On January 27, State Street's CEO, Cyrus Taraporevala, released the firm's annual letter to directors and ESG oversight framework for directors.
Highlights include:
- SSGA will continue engaging with boards on sustainability in 2020, and "will use [its] proxy vote to press companies that are falling behind and failing to engage."
- Specifically for 2020, State Street will be taking action against board members at companies within the S&P 500 that are categorized as laggards under R-Factor and cannot articulate how they plan to improve their score. R-Factor scores classify companies as laggards based on their percentile ranking compared to industry peers as defined by the Sustainable Industry Classification System (SICS) designed by SASB. Beginning in 2022, this voting action will expand to all companies that have consistently underperformed peers on their R-Factor score unless State Street sees "meaningful change." Currently, underperformers appear to be companies whose R-Factor score places them within the 10th to 30th percentile range of their SICS industry classification.
- Notwithstanding engagements over the past three years, in SSGA's analysis fewer than 25% of companies currently have meaningfully identified, incorporated and disclosed material ESG issues.
- A reminder to companies that SSGA's proprietary R-Factor ESG rating system relies on the SASB standards.
Learn more about R-Factor here and here.
If you're interested in requesting your R-Factor score, we can help. The Georgeson team will provide you guidance on the information State Street requires for the request. Contact Georgeson to learn more.
If you have questions or comments, please email info@georgeson.com or call 212 440 9800.