Following the recent release of the results of its Benchmark Policy Survey and climate-focused survey (reported on here), ISS released today for public comment its proposed 2022 benchmark voting policies, which include these proposed changes impacting US companies:
Board Diversity
ISS’s board gender diversity policy currently applicable to Russell 3000 and S&P 1500 companies is proposed to be extended to all companies covered under its US policy following a one-year grace period (so, effective February 1, 2023). According to that policy, ISS will recommend a vote against (or withhold) from the nominating committee chair (or other relevant directors on a case-by-case basis) of boards lacking gender diversity subject to an exception if there was a woman on the board at the preceding annual meeting and the board makes a firm commitment to return to a gender-diverse status within a year.
As reflected in last year’s policy, effective for meetings on or after February 1, 2022, ISS will recommend voting against the chair of the nominating committee (or other relevant directors on a case-by-case basis) at Russell 3000 and S&P 1500 companies where the board has no apparent racially or ethnically diverse directors. Mitigating factors - including the presence of presence of a racial and/or ethnic minority on the board at the preceding annual meeting and a firm commitment to appoint at least one racial and/or ethnic diverse member - will be considered.
Climate
Under the proposed new policy, ISS will recommend a vote against (or withhold from) the responsible incumbent director, committee, or full board at companies that are significant GHG emitters through their operations or value chain (which are defined for 2022 as those companies on the current Climate Action 100+ Focus Group list), where the company is not taking these minimum risk mitigation steps:
- Detailed disclosure of climate-related risks, such as pursuant to the TCFD framework, including: (i) board governance measures, (ii) corporate strategy, (iii) risk management analyses, and (iv) metrics and targets
- Appropriate GHG emissions reduction targets, which, for 2022, will be any well-defined GHG reduction targets. Targets for Scope 3 emissions will not be required for 2022, but the targets should cover at least a significant portion of the company’s direct emissions. Expectations about what constitutes “minimum steps to mitigate risks related to climate change” will increase over time.
The proposed policies also include a case-by-case analysis framework for say-on-climate management and shareholder proposals. Criteria that will be considered for shareholder proposals includes: (i) the completeness and rigor of the company’s climate-related disclosure; (ii) the company’s actual GHG emissions performance; (iii) whether the company has been the subject of recent, significant violations, fines, litigation, or controversy related to its GHG emissions; and (iv) whether the proposal’s request is unduly burdensome (scope or timeframe) or overly prescriptive.
Subject to the proposed transition period relating to racial/ethnic board diversity for companies outside the Russell 3000 and S&P 1500, the new policies, which are expected to be released at the end of the month, will apply to shareholder meetings on or after February 1, 2022. Comments should be submitted via email to policy@issgovernance.com, and may be published on ISS’s website. The comment period closes November 16 at 5 pm ET.
See the Society's comment letter on the Annual Policy Survey and Climate Policy Survey and additional ISS resources on our Proxy Advisors page.