ISS Initiates Open Comment Period for 2022 Policy Changes: Weigh in Now to Have Your Perspective Heard

November 8, 2021

Written by the Clermont Partners ESG Team

As part of its annual policy review process, ISS surveys investors and issuers on policy topics. From these survey responses and additional roundtable discussions, ISS updates its proxy voting policies for the upcoming proxy season. Before the new proxy voting guidelines are published, the biggest policy changes are made available for comment every year.

The purpose of the current comment period is to fine tune the policies that will be adopted for the 2022 proxy season based on stakeholder feedback. ISS will use the comments specifically to assess support for the changes and make adjustments as appropriate.

Summary of Changes

Below is a summary of the changes ISS is proposing, what is up for comment until 5:00 p.m. ET on Tuesday, November 16th, 2021, and our take on the issues. Comments should be sent to


To apply appropriate targeting of climate-related recommendations, the proposed changes differ by market and region. In all markets, additional information will be provided in ISS’ benchmark research reports on high emitting companies’ climate-related disclosures and GHG reduction targets where that information is available.

  • Director Election Proposals
    • Proposed change:  Generally, vote against or withhold from the responsible incumbent director, committee, or full board in cases where ISS determines that the company is not taking the minimum steps needed to understand, assess, and mitigate risks related to climate change.
    • Who it impacts: Companies that are significant greenhouse gas (GHG) emitters through their operations or value chain
    • Effective date: 2022
    • Important to note:
      • Minimum steps to understand and mitigate risks include detailed disclosure of climate-related risks such as according to the framework established by the Task Force on Climate-related Financial Disclosures (TCFD).
      • ISS defines “significant GHG emitters” as those on the current Climate Action 100+ Focus Group list.
  • Say on Climate (SoC) Management Proposals
    • Proposed change: Vote case-by-case on management proposals that request shareholders to approve the company’s climate transition action plan.
    • Who it impacts: Companies with management-offered “Say-on-Climate” proposals
    • Effective date: 2022
    • Important to note:
      • Votes should take into account the completeness and rigor of the company’s climate plan.
      • Where possible, ISS will consider the extent to which companies’ climate-related disclosures are in line with TCFD recommendations and meet other market standards.
  • Say on Climate (SoC) Shareholder Proposals
    • Proposed change: Vote case-by-case on shareholder proposals that request the company to disclose a GHG report, reduction targets, or a climate transition action plan.
    • Who it impacts: Companies with shareholder-offered “Say-on-Climate” proposals
    • Effective date: 2022
    • Important to note:
      • Votes should take into account the completeness and rigor of the company’s climate-related disclosure.

Clermont’s two cents: A number of these proposed changes are reactions to events that unfolded during the 2021 proxy season, including the “say on climate” proposals and the “vote no” campaigns launched by the Climate Action 100+. ISS could be scrutinized for restricting the definition of high emitters to the Climate Action 100+ focus group, and we believe ISS is likely to expand the definition of high emitting companies in future years.

ISS currently rates a company’s individual exposure to carbon risk using its Carbon Risk Classification assessment in the Climate Awareness Scorecard. The Climate Awareness Scorecard also evaluates Climate Performance (based on disclosed or estimated emissions) and Climate Risk Disclosure (based on TCFD alignment using data from the ISS Environmental & Social QualityScore).

Important to note, the ISS E&S QualityScore includes factors related to the CDP (Carbon Disclosure Project). With this data mapping in mind, we continue to recommend clients fill out the CDP questionnaire during this upcoming CDP season. This will make it easier to align with TCFD recommendations, improve your ISS E&S QualityScore, and lay the foundation needed to build carbon risk mitigation strategies and improve climate performance.

Board Diversity

ISS continues to enhance its expectations regarding board diversity in several markets.

  • Gender Board Diversity
    • Proposed change: Expand the expectation of at least one woman on the board to extend beyond the current universe of the Russell 3000 and S&P 1500 indices.
    • Who it impacts: Most U.S. companies
    • Effective date: 2023
  • Racial and Ethnic Board Diversity
    • Proposed change: Implement the policy announced last year for U.S. companies in the Russell 3000 and S&P 1500 indices to have at least one racially/ethnically diverse director.
    • Who it impacts: Companies in the Russell 3000 and S&P 1500 indices
    • Effective date: 2022

Clermont’s two cents: ISS is expanding its diversity requirement from solely race/ethnicity to now include gender diversity also, with a one-year grace period. The board diversity policy announced in 2020 requiring S&P 1500 or Russell 3000 companies to have at least one racially/ethnically diverse director will take effect in 2022.

Board Accountability

Starting in 2023, ISS will remove its differential policy regarding unequal voting rights without a sunset provision.

  • Proposed change: After a one-year grace period, ISS will begin recommending against the responsible director at all U.S. companies with unequal voting rights, unless the non-compliant structure is reversed, removed, or subject to a reasonable sunset.
    • Who it impacts: Companies with unequal voting rights
    • Effective date: 2023
    • Important to note:
      • This update means that ISS will likely recommend against directors at many large U.S. companies such as Alphabet Inc., Meta Platforms Inc., Ford Motor Company, and others beginning in 2023.

Clermont’s two cents: The proposed change seems to be a reaction to market complacency around sunset provisions. Proxy advisors and most institutional investors were generally in agreement with phase-outs in dual class stock structures within seven years after the firm’s IPO. But a plurality of sunset provisions announced over the last couple of years exceeded that grace period. According to the Council of Institutional Investors (CII), the mean sunset of companies that went public in 2016 was 10.3 years. That number changed to 9.5 years for 2017 IPOs and to 7 years for 2018 IPOs. Of the eight companies that went public in 2020, two adopted 20-year sunset provisions (Airbnb and and only one chose a sunset shorter than seven years (Seer adopted a 5-year phase out provision). Our recommendation for newly public companies considering the adoption of a multi-class share structure with unequal voting rights is to establish a sunset provision no greater than seven years and disclose rationale for the period selected. For long-standing grandfathered public companies, our recommendation is to consider providing additional protections for minority shareholders, or prepare for reoccurring against recommendations against the board.


According to the ISS global survey results, over 50 percent of investors believe non-financial ESG-related metrics should be incorporated into executive compensation.

  • Proposed change: European guidelines will now encourage the use of ESG-related metrics in executive compensation programs as long as they are quantifiable and aligned with the company’s climate strategy.
    • Who it impacts: European companies
    • Effective date: 2022
    • Important to note:
      • While the survey was global, no U.S. executive compensation changes on the subject appear to have been contemplated.

Clermont’s two cents: We expect this policy could extend to U.S. companies in future years. For U.S. companies, our recommendation is to explore and evaluate opportunities to link executive compensation to ESG metrics. Even if your organization is not ready to implement these compensation metrics, companies should have a detailed plan in place that can be implemented in the event that ISS’ voting policy extends to U.S. companies. Note, ISS would likely provide for a one-year transition period.

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