State Street Global Advisors has written to the board members of its portfolio companies to ask about “issues [that] can have a material impact on a company’s ability to generate returns,” including sustainability.
As one of the largest asset managers in the world, we have an important responsibility to the millions of individuals who entrust their financial futures to us through retirement plans, endowments and foundations, financial intermediaries, and sovereign institutions. Our mission is to invest responsibly on their behalf to enable economic prosperity and social progress over the long term. We believe that a focus on ESG issues is a critical requirement for us to deliver against that mission. At the same time, we recognize that companies through sound management and effective, independent board oversight are in the best position to determine what will create long-term value for shareholders. Therefore, as always our focus will be on process and approach rather than rules and “litmus tests.”
Of particular interest is the board’s assessment of climate change with regard to its own impact and the impact climate change has on its supply chain and product development.
Since 2014, climate change has been a priority engagement issue for us because of its potential to impact long-term results. Last year we created a framework to help boards capture and evaluate different kinds of physical, regulatory and economic risks associated with climate change within specific sectors. We have provided detailed guidance as to how we assess a company’s evaluation of climate risk and its preparedness for addressing it. We have also sought to ensure that our voting record aligns with the priorities we have communicated to our portfolio companies. While we make case-by-case decisions when voting proxies, we will support climate resolutions if companies’ disclosure, practices and board governance structures are found to be inadequate. That was the rationale behind our votes in 2016.