It’s essential to remember that ISS is market-driven and these changes are a reflection of their response to client demand and not an indicator of their intention to lead on climate issues.
Proxy advisory firm Institutional Shareholder Services today published its annual list of proposed policy changes for the 2022 proxy season, and it includes strict accountability standards for boards related to climate-risk oversight. If ISS determines that companies aren’t clearing what it considers to be the bare minimum, it could lead to recommendations against individual directors, committees or the entire board.
According to the new proposed policy, ISS will vote against the reelection of directors at companies that have not made sufficient climate disclosures in line with the Taskforce on Climate-related Financial Disclosures (TCFD) framework or have not set clear quantitative greenhouse gas reduction targets. ISS expects significant GHG emitters to have taken “minimum steps” to assess, evaluate, understand and mitigate climate change issues related to the company and larger economy.
The minimum steps include detailed disclosure of climate-related risks in the areas of board governance measures; corporate strategy; risk management analyses; and metrics and targets. Plus, companies should also provide disclosure of “well-defined” GHG emissions reduction targets, which should cover a “significant portion” of the company’s direct emissions.
For 2022, heavy emitters’ Scope 3 emissions targets won’t be required as part of the “minimum steps” in crafting appropriate reduction targets, but ISS stated that the expectations for the minimum will increase over time.Agenda – ISS Sets ‘Minimum’ Bar for Boards on Climate in Proposed Policy Changes