ISS Significantly Expands Criteria for ESG Governance Quality Score

23 additional factors will now be considered by ISS in the assessment of best practices within their Governance QualityScore (GQS) scoring solution. The new factors reflect the continued and expanding focus of ESG topics that companies are being expected to monitor. The criteria join 52 existing factors that already comprise an organization’s GQS score.

Directors are the highlight of many of these new areas of focus including:

• Director Skills: Assess the qualifications of directors related to climate, DEI, and other areas in which boards are expanding their governance.
  
  
• Director and Executive Pledging: Evaluate policies and pledging practices and calculate actual shares pledged expressed as a percentage of shares outstanding.
  
  
• Director Independence: Review emerging risk oversight by gauging the independence of committee members responsible for ESG topics such as human capital management, climate, health and safety and succession.
  
  
• Diversity, Equity and Inclusion: Consider whether the board has ethnically diverse and LGBTQ+ directors.

Other topics include assessing information security risks, concerns that arise from pay versus performance disclosures and identifying companies in violation of the Holding Foreign Companies Accountable Act.

Additional information about the scoring mechanics can be found here. Companies can review their ESG data on ISS’ site and submit changes before scores are published.

Finally, ISS released its 2023 benchmark draft policy for comment by November 16. This year’s draft policies, similar to the new QualityScore factors above, pose no significant changes to US compensation policy and focus on board diversity and accountability.