Last week, the CEO of State Street Global Advisors--one of the largest investment managers--issued a letter to corporate boards of directors announcing a series of priorities with respect to the companies in which it invests. Specifically, State Street announced that its "main focus in 2022 will be to support the acceleration of the systemic transformations underway in climate change and the diversity of boards and workforces." In other words, State Street has embraced the recent focus on "material environmental, social and governance (ESG) issues."
Notably, State Street has endorsed the principle that companies should issue climate disclosures, and has specifically proclaimed that it "expect[s] companies in major indices in the US, Canada, UK, Europe, and Australia to align with climate-related disclosures requested by TCFD." This is yet another major player in the system of global finance that has supported the TCFD disclosure regime. (SEC Chairman Gensler, among others, has also noted and praised the TCFD.) This development suggests a growing consensus around the TCFD standard for climate disclosures in "developing the global set of standard metrics for sustainability-related corporate reporting and disclosure that investors have long needed." Indeed, State Street referred to the "TCFD framework" as "table stakes for any climate-related discussion."
This statement by a substantial player in global finance--and specifically by a major investor in large companies--reinforces the notion that ESG concerns will remain salient over the coming year, and especially that climate disclosures are a significant area of concern for the investing community.
We expect companies in major indices in the US, Canada, UK, Europe, and Australia to align with climate-related disclosures requested by TCFD, including whether the company discloses: (1) board oversight of climate-related risks and opportunities; (2) total direct and indirect GHG emissions (“Scope 1” and “Scope 2” emissions); and (3) targets for reducing GHG emissions. With approximately one-third of companies in the S&P 500 still not providing these TCFD disclosures, we will start taking voting action against directors across applicable indices should companies not meet these disclosure expectations.
[W]e will launch a targeted engagement campaign with the most significant emitters in our portfolio 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.... [W]e will hold companies and directors accountable[.]