STATE STREET GLOBAL ADVISORS
Vernardis says , going on to explain the impact of these moves .
“ Our stewardship programme is designed to have an impact and drive positive changes to promote long-term , sustainable returns for clients . Through engagement and voting we have seen portfolio companies responding to our call to action by , for example , enhancing their board gender diversity or sustainability disclosures and practices .”
“ Boards should lead the way on ESG . The quality of oversight provided by the board and setting the right tone within the organisation can make the difference between a company landing at the front or back of the pack . In our view board accountability is fundamental to strong governance . So , if directors have been on the board for some time and they ' re not performing and they are not responding to our feedback , then as long-term shareholders we need to keep them accountable ,” Vernardis outlines . “ We usually hold boards accountable by exercising our voting rights on director elections .”
“ So , for example , with gender diversity , we vote against the re-election of the Chair of the Board ’ s Nominating Committee or the Board Leader if the company has no female directors on the board .”
Addressing the ESG Data Challenge The lack of standardisation and transparency in ESG reporting and scoring presents major challenges for investors and corporates alike . In a bid to address the ESG data challenges , State Street Global Advisors developed their unique R-Factor™ scoring system in 2019 to help clients understand their portfolio exposures , as well as inform their own asset stewardship engagements and investment decisions .
As different sectors are faced with different challenges and opportunities , Vernardis emphasises that the relevance of an ESG issue to a company ’ s financial performance varies industry by industry , company by company : “ Focusing on the right ESG issues is key to a company ’ s ability to create long-term , sustainable value for shareholders and investors .”
“ Investors face two key data challenges : the lack of a consistent , commonly accepted materiality framework and the opaque ESGscoring methodologies of existing data providers . So we developed an innovative ESG-scoring system that measures the performance of a company ’ s business operations and governance as it relates to financially material ESG challenges facing the company ’ s industry ,” he explains .
“ R-Factor™ is the first system of its kind offering companies a roadmap on how to
96 April 2022