State Street Global Advisors' key stewardship issues for in 2022 will be accelerated action on climate change and board diversity, said Cyrus Taraporevala, president and CEO, in an annual proxy letter sent to portfolio companies Wednesday.
Addressing the companies' board members, Mr. Taraporevala said the asset manager's approach to engaging with boards has been evolving in light of events, including the global pandemic and last year's U.N. global climate change conference, known as COP26.
"While COP26 and the pandemic have brought certain issues into sharper focus, we have been in dialogue with boards on a range of material issues — from climate to diversity to human capital management — for many years," Mr. Taraporevala said. "For us, these issues are matters of value, not values — opportunities for companies to mitigate downside risk, innovate, and differentiate themselves from competitors. To that end, we view the use of our voice and our vote as central to our fiduciary responsibility to our clients to maximize long-term risk-adjusted returns."
On climate change, SSGA will target companies with the most significant emissions, "to encourage disclosure aligned with our expectations for climate transition plans, which covers 10 areas including decarbonization strategy, capital allocation, climate governance, and climate policy. In 2023, we will be hold companies and directors accountable for failing to meet these expectations," the letter said.
Companies in major indexes in Australia, Canada, Europe, the U.K. and U.S., and will also be pushed to align with climate-related disclosures requested by the Task Force on Climate-related Financial Disclosures framework. For companies not meeting those expectations, "we will start taking voting action against directors," Mr. Taraporevala said.
On board diversity, the asset manager, known for its Fearless Girl campaign launched in 2017, will expect all companies it holds to have at least one women on the board. That is a step up from a policy that expected it just for companies in major indexes.
By the 2023 proxy season, boards will be expected to have at least 30% female directors for companies in major indexes in Australia, Canada, Europe, the U.K. and U.S., the letter said.
This proxy season, SSGA will also vote against directors of S&P 500 and FTSE 100 companies that do not have a person of color on their board, do not disclose the racial and ethnic diversity of their boards or do not disclose their EEO-1 reports.
Mr. Taraporevala concluded his letter: "We hope that you and your fellow directors continue to oversee the increasingly material dimensions of ESG, alongside more traditional strategic and financial issues. As long-term investors, we share your goal of creating more resilient, sustainable, and inclusive companies."
