As reported in yesterday's Society Alert, State Street Global Advisors’ posted a slew of new and refreshed guidance documents for companies. All companies with State Street in their stock should familiarize themselves with these expectations and understand the proxy voting implications.
- Climate-Related Disclosure Expectations – State Street expects all companies to make disclosure in accordance with the TCFD framework. Disclosure expectations are more stringent for companies in carbon-intensive sectors. Starting with this proxy season, State Street may vote against independent chairs/lead directors of S&P 500 companies that fail to provide sufficient TCFD disclosure, including board climate oversight, total Scope 1 and Scope 2 emissions, and emissions reduction targets. More broadly, companies across its portfolio that fail to show progress in their disclosure will risk “no” votes against directors or State Street’s support of relevant shareholder proposals.
- Disclosure Expectations for Effective Climate Transition Plans outlines the core criteria State Street expects companies to address when developing climate transition plans. State Street plans to launch an engagement campaign this year on climate transition plan disclosure that targets significant emitters in carbon-intensive sectors. Beginning in 2023, it will vote against directors at those companies that fail to show adequate progress on meeting its disclosure expectations.
- Diversity Disclosures and Practices – State Street expects all companies to make disclosure on board DE&I oversight, strategy, goals, workforce and board demographics, and board diversification efforts. The guidance outlines the proxy voting implications (some of which apply to all companies and others to just the S&P 500 for now) for failure to disclose the board’s racial and ethnic composition, failure to have minority representation on the board, failure to disclose the company’s EEO-1 report, and failure to meet State Street's board gender diversity expectations.
- Human Capital Management Disclosures & Practices – State Street expects companies to make disclosure on board human capital oversight, their approach to human capital vis-à-vis the company’s long-term strategy, compensation, workforce engagement, and DE&I. “Laggards” are subject to potential “no” votes against directors or State Street’s support of relevant shareholder proposals.
- Human Rights Disclosures & Practices – State Street expects all companies to disclose what processes exist for identifying whether risks related to human rights are material to the company’s operations and supply chain. If the risks are material, it expects companies to disclose how the board oversees human rights-related risks; which human rights-related risks the company considers most material; how the company manages and mitigates those risks; and how the company assesses the effectiveness of its human rights risk management program. “Laggards” are subject to potential “no” votes against directors or State Street’s support of relevant shareholder proposals.
- Board Oversight of Director Time Commitments - State Street expects boards to establish, enforce, and disclose their director commitment policies and is updating its proxy voting guidelines accordingly to ensure that nominating committees evaluate their directors’ time commitments, regularly assess director effectiveness, and provide public disclosure on their policies and efforts. The guidance outlines State Street’s director overboarding policy and director commitment policy disclosure expectations. Adequate disclosure may garner State Street’s voting support for directors notwithstanding technical noncompliance with its overboarding policy.
- Corporate Participation in the Political Process – State Street expects companies to publicly disclose all political contributions, regardless of dollar value, made to individual candidates at the state and federal levels (and its equivalent in non-US countries) and the role of the board in political contribution oversight, and expects boards to oversee their companies’ direct lobbying activities. The guidance outlines the factors State Street will evaluate in considering whether to support climate-related lobbying proposals in particular.
State Street's annual CEO letter on its 2022 proxy voting agenda (released yesterday) articulated climate change-related transition and board and workforce diversity as this year's chief areas of focus. The expectations set out in the letter in these areas are consistent with the above guidance documents.
Access additional State Street resources on our Institutional Investors page »State Street.