CHAPTER 08 ESG and Climate Change in the Shadow of COVID-19: “E,” “S” & G Are Here to Stay
Shortly after BlackRock’s January 2020 announcement, State Street Global Advisors followed suit, reiterating its focus on financially material ESG issues, and confirming its intention to go beyond engagement and deploy its voting power in director elections to accelerate corporate action on ESG matters. 177 State Street disclosed in its CEO letter, “[h]aving already engaged with companies on a number of governance matters for many years, we see that shareholder value is increasingly being driven by issues such as climate change, labor practices, and consumer product safety. We believe that addressing material ESG issues is good business practice and essential to a company’s long-term financial performance – a matter of value, not values ” [emphasis added]. State Street intends to leverage its endorsement of the Sustainability Accounting Standards Board (SASB) materiality framework through the use of its new proprietary R-Factor ESG scoring methodology (“R” stands for “responsibility”) to benchmark over 6,000 companies globally against their peers. State Street describes its R-Factor as a transparent scoring system that measures the performance of a company’s business operations and governance as it relates to financially material and sector-specific ESG issues. The resulting R-Factor score is then used to determine whether to vote against “laggards” that cannot properly articulate a plan to improve the company’s score. State Street disclosed that in 2022 this voting strategy would be expanded to include all companies that have consistently underperformed in comparison with their peers for multiple years. In Canada, the Ontario Municipal Employees Retirement System (OMERS) has committed in its proxy voting guidelines to generally support proposals that request the reasonable disclosure of information or development of policies related to ESG factors. 178 OMERS indicates that it supports the view that companies should publish and update their policies and procedures with respect to ESG issues that materially affect long-term shareholder value. And these policies should be an integral part of the overall management of companies. OMERS encourages the companies in which it invests to develop policies and practices that address issues of social and environmental responsibility, including with respect to: – the environmental impact of a corporation’s products and operations; – the impact of a corporation’s strategies and decisions on the communities and constituencies directly affected by its products and operations; and – human rights and work standards in a corporation’s operations.
Shortly after BlackRock’s January 2020 announcement,
State Street Global Advisors followed suit, reiterating its focus on financially material ESG issues, and confirming its intention to go beyond engagement and deploy its voting power in director elections to accelerate corporate action on ESG matters.
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Davies | dwpv.com
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