Institutional Shareholder Services (“ISS”) published its Proposed Benchmark Policy Changes for 2022 seeking views from stakeholders with regard to a number of proposed voting policy changes for 2022 and beyond.
In relation to its UK and Ireland voting policies, proposed changes include:
- Climate - A new climate-related board accountability policy is proposed for high greenhouse gas emitting companies. Changes proposed will provide for recommendations to vote against the re-election of individual directors, committees or the full board at high emitting companies in cases where ISS determines that the company is not taking the minimum steps needed to understand, assess, and mitigate risks related to climate change to the company and the larger economy. For 2022, minimum steps include making appropriate climate-related disclosures and setting quantitative greenhouse gas reduction targets. In addition, ISS is proposing new policies codifying the framework developed for analysing “say on climate” management and shareholder proposals. ISS will assess these on a case-by-case basis taking into account the company’s current climate-related disclosures and performance.
- Board Diversity - From 2022, FTSE 100 companies will be expected to have appointed at least one individual from an ethnic minority background to their board, with the expectation extended to most listed companies by 2024. ISS recognises that the UK has a generally more diverse demographic profile than Ireland and acknowledges that there is no clear requirement which mandates that Irish companies maintain diverse boards. However, it is recognised that of the 20 largest Irish companies, a majority are already constituents of the London Stock Exchange, with three listed within the FTSE 100 index, indicating that Irish companies, particularly larger ones, do have exposure to standards that are expected of FTSE companies, and would be cognisant of the need of incorporating ethnic diversity on their boards. ISS notes that three of the top six ISEQ 20 companies in terms of market capitalisation have already identified a director of an ethnically diverse background. Based on the these observations, ISS considers that there is a sufficient case for Irish companies to also be expected to incorporate ethnic diversity on their boards by 2024.
- Remuneration - Changes are proposed to clarify that the relevance and stringency of non-financial ESG performance conditions will be assessed similarly to financial criteria.
ISS expects to announce its final 2022 benchmark policy changes by the end of November 2021, with updated voting policies to be applied for shareholder meetings taking place on or after 1 February 2022.
Climate change and climate-related risks are now among the most critical topics for many investors