- Fidelity will consider voting against developed market companies that do not have at least 30% female representation on the board.
- Fidelity will vote against directors at companies that fail to directly address climate change impacts and reduce GHG emissions.
- This means failure to make specific and appropriate disclosures around emissions, targets, risk management and oversight.
How does this play out against what companies are already doing? According to Skadden’s
recent evaluation of ESG disclosures, though 90% of S&P 500 companies already draft a Corporate Social Responsibility report, voluntary disclosures above and beyond that are on the rise. The article notes that the pressure for disclosures is further increased as more banks consider ESG when making financing decisions and as more investors incorporate third-party ESG ratings into investment and proxy voting policies.
The Skadden piece recommends that companies develop robust disclosure controls and procedures (DCP) for voluntary E&S disclosures (this will also facilitate DCP procedures should the SEC implement new climate risk and HCM disclosure rules, as is expected):
- Determine which functional areas and individuals should be involved in collecting and aggregating data or drafting disclosures
- Stand up a disclosure committee that oversees the disclosure process composed of business unit heads, legal, investor relations, and financial reporting/accounting departments.
- Establish a calendar with time for legal review, an internal audit, and final review to ensure consistency across all disclosures (such as the 10-K and the EEO-1).
- Consider hiring a third-party to provide an additional assurance review.
While voting policies on board diversity have trended toward threshold expectations of representation, voting policies addressing D&I, HCM, and climate risk have focused on companies establishing dedicated reporting and tracking regimes and providing evidence of progress going forward. It is worthwhile building out these competencies now, rather than in face of an activist campaign.
