Glass Lewis has released its response to a May letter from a group of State Treasurers and Chief Financial Officers with a series of questions about Glass Lewis’ approach to environmental and social shareholder proposals. In addition to responding to the specific questions in the State Treasurers’ letter, the Glass Lewis response makes two basic points about our approach to environmental and social issues and our role as a proxy advisor.
First, our response explains how and why our benchmark policy considers environmental and social issues. That policy — like the proxy voting policies of many institutional investors — recognizes that how companies manage the risks and opportunities associated with climate change, as well as the composition of their board and workforce, can be material issues. Importantly, however, our benchmark policy considers these issues as they relate to mitigating risk and promoting the long-term economic interest of shareholders. As that policy clearly explains, “Glass Lewis evaluates all environmental and social issues through the lens of long-term shareholder value.” Our benchmark policy’s focus on long-term shareholder value is also evidenced in practice. Under our benchmark policy, we routinely recommend against shareholder proposals on environmental and social issues that — however worthwhile as a social goal — have not demonstrated a nexus to shareholder value.
As this recommendation rate and the benchmark policy itself reflect, that policy is focused on shareholder value, not seeking to achieve any political or social goals.
Second, as a proxy advisor, Glass Lewis’ role is to assist its institutional shareholder clients in implementing their chosen proxy voting policy. The Glass Lewis benchmark policy is one voting option our clients can choose. It generally reflects the current, predominant views of our institutional investor clients on corporate governance best practices. We recognize, however, that our clients have a broad range of views on proxy voting issues, as well as different investment strategies and time horizons. For that reason, Glass Lewis offers its clients a menu of voting options, allowing a client to either select and implement a policy “as-is” or use any such policy as a starting point, with further customization to reflect their specific voting preferences. For example, Glass Lewis has a Climate Policy for investors focused on mitigating risks associated with climate change, a Catholic Policy that reflects the unique fiduciary responsibility of Catholic institutions, and a Governance-Focused Policy that is designed for our clients that are skeptical of the materiality of environmental and social considerations. Apart from these policy choices, a significant majority of our clients have elected to simply not follow any Glass Lewis policy and instead have their own custom voting policy.
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Glass Lewis’ response follows an earlier exchange with a group of State Attorneys General on these issues. We also note that the House Financial Services Committee is planning a series of hearings this month on issues related to ESG investing and stewardship.
Glass Lewis welcomes these opportunities to better explain our role and approach to these issues. As our response to the State Treasurers notes, “Proxy voting is a critical component of the corporate governance system and we are proud of the long-standing work we continue to do to help our clients, which include pension funds in your states, fulfill this responsibility in a manner that benefits and safeguards their beneficiaries’ investments.”