ISS Now Catering to “ESG Skeptics”

In a continued effort to “please everyone” while pleasing no-one, ISS will be offering a new “ESG skeptic” set of proxy voting guidelines in partnership with anti-ESG proxy consulting firm Bowyer Research.  

Why it matters: ISS has come under pressure from Republican lawmakers for supporting ESG shareholder proposals. This offering, which ISS executive Lorraine Kelly called “in keeping with our longstanding mission to provide a wide array of voting policy choices,” could help mitigate that criticism while appealing to anti-ESG clients.

Go deeper: According to Bowyer Research, the new guidelines will initially be available only to public pension plans. Bowyer supports fewer than 5% of ESG resolutions while ISS’s benchmark guidelines are around 50%. Given this chasm, it seems illogical for ISS to “talk out of both sides of its mouth” on whether investors should or should not support sustainability-related shareholder proposals.

• Bowyer’s press release touted the new guidelines as “designed for investors who wish to counter the promotion of ESG ideology by political activists through the use of the proxy voting system.” The guidelines will “require corporations to resist activist demands to pressure them into making public statements on hot-button topics.”

Upshot: Like companies, ISS is trapped between a rock and a hard place in the ongoing battle over ESG. This new offering, while seemingly hypocritical given ISS’s strong insistence on the importance of ESG efforts to shareholder returns, is likely just another attempt to avoid the criticism of being politically motivated.