Proxy voting advisory firms Institutional Shareholder Services Inc. (ISS) and Glass, Lewis & Co. (Glass Lewis) recently published updated 2023 voting guidelines. Changes to Canada’s guidelines in 2023 introduce a new Climate Accountability Voting Policy that addresses climate-related disclosure and board oversight of climate-related issues.
Climate Accountability Policy Overview
The ISS Voting Guidelines – 2023 Benchmark Policy Changes Effective from November 30, 2022 and February 1, 2023 shareholders’ meetings. As part of the changes to its benchmarking policy, ISS has expanded its “climate accountability” policy to Canada. Under this policy, ISS will appoint the current chair (or other Director) to vote against. 1) Adequate climate risk disclosures in line with the four-pillar framework established by the Task Force on Climate-related Financial Disclosures (TCFD). (2) adopt appropriate GHG emission targets;
Published by Glass Lewis 2023 Voting Guidelines Effective November 17, 2022, from the General Meeting of Shareholders held on or after January 1, 2023. (1) does not provide full disclosure in line with the TCFD; (2) Clearly define the board’s oversight responsibilities for climate-related issues. The policy may extend to the chair of the governance committee, and may apply to other directors, if the committee (or board) is not assigned oversight of climate-related issues. Note that the group of companies covered by the Glass Lewis policy appears broader than the ISS policy.
Focus Areas for Climate Accountability
In light of the 2023 update to our voting guidelines, issuers, especially those with significant GHG emissions or those identified by Climate Action 100+, should carefully consider climate risk disclosure and monitoring. and should be assessed for overall alignment with ISS, Glass Lewis, and TCFD. Recommendation. Issuers should pay particular attention to the following key areas for climate accountability in 2023:
Appropriate climate risk disclosure
ISS does not believe that high-emission companies have adequate climate risk disclosures unless they provide detailed disclosures of climate-related risks, including board governance measures, corporate strategy, risk management analysis, metrics and targets. I don’t think so. ISS and Glass Lewis suggest that climate risk disclosure should be in line with he TCFD recommendations.
Appropriate GHG emission reduction targets
At this time, ISS does not equate appropriate GHG emission reduction targets for high-emitting companies with medium-term GHG emission reduction targets, or at least the majority of company direct emissions (i.e., scope 1) and electricity use (scope 2). 95%) are covered. The language used by ISS leaves open the possibility of future changes to the objectives that ISS deems appropriate.
Clear monitoring of climate-related issues
Glass Lewis believes that the boards of high-emission companies should have clear and well-defined oversight responsibilities for climate-related issues. This builds on Glass Lewis and his ISS’s extensive policy of requiring board-level oversight of environmental matters and disclosure of such oversight.
Anticipated Mandatory Climate Disclosure
National Instrument 51-107 proposed by the Canadian Securities Administrators Disclosure of climate-related matters (Proposed Document) and its accompanying policies, which are expected to become effective after December 31, 2022, will mandate climate-related disclosures by non-venture and venture issuers based on TCFD recommendations. For more information on the proposed instruments, please refer to previous available Dentons Insights. here (for an overview of the proposed measures) and here (For discussion of implications for directors, boards, and governance).
