On Thursday, November 4, proxy advisory firm Institutional Shareholder Services (ISS) launched an open comment period on 16 proposed policy changes. The request for comment grouped the proposed changes within five general topics: (i) Board Diversity; (ii) Board Accountability – Unequal Voting Rights; (iii) Board and Other Governance Structure Elections; (iv) Climate; and (v) Compensation. Focusing primarily on the impact to the U.S. benchmarks, these general topics are summarized below; however, this blog post focuses on ISS’s updates regarding climate issues.


Adding to ISS’s U.S. Proxy Voting Guidelines policy recommendations related to climate change/greenhouse gas (GHG) emissions, energy efficiency and renewable energy, proposed changes for 2022 include a focus on the world’s highest GHG emitting companies and add policy provisions for “say on climate” votes.

Board Accountability

For the highest emitting companies, ISS is proposing to introduce recommendations to vote against the re-election of, or recommend withholding votes for, relevant directors or any other appropriate items at companies that have not made appropriate climate-related disclosures, such as according to the Task Force on Climate-related Financial Disclosures (TCFD) framework, or that have not set quantitative GHG reduction targets.

“Say on Climate” Voting

ISS is also proposing new policies codifying the case-by-case analysis frameworks for (i) management proposals seeking approval of climate transition plans and progress, and (ii) shareholder proposals requesting climate-related reporting and regular shareholder votes on companies’ climate transition plans and progress.

These proposed policies are reproduced in full below.

Changes at the SEC

ISS’s request for comment comes a day after the Securities and Exchange Commission’s (SEC) Division of Corporation Finance (the “Division”) issued a new Staff Legal Bulletin regarding shareholder proposals. The new Staff Legal Bulletin explains the Division’s views on Rule 14a-8(i)(7), the ordinary business exception, and Rule 14a-8(i)(5), the economic relevance exception. As discussed here, the new Staff Legal Bulletin will ultimately make it more challenging for companies to exclude shareholder proposals under the two exceptions, particularly when related to climate or social issues. As shareholder proposals on climate issues are becoming more prominent, the combined impact of the Staff Legal Bulletin and ISS’s proposed policy changes may make it particularly daunting for companies trying to avoid inclusion of such shareholder proposals in their proxy statements. Nevertheless, companies can take a proactive approach to avoiding future climate-related shareholder proposals. For instance, companies can:

  • Engage in dialogue with shareholders on climate-related topics in advance of proxy season.
  • Take action to address or mitigate the stated concerns of shareholders.
  • Continue to track developments and anticipate possible proposals and the company’s response.


Current ISS policy states that for companies in the Russel 3000 or S&P 1500 indices, companies without women on the company’s board will generally receive a vote against or withhold for the chair of the nominating committee. After a one-year grace period, for meetings on or after February 1, 2023, ISS has proposed to expand this policy to companies not in the Russell 3000 and S&P 1500 indices. This follows the ISS policy announced last year for U.S. companies in the Russell 3000 and S&P 1500 indices to have at least one racially/ethnically diverse director that will go into effect in 2022 after the one-year grace period in 2021.

Unequal Voting Rights

Beginning February 1, 2023, ISS intends to recommend against the responsible director(s) at all U.S. companies with unequal voting rights. Previously, ISS policy was solely focused on newly public companies that adopted unequal voting rights without a sunset mechanism.

Board and Other Governance Structure Elections

ISS is proposing to update the Brazilian Benchmark policy to reflect an expectation of timely disclosure as well as to extend its policy on independence of the audit committee in Saudi Arabia to external, non-director members.


In Canada, say on pay proposals that receive the support of less than 80 percent of votes cast will trigger a responsiveness analysis the following year in order to align with recommendations from the Canadian Coalition for Good Governance.

ISS is also proposing a policy change to Continental European Benchmark policy to take into account the extent to which a company provides sufficiently clear limits to its derogation policy in analyzing the quality of the executive remuneration disclosure.

Comment Period

ISS included seven specific questions within its request for comment on its proposed policy changes, welcoming feedback from institutional investors, companies and other market constituents. Interested persons are asked to submit any comments via email to [email protected]. The comment period will run through 5:00 p.m. ET on November 16, 2021.

The climate-related proposals are reproduced below.

Climate-related Proposed Policies

Board Accountability on Climate

General Recommendation: For companies that are significant greenhouse gas (GHG) emitters, through their operations or value chain, 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.

Say on Climate (SoC) Management Proposals

General Recommendation: 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. Information that will be considered where available includes the following:

The extent to which the company’s climate related disclosures are in line with TCFD recommendations and meet other market standards;

  • Disclosure of its operational and supply chain GHG emissions (Scopes 1, 2, and 3);
  • The completeness and rigor of company’s short-, medium-, and long-term targets for reducing operational and supply chain GHG emissions (Scopes 1, 2, and 3 if relevant);
  • Whether the company has sought and approved third-party approval that its targets are science-based;
  • Whether the company has made a commitment to be “net zero emissions” for operational and supply chain emissions (Scopes 1, 2, and 3) by 2050;
  • Whether the company discloses a commitment to report on the implementation of its plan in subsequent years,
  • Whether the company’s climate data has received third-party assurance,
  • Disclosure of how the company’s lobbying activities and its capital expenditures align with company strategy,
  • Whether there are specific industry decarbonization challenges, and
  • The company’s related commitment, disclosure, and performance compared to its industry peers.
Say on Climate (SoC) Shareholder Proposals

General Recommendation: 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.