ISS tells GOP treasurers it supported ‘just’ 52% of E&S proposals in 2022

Influential proxy advisor seeks to ‘set the record straight’ in letter to Republican treasurers, following recent scrutiny.

Influential proxy adviser ISS has pushed back against allegations made by US Republican politicians that it is “pushing political agendas” by highlighting that is supported “just 52 percent” of environmental and social shareholder resolutions filed at major US firms last year in its main advice. 

The letter signed off by ISS CEO and president, Gary Retelny, dated 29 June, sought to “set the record straight” following repeated accusations from right-wing conservatives that the Maryland-based adviser is pushing an ESG agenda.  

In the final paragraphs of the eight-page response it stated: “You might also be interested to know that in 2022, a record year in terms of the number of environmental and social shareholder resolutions on the ballots of S&P500 constituents, ISS’s benchmark policy supported just 52 percent of all such shareholder proposals while supporting more than 96 percent of all management resolutions.”

“That is hardly the track record of an advocacy organisation ‘pushing political agendas’,” the letter added.    

Responsible Investor asked ISS for details on what proportion of environmental and social proposals it supported in its benchmark advice in previous years for comparison but has not heard back from them at the time of writing.  

It is not the first time that Retelny has sought to defend ISS. Last month, he released a statement stressing that ISS’s proxy advice is “apolitical” and that it is “not an activist or advocacy organisation”.  

Attacks on the company, Retelny added, were part of “a broader, highly partisan attack on ESG investing”. “Any proxy vote recommendation that includes a consideration of ESG factors will continue to be attacked, just as any failure to support an ESG proposal may be attacked by an unsuccessful shareholder proponent,” he said. 

Scrutiny of the big US proxy advisers by Republicans is not new. Under Donald Trump’s presidency, the US Securities and Exchange Commission (SEC) introduced controversial rules requiring proxy advisers to share their advice with companies “in a timely manner” and provide clients with access to companies’ written responses to their advice.   

But in July 2022, under Biden’s administration, the SEC brought in amendments to reverse both those requirements, to “avoid burdens on proxy voting advice businesses that may impair the timeliness and independence of their advice”.

ISS’s new letter also suggested that attention to the recommendations of its benchmark is disproportionate given that 86 percent of the voting shares it processes on behalf of clients are subject to “custom policies that are specifically tailored to a particular client’s needs and preferences”.

“It is the client who creates or selects the voting policies and guidelines, consistent with their own fiduciary obligations, and who decides how it votes its proxies, including whether or not to follow a proxy adviser’s vote recommendations,” the letter added.    

Falling support 

Average support for environmental and social proposals fell again this year in the US amid the continued anti-ESG backlash. 

Proxy solicitation firm Georgeson recently reported that average support for environmental resolutions fell to 25 percent in 2023 from 38 percent the year before, while tallies for social ones fell from 26 percent in 2022 to 20 percent this proxy season. 

There are signs that ISS supported fewer ESG proposals this year too. For instance, RI understands that the adviser, along with its rival Glass Lewis, opposed the refined climate proposal filed by Follow This at Chevron and Exxon, despite supporting the Dutch activist’s broader request last year at the duo last year.  

ISS also opposed a proposal on risks related to access to lack of access to reproductive health services this year at Coca Cola, despite supporting it last year at US retailers.  

The letter from ISS also discussed how different voting policies it offers can deviate on the same vote, something the advisor has come in for criticism over.  

In April, the CIO of Australian super fund Vision Super, Michael Wyrsch, questioned the ISS’ decision to back the directors at Woodside Energy in its main advice but oppose three on climate grounds in its dedicated sustainability offering. 

“Either a resolution is appropriate for support, or it isn’t,” Wyrsch told RI at the time. “There may be some arguments about the best way to get Woodside back on track, but it makes no sense to pursue different strategies for the sustainable and main advice.”   

ISS stated in its letter to the treasurers that given the diversity of its voting policies and guidelines, it “may offer two different clients opposing recommendations about the same ballot measure”.

To explain how this might occur, it used the example of how its Catholic-Faith policy might deviate from its benchmark.