"ISS’ transparent, market-based approach to evolving the policies that are the basis of our informed, independent research and benchmark voting recommendations, continues to develop to help support our institutional investor clients' voting and other stewardship-related decisions."

December 7, 2021

ISS Announces 2022 Benchmark Policy Updates

ROCKVILLE, Md. (December 7, 2021) – Institutional Shareholder Services Inc. (“ISS”), a leading provider of corporate governance and responsible investment solutions to the global financial community, today released updates to its 2022 ISS benchmark proxy voting policies. The updated policies will generally be applied for shareholder meetings taking place on or after Feb. 1, 2022, except for those updates that are being announced now with a one-year transition period and which will become effective in 2023.

To ensure its global voting policies take into consideration the changing views and needs of its institutional investor clients and the broader corporate governance community, ISS gathers input each year from institutional investors, companies, and other market constituents worldwide through a variety of channels and over many months. The updates announced today have been informed by the careful consideration of the many inputs received.

Of particular note, as part of this year’s policy development process, ISS undertook a separate dedicated “Climate Survey” to invite feedback relevant to the evolvement of both ISS’ benchmark and its various specialty policies. It sought input on criteria considered important for determining proper board oversight of climate-related risks, for determining views on regular shareholder votes on climate transition plans, and for assessing the quality of companies’ climate transition plans. The Climate Survey also elicited feedback specifically relevant to ISS’ specialty climate policy, launched in 2020, which incorporates information and policy approaches using ISS’ proprietary climate research. Changes to ISS’ specialty climate policy and other specialty policies will be announced in January.

“Institutional investors, companies and other interested market constituents globally have provided much thoughtful feedback on a wide range of issues through the ISS benchmark policy survey and new climate survey, multiple policy roundtables and other discussions, and through our public open comment period on proposed changes,” said Georgina Marshall, Global Head of Research and Chair of the ISS Global Policy Board. “ISS’ transparent, market-based approach to evolving the policies that are the basis of our informed, independent research and benchmark voting recommendations, continues to develop to help support our institutional investor clients in making informed voting decisions. These increasingly include voting and other stewardship-related decisions on a range of climate as well as other environmental, social and governance matters, and the changes announced for 2022 reflect the next steps along the path on climate-related topics that many investors indicated they consider important and would support. All feedback received during the policy development process including the open comment period has been carefully considered, and will continue to inform ISS policy development for 2023 and beyond.”

Of further note, ISS is planning to release more information about policy application relating to the new climate-related policies as well as other policy changes announced today in an update of ISS’ Frequently Asked Questions documents, to be issued before the new policies go into effect. Full updated policy documents for 2022 will also be published in the coming weeks.

ISS’ 2022 Benchmark Policy updates include:

Board Accountability on Climate Climate change and climate-related risks are now among the most critical topics for many investors, and this area has developed significantly in the last year. Many investors are seeking to better integrate climate risk considerations in their investment, engagement, and voting processes. The policy updates for 2022 introduce a board accountability policy for the assessment of and focus on the world’s highest greenhouse gas (GHG) emitting companies. In response to our 2021 Climate Survey, high percentages of investor respondents supported establishing minimum criteria for companies considered to be strongly contributing to climate change. Therefore, for 2022 the new benchmark board accountability policy will focus on the companies currently identified as Climate Action 100+ Focus companies, and will recommend “Against” votes for responsible incumbent directors – usually the appropriate committee or board chair in the first year, dependent on the market – in cases where the company is not considered to have adequate disclosure, such as according to the Task Force on Climate-related Financial Disclosures (TCFD), or does not have quantitative GHG emission reduction targets covering at least a significant portion of the company’s direct emissions.

Say on Climate (SoC) Management Proposals ISS is codifying the framework developed over the last year for analyzing management-offered climate transition plans put up for shareholder approval, incorporating feedback received during this year’s policy development process including from the Climate Survey. For transparency, the policy lists the main criteria that will be considered when analyzing these plans (a non-exhaustive list).

Say on Climate (SoC) Shareholder Proposals “Say-on Climate” shareholder proposals emerged late in 2020 and the number increased in 2021, generally asking companies to publish a climate action plan and to put it to a regular shareholder vote. This policy establishes a case-by-case approach toward such proposals and provides a transparent framework of analysis that will allow for consistency of assessment across markets.

Board Diversity ISS is expanding the coverage of its board diversity policies with regard to both gender and ethnicity. U.S. and Japan policy changes extend board gender diversity requirements to a larger universe of companies in each market from 2023 and following a one year grace period. In Canada, the policy requires at least one woman on the board of most listed Canadian companies for 2022, with at least 30 percent women on the board for large Canadian companies already having been announced in 2020. Changes to the U.K. & Ireland policy phase in the expectation that FTSE 100 boards will have at least one director from an ethnic minority background from 2022, extending to most other U.K. companies by 2024. Other ISS board diversity policies previously announced in 2020 that will take effect in 2022 include the expectations that large companies in the U.S. will have at least one racially/ethnically diverse director, and in Latin America that companies have at least one woman on the board.

Board Accountability on Unequal Voting Rights When the original ISS U.S. policy on unequal voting rights was introduced in 2015, the focus was on addressing investor concerns with newly-public companies that adopted unequal voting rights without a sunset mechanism. Therefore, companies with an unequal voting rights structure whose first public shareholder meeting was prior to 2015 were exempted from the new policy. Due to the strong support expressed through the survey results and roundtable discussions, ISS is now removing the differential policy application that arose from that grandfathering and after a year’s grace period in 2022, will begin in 2023 to generally recommend against the responsible director/s at all U.S. companies with unequal voting rights.

Compensation Aligning with recommendations from the Canadian Coalition for Good Governance, the Canadian Benchmark policy is raising the minimum support threshold that triggers a responsiveness analysis on a company’s Management Say on Pay proposal, from 70 percent support to 80 percent support.
In Europe, in response to changes in regulation as part of SRD II, many EU companies have included broad language allowing derogations (deviations) from their stated remuneration policies without clear definitions and limits about when the derogations may apply. Going forward, ISS’ Continental Europe Policy will take into account the presence and terms of a derogation policy when analyzing a company’s remuneration policy. Those policies will be expected to clearly define and limit any elements (e.g., base salary, STI, LTI, etc.) and the extent (e.g., caps, weightings, etc.) to which derogations may apply. Also, non-financial ESG-related metrics are now seen more frequently in compensation plans, and the Continental European Policy will now state that financial and non-financial conditions, including ESG criteria, are relevant as long as they reward an effective performance in line with the purpose, strategy, and objectives adopted by the company. The ISS U.K. & Ireland policy is aligned with updated U.K. Investment Association Principles of Remuneration, that ESG metrics can be included as performance measures utilised by a company’s variable remuneration schemes, if the measures are clearly linked to the company’s long-term strategy, material to the business and are quantifiable, and that ISS will assess them in line with this approach.

For full details of all ISS benchmark policy updates for 2022, please visit the ISS Policy Gateway.

ISS will be hosting an informational webcast on the 2022 policy updates as well as other developments in the governance landscape, on January 20, 2022 at 4:00p.m. GMT | 11:00a.m. EST | 8:00a.m. PST. To register, please click here.


About ISS
Founded in 1985, Institutional Shareholder Services group of companies (ISS) empowers investors and companies to build for long-term and sustainable growth by providing high-quality data, analytics and insight. ISS, which is majority owned by Deutsche Börse Group, along with Genstar Capital and ISS management, is a leading provider of corporate governance and responsible investment solutions, market intelligence, fund services, and events and editorial content for institutional investors and corporations, globally. ISS operates on an arm’s-length basis and Deutsche Börse has adopted Principles protecting the independence and integrity of ISS’ research offerings. ISS’ 2,000 employees operate worldwide across more than 30 global offices in 15 countries. Its more than 4,000 clients include many of the world’s leading institutional investors who rely on ISS’ objective and impartial ESG and governance research, market intelligence and fund services and data and analytics, as well as public companies focused on ESG and governance risk mitigation as a shareholder value enhancing measure. Clients rely on ISS’ expertise to help them make informed investment decisions.

Media Contact:
Sarah Ball, Executive Director

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