The responsible investment arm of proxy advisory firm Institutional Shareholder Services Inc., ISS ESG, is expanding its governance evaluations with the addition of environmentally driven executive compensation and shareholder rights considerations.
The firm announced changes to its governance scoring methodology that, it says, are designed to provide investors with more in-depth insight, particularly when it comes to sustainability.
Among other things, the methodology will now identify environmental and social shareholder resolutions that receive the highest level of shareholder support.
“A shareholder resolution that receives a significant level of support for sustainability measures could indicate inadequate company disclosures or sustainability performance issues,” the firm said.
It has also added two new compensation-related considerations that aim to evaluate whether companies disclose any environmental and social performance metrics as part of their executive compensation plans.
“The new factors capture the level of disclosure companies provide around these measures and also whether companies have environmental and social goals without quantitative metrics,” it said.
ISS ESG said that more companies are disclosing environmental and social metrics as part of their short-term incentive plans, particularly in the energy, materials and utilities sectors, “where ESG metrics like employee health and safety are particularly material to the companies’ businesses.”
In particular, the firm noted that Canada has the greatest percentage of companies (34%) that now include environmental and social considerations in their short-term incentive plans.
Additionally, in 2020, ISS ESG expects to expand its governance coverage by more than 900 companies in 29 countries.