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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.

The Issue

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 environmental, social, and governance (ESG) risks and opportunities is an important indicator of good governance that we believe helps protect and enhance long-term shareholder value. Our corporate governance engagement is intertwined with our other focus areas of climate and equality.

According to the proxy advisory firm ISS, 20 environmental and social shareholder proposals received majority support, up from 12 in 2019 and 10 in 2018 (Proxy Season Review).

According to The Conference Board, the median level of support for environmental and social shareholder proposals at Russell 3000® companies reached 27.3% in 2019, up from 25.7% in 2018 (Proxy Voting Analytics).

Boston Trust Walden typically supports more than 75% of shareholder sponsored resolutions.

Our Engagement Strategy (2020)

We have advocated for leading practice corporate governance reforms for decades, because we believe strong transparency and accountability mechanisms should lead to improved management of ESG risks and opportunities. These reforms include encouraging companies to adopt policies requiring independent board chairs and annual elections of directors; increasing representation of women and people of color on boards of directors; 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 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 progress toward achieving their goals. It also can play an instrumental role in increasing operational efficiencies, enhancing competitiveness, and identifying new revenue generating opportunities, not to mention building brand and reputational value, attracting and retaining talent, and better managing an evolving regulatory landscape. We expect inaugural reporting to emphasize the most material and salient ESG factors and subsequent reporting to provide more decision-useful information on strategy, management and oversight, and performance over time.
  • Enhance transparency regarding lobbying policies, oversight, and expenditures. This request covers indirect lobbying activities through third parties such as trade associations and think tanks. Such transparency recognizes that lobbying activities have the potential to conflict with stated company policies or goals, hindering broader efforts to address systemic risks such as climate change and posing potential reputational risk.
  • Integrate ESG considerations into proxy voting and engagement (asset management firms only). Conscientious proxy voting and engagement with portfolio companies on issues such as climate, workplace equality, supply chain management, and sustainability reporting are essential to fulfilling the role of investment fiduciary. Asset managers have the potential to meaningfully affect corporate practices through their proxy voting given their significant ownership stake in portfolio companies. Historically, however, many large investment firms have voted against, or abstained from, most environmental or social proposal on proxy ballots. We urge investment firms and proxy advisors to strengthen their proxy voting policies, practices, and accountability. Recent trends in proxy voting and investment stewardship activities indicate measured but meaningful progress.