State Street CEO to Boards of Companies in Portfolio: Disclose More About the Impact of Climate Change on Your Business -- Be More Transparent...and More

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State Street CEO to Boards of Companies in Portfolio: Disclose More About the Impact of Climate Change on Your Business -- Be More Transparent...and More

G&A's SustainabilityHighlights (10.2.2017)
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Monday, February 13, 2017 - 12:45pm

State Street Corp is one of the world's leading asset managers, with US$2.47 trillion in AUM.  State Street Global Advisors CEO Ron O'Hanley in late-January sent a message to the boards of directors of public companies whose stock is in State Street portfolios:  SSGA is increasing focus on climate change, safety, workplace diversity and various other ESG issues.  Especially climate change.  Tell us more about what you are doing.

How?  The State Street Global Advisors CEO is asking, how is the board [of the company] preparing the enterprise for the impacts of climate change?  He is communicating to these directors that it is necessary for boards to disclose more about those plans.  The CEO's letter was accompanied by a description of the framework that SSGA uses to evaluate public companies' sustainability efforts.

In this week's first Top Story, the highlights of the approach are described for you. Three criteria are used to evaluate and rank companies -- as Tier One, Two and Three.  Tier One companies satisfy the three criteria.  The results are reflected in the proxy voting of SSGA, the #3 asset manager of ETF's in the USA (Exchange Traded Funds).

There were 177 companies in the portfolio that SSGA evaluated in 2016; a mere 7% qualified as Tier One.  Tier Two totals 72%, which meant that companies had a sustainability program but had not integrated it into its overall business strategy, articulated how ESG factors affected long-term strategies, or established long-term goals aligned with ESG strategy. (Tier Three companies were described as not doing anything ESG-wise, 21% of companies in the portfolio, according to the Think Advisor story.)

Company boards and C-suite should consider that State Street is an active player in the coming proxy voting season.  SSGA supported 46% of climate-related proposals in 2016.  That's important when you consider the competition:  the vote count was zero (voting) at Vanguard, American Funds, Black Rock and Fidelity -- a source of concern and a growing level of activism on the issue among sustainable & responsible investing advocates.

In an interview with Bloomberg's top environmental reporter, Emily Chasan in January (our second Top Story below), SSGA CEO O'Hanley said:  "We're asking companies to make sure they are identifying and communicating both their risks and opportunities.  Climate change may be the poster child for risk out there."

The Bloomberg Business Week story has a neat chart for you, with the voting records of "shares of proxy votes in favor of climate-related proposals."  The Top 20 of the world's asset managers' voting records are presented.  State Street is the fifth-ranked (at the top).

Stay Tuned, as we often say, to the coming 2017 Proxy Voting Season at public companies.  ESG issues are front and center at some large corporate issuers and the action will be in the maneuvering around the shareholder-offered resolutions on climate change and other ESG issues by the entire voting body. 

This is just a sample of some of the articles from this weeks SustainabilityHQ Highlights.  You can view the full Highlights by using the following links.Sustainability | ESG, Highlights for the Week of February 10, 2017

Keywords: Events, Media & Communications | G&A Institute | GRI | Governance & Accountability Institute | Responsible Business & Employee Engagement | SRI | SWF | Sovereign Wealth Funds | State Street | SustainabilityHQ | climate change