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Effective management of significant ESG risks and opportunities is an important indicator of good governance that we believe helps protect and enhance long-term company success.

Corporate governance refers to board- and management-level structures, policies, and processes put in place to oversee and guide the achievement of company objectives. Governance also encompasses how corporate leadership balances the interests of, and is accountable to, multiple stakeholders (e.g., shareholders, customers, employees, suppliers, government, and local communities). As such, effective management of significant ESG risks and opportunities is an important indicator of good governance that we believe helps protect and enhance long-term shareholder value. Corporate governance is inextricably linked with our other focus areas of climate risk and equality, often resulting in multifaceted corporate engagements.

In 2022, Boston Trust Walden joined the Investor Advisory Group to the International Sustainability Standards Board (ISSB), a standard setting body created by the IFRS Foundation tasked with developing a comprehensive global baseline of sustainability-related disclosure standards.

Our Strategy (2024)

We have advocated for leading practice corporate governance reforms for decades because we believe strong oversight, transparency, and accountability mechanisms enhance management of ESG risks and opportunities. These reforms include encouraging companies to adopt policies requiring independent board chairs and annual elections of directors; increasing gender, race, and ethnic diversity on boards of directors and in senior leadership; and promoting executive compensation accountability through shareholder approval of pay packages (known as Say-on-Pay).

As the scope and urgency of society’s greatest challenges have evolved, so have the priorities for governance reform. Our current focus is to encourage companies to:

Disclose comprehensive and decision-useful sustainability data, including actionable ESG metrics and goals.

Sustainability reporting enables investors and other stakeholders to understand if and how effectively companies manage and measure ESG risks and opportunities, as well as evaluate company progress toward achieving goals. From a company perspective, robust ESG management and disclosure helps corporate leaders increase operational efficiencies, enhance competitiveness and brand recognition, identify revenue generating opportunities, and respond to an evolving regulatory landscape. We expect inaugural reporting to emphasize the most material and salient ESG factors and subsequent reporting to provide more consistent, comparable, decision-useful information on strategy, management and oversight, and performance over time.

Enhance transparency regarding lobbying policies, oversight, and expenditures, and alignment with corporate positions on ESG risks and opportunities.

Companies play an outsized role in influencing public policymaking, which is why we ask portfolio companies to increase transparency of political spending and lobbying activities — both direct activities and those of their trade associations and other third-party affiliations. Misalignment between a company’s ESG objectives and its lobbying and political spending activity can pose reputational risks, undermine publicly stated goals, and hinder broader efforts to address systemic issues, such as climate change and inequality. We ask companies to transparently disclose policies, oversight, and details of corporate lobbying activities and political expenditures. We also ask companies to audit lobbying activity and political expenditures to ensure alignment with publicly stated ESG commitments and policies and to address instances of misalignment risk.

We also engage regulators and policymakers in the US and globally to ensure robust corporate ESG disclosure frameworks and protect critical shareholder rights. To price ESG risks appropriately and allocate capital responsibly and efficiently, investors require access to rigorous, standardized, and high quality corporate disclosures. Boston Trust Walden actively engages with regulators and standard setters to influence the creation and evolution of disclosure standards in the US and globally. We also engage with regulators and policymakers to protect our rights as shareowners to engage with companies on issues of governance and long-term value creation.