ISS has published proposed policy changes for 2022 for public comment. The following summarizes proposed changes for the U.S. market.

Board Diversity.  Proposed U.S. policy changes will extend board gender diversity requirements to a larger universe of companies from 2023 and following a one-year grace period.  This policy will also apply for companies not in the Russell 3000 and S&P1500 indices, effective for meetings on or after Feb. 1, 2023.

Unequal Voting Rights – Board Accountability. When ISS implemented its original U.S. policy on unequal voting rights 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. ISS is now proposing to remove the differential policy application that arose from that grandfathering and after a year’s grace period in 2022, to begin in 2023 recommending against the responsible director/s at all U.S. companies with unequal voting rights.

Climate – Board Accountability. For companies that are significant greenhouse gas (GHG) emitters, through their operations or value chain, ISS will generally vote against or withhold from the responsible incumbent director, committee, or full board 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 to understand and mitigate those risks are considered to be:

• Detailed disclosure of climate-related risks, such as according to the framework established by the Task Force on Climate-related Financial Disclosures (TCFD), including:
  • Board governance measures;
  • Corporate strategy;
  • Risk management analyses; and
  • Metrics and targets.
• Appropriate GHG emissions reduction targets.

For 2022, “appropriate GHG emissions reductions targets” will be any well-defined GHG reduction targets. Targets for Scope 3 emissions will not be required for 2022 but the targets should cover at least a significant portion of the company’s direct emissions. Expectations about what constitutes “minimum steps to mitigate risks related to climate change” will increase over time.

Climate – Management Say-on-Climate Proposals.  ISS will vote case-by-case on management proposals that request shareholders to approve the company’s climate transition action plan, taking into account the completeness and rigor of the plan.

Climate – Shareholder Say-on-Climate Proposals. ISS will vote case-by-case on shareholder proposals that request the company to disclose a report providing its GHG emissions levels and reduction targets and/or its upcoming/approved climate transition action plan and provide shareholders the opportunity to regularly express approval or disapproval of its GHG emissions reduction plan, taking into account information such as the following:

• The completeness and rigor of the company’s climate-related disclosure;
• The company’s actual GHG emissions performance;
• Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy related to its GHG emissions; and
• Whether the proposal’s request is unduly burdensome (scope or timeframe) or overly prescriptive.