ISS takes on anti-ESG critics

Proxy advisory firm Institutional Shareholder Services (ISS) is pushing back against critics of its voting policies and the politically driven attacks on ESG investing.

ISS posted a draft op-ed from president and CEO Gary Retelny defending the firm against partisan criticism amid a rise in anti-ESG sentiment in the U.S.

Certain states have adopted legislation preventing state pension systems and their fund managers from considering ESG factors in investing decisions.

“[T]hese well-funded and concerted efforts have included assertions that proxy advisers’ recommendations in support of certain ESG proposals, though based on investors’ proxy voting choices, violate investors’ fiduciary duties,” Retelny stated.

ISS rejected that claim, saying its proxy recommendations are developed with market input and are guided by clients’ preferences.

“Many of our clients recognize that environmental and social factors can be financially material to their investment decisions,” it said. “These clients view the incorporation of relevant ESG factors into the investment and capital stewardship processes, including proxy voting, as entirely consistent with their fiduciary obligations.”

Ignoring the impact of material ESG factors on long-term returns “could result in imprudent risk-taking to the detriment of the retirement savers and other investors our clients serve,” it said.

Additionally, ISS argued that the criticisms of ESG investing aren’t supported by evidence that these considerations are being misused.

The firm also defended its own track record. In 2022, its benchmark policy supported just over half (52%) of environmental or social shareholder proposals, it said, and supported over 96% of management resolutions.

“This is hardly the track record of an activist or advocacy organization pushing an ESG agenda,” it said.

“Imposing heightened duties on investors, investment managers, and proxy advisers who consider ESG criteria and thwarting investors’ access to research and analysis that incorporate such criteria may further a political agenda, but they do not encourage fiduciary conduct.”

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.