New regulations and stakeholder pressure are creating the need for investors to demonstrate their commitment as responsible owners that view corporate accountability as a means of achieving greater long-term value. In Europe, the Shareholder Rights Directive II requires transparency around voting and engagement and, in North America, voting is considered part of investors’ fiduciary duty with engagement being a natural extension of voting proxies. This underscores the benefit of aligning voting and engagement activities.
Sustainalytics’ ESG Voting Policy Overlay supports a holistic approach to stewardship by providing voting recommendations that are based on:
ESG Principles & Sustainability Signals
Our policy overlay is designed to provide investors with expert guidance on ESG focused shareholder resolutions and management proposals, looking beyond traditional corporate governance measures to align with Sustainalytics ESG Principles or the SDGs.
Investor Driven Research Signals
Based on the previous proxy season’s proposals and votes, we identify ESG topics that have strong support among investors. Sustainalytics’ ESG Risk Ratings are then used to identify companies where the management of these issues is assessed as weak.
As part of our Engagement Services, we explore all avenues of stewardship with a focus on constructive dialogue. An issuer’s willingness to engage and authentically work toward change objectives that are in the best interest of shareholders is a cornerstone of the vote recommendations driven by our policy guidelines.
Net Zero Climate Governance
Many financial institutions have set the goal of reducing portfolio greenhouse gas emissions to net zero by 2050 and taking action to advance economy-wide decarbonation. We aim to support our clients by encouraging the most carbon intensive companies, beginning with large fossil fuel companies, to align corporate governance arrangements with climate targets consistent with Paris Climate Agreement goals.
Key Features and Benefits
Comply with Stewardship Responsibilities
Choose your level of participation and where to focus your own efforts while leveraging Sustainalytics’ support to meet stewardship responsibilities and comply with relevant regulation.
Holistic Stewardship Strategy
Seamlessly align voting and engagement activities to shared investor concerns, robust ESG principles and the latest ESG research.
1. Portfolio Management
Voting seeks to influence corporate behavior in clients’ holdings and the societies in which they operate.
2. ESG Integration
Voting on research signals enables fuller ESG integration and aligns messages across different products.
3. Shareholder Collaboration
By voting in alignment with Sustainalytics research and principles, clients will, together with likeminded peers, collaboratively advance their sustainability agendas.
Voting demonstrates a commitment to be a responsible shareholder.
5. Fiduciary Duty
Engaging with high risk portfolio companies is a key element of stewardship codes and guidelines for responsible investors, such as EU Action Plan on Sustainable Finance on Long Term Shareholder Engagement, the EU Shareholder Rights Directive II and more.
Voting supports engagements, which address material ESG issues that may end up on companies’ AGM agendas.
Post-AGM report on Engagement and Voting Activities
Given the global nature of our business, Sustainalytics is working to implement equal measures across all its affiliates, such as to enable alignment with the industry requirements that apply to providers of voting recommendations in different jurisdictions. An overview of the measures implemented by Sustainalytics is available here.
Sustainalytics’ mission is to provide the insights required for investors and companies to make better informed decisions that lead to a more just and sustainable global economy. We believe that when investors and companies embrace ESG meaningfully, it will create long-term value that benefits all stakeholders, including shareholders. The cornerstone hereof is mutual trust, which is built on transparency. We have captured these values in a set of principles that are aligned to widely accepted norms, standards and sustainability objectives. For more information, please see Sustainalytics' ESG principles.
Sustainalytics’ ESG Voting Policy Overlay is intended to work in tandem with traditional corporate governance voting policies, supplementing it with guidance, analyses and recommendations on ESG topics. It can be used in combination with clients’ own policies or that of a third-party policy and provider. With regards to corporate governance voting items, Sustainalytics supports the International Corporate Governance Network’s (ICGN) Global Stewardship Principles and Global Governance Principles as overarching guidelines on best practice.
A Single Market Standard
Consistent approach to ESG assessments across the investment spectrum.
Award-Winning Research and Data
Firm recognized as Best ESG Research and Data Provider by Environmental Finance and Investment Week.
End-to-End ESG Solutions
ESG products and services that serve the entire investment value chain.
30 Years of ESG Expertise
800+ ESG research analysts across our global offices.
A Leading SPO Provider
As recognized by Environmental Finance and the Climate Bonds Initiative.
Related Insights and Resources
Investors Seek Meaningful Scope 3 Emissions Targets to Evaluate Climate Transition Plans
Climate concerns continued to dominate proxy voting in the 2022 proxy season. With more clarity on sectoral commitments required to achieve the global net zero goal, shareholders’ requests have become noticeably more specific. A larger number of resolutions asked companies to adopt and report on emissions reduction targets and transition plans that reference the latest forward-looking guidance.
Danish Delegation Engages Sustainalytics’ Biodiversity Expert, Enabling Front Row Access to COP15 Negotiations
Finance Day within the U.N. Biodiversity Conference (COP15) is fast approaching, and Morningstar Sustainalytics’ team members will be in attendance, each focusing on different investor biodiversity considerations related to active ownership.
UK Stewardship Code 2020 - Stewardship Report
Morningstar Sustainalytics has maintained its status as a signatory of the UK Stewardship Code 2020 (the Code) per the Financial Reporting Council (FRC). Download the report to review how Sustainalytics' commitment to high stewardship standards meets the service provider principles set under the Financial Reporting Council’s revised Code.
Climate Change, Innovation, and Cybersecurity in the Defense Industry: New Opportunities for ESG Investors
While perhaps not a widely considered link between the defense industry and climate change, several Eurosatory conference sessions addressed how climate change can intensify security risks and threats.
Engage on the most challenging ESG issues, from climate change to human capital.
Engage on the most material ESG risks identified by the ESG Risk Ratings.