for maximum impact and responsiveness.
- Boards and the broader market need to understand the ISG Corporate Governance Principles, which reflect the minimum standards investors expect from issuers.
- The growth in ESG-integrated investing is risk mitigation/management-based. The SASB framework, which integrates an investor perspective of ESG risks, and the GRI, are key in this regard. Kumar comments: "It's surprising to me how many board members are not aware of SASB and the growing importance of ESG scores in driving investment. I would definitely say that from an ESG messaging perspective, ESG scores are going to be as important in driving investor dollars into shares as credit scores are for fixed income."
See these prior reports on SSGA: here for both "State Street Defends Activist Engagement Approach" and "SSGA Stewardship Report Enlightens," "State Street Expands Gender Diversity Push to the All Management Ranks," "State Street Elaborates on its New Use of "Abstain" in Executive Pay Votes," "State Street Report Instructs on Board Leadership Disclosure & Practices," "State Street Issues Climate Disclosure Guidance for "High-Impact" Companies," and "State Street Guidance to Boards: ESG/Strategy Integration"; on ESG ratings: "Investors Exclude Funds with Poor Sustainability Ratings," "ESG Rating Agency Shortcomings & Implications," "ESG Ratings Arena: State of Play," and "ESG Report & Ratings Providers Basics," and BlackRock's paper: "A Pitfall in Ethical Investing: ESG Disclosures Reveal Vulnerabilities, Not Virtues"); and on the ISG Principles: "How to Disclose Alignment of Practices With ISG Governance Framework," "SSGA To Companies: Evaluate & Disclose Compliance with ISG Governance Principles - Potential "No" Vote Implications for Directors," and "Investor Stewardship Group Seeks Disclosure on Corporate Governance Principles."
This post first appeared in this week's Society Alert!