This client alert provides an overview of recent key updates on environmental, social and governance (ESG) matters from the leading proxy advisory firms and major institutional investors. We also address updated guidance by the Securities and Exchange Commission (SEC) related to the shareholder proposal submission process.

Updates From Proxy Advisory Firms

The two largest proxy advisory firms in the United States, Institutional Shareholder Services (ISS) and Glass Lewis, have released their U.S. voting policies for the 2022 proxy season, including specific guidelines on ESG issues. The updated voting policies reach a number of areas and reflect revisions on matters such as climate, board diversity and uneven voting rights in multi-class share structures.

Environmental Matters

First, ISS has announced frameworks for evaluating both management and shareholder “Say on Climate” proposals. Where management asks that shareholders approve climate transition plans, ISS will consider a variety of factors in reaching a recommendation, including (i) how such plans align with Task Force on Climate-related Financial Disclosures (TCFD) recommendations and other market standards, (ii) disclosures of operational and supply chain greenhouse gas (GHG) emissions, (iii) the completeness of the company’s short-, medium- and long-term targets for reducing emissions, (iv) third-party assurances, including third-party approval of whether the company’s targets are science based, (v) commitments from the company to reach net zero emissions by 2050 and report on the plan’s implementation in subsequent years, (vi) the alignment of lobbying activities and capital expenditures with the transition plan, and (vii) certain industry-specific comparisons. Where shareholders propose that companies publish a climate action plan and put it to a shareholder vote, ISS will evaluate the proposal based on (i) how complete the company’s existing climate-related disclosures are, (ii) the company’s actual emission performance, (iii) recent violations, fines, litigation or controversy related to emissions, and (iv) how burdensome the proposal is.

In addition, ISS will recommend voting against the incumbent chair of the responsible committee at companies that are significant GHG emitters if ISS determines that the company has not taken minimum steps to understand, assess and mitigate climate change risks. Such minimum steps include releasing detailed disclosures of climate-related risks in line with established frameworks (such as TCFD) and well-defined GHG reduction targets, which must cover a significant portion of the company’s direct emissions.

Finally, Glass Lewis will recommend voting against the governance committee chair of companies in the S&P 500 index if the company fails to provide explicit disclosures concerning the board’s role in overseeing environmental and/or social issues. The manner in which this oversight is conducted is left to each company’s discretion.

Diversity Matters

Regarding gender diversity, ISS will recommend voting against the chair of the nominating committee for companies in the Russell 3000 or S&P 1500 indices if there is not at least one woman on the board. For companies not in the Russell 3000 or S&P 1500 indices, this policy will be effective for meetings on or after Feb. 1, 2023. Glass Lewis goes a step further, and will recommend voting against chairs of nominating committees of companies in the Russell 3000 index if the board has fewer than two gender-diverse directors (identifying as female or outside of the gender binary), and against the entire nominating committee if the board has no gender-diverse directors. Starting Jan. 1, 2023, Glass Lewis will recommend voting against the nominating committee chair if the board is not at least 30% gender diverse. However, Glass Lewis’ current policy requiring a minimum of one gender-diverse director will continue to apply to companies not in the Russell 3000 index or with boards of six or fewer directors.

With respect to racial and ethnic diversity, ISS will recommend voting against the chair of the nominating committee of any company in the Russell 3000 or S&P 1500 indices if the board does not have at least one apparent racially or ethnically diverse member. Starting in 2023, Glass Lewis will adopt a similar policy, recommending shareholders vote against the chair of the nominating and/or governance committee of companies in the S&P 500 index that do not disclose individual or aggregate racial or ethnic demographic information of the board.

Finally, ISS will approach shareholder proposals asking a company to conduct an independent racial equity and/or civil rights audit on a case-by-case basis, considering a number of factors, including the company’s established internal processes for addressing racial inequity/discrimination, the company’s engagement with impacted communities, whether the company has been the subject of recent controversy and whether the company’s actions are aligned with market norms.

Governance Matters

Both proxy advisory firms have announced that they will recommend against certain directors at all companies (not just those that have recently gone public) with multi-class capital structures with unequal voting rights. More specifically, starting in 2022, Glass Lewis will recommend voting against the chair of the governance committee at such companies when the company does not provide for a reasonable sunset of the multi-class share structure (generally seven years or less). In 2023, ISS will start recommending shareholders vote against directors at such companies, with exemptions for newly public companies with a sunset provision of no more than seven years from the time of going public, where the unequal voting rights are de minimis or where the company provides sufficient protections to minority shareholders.

Additionally, Glass Lewis has released guidance on how it will approach the governance of companies that combine with special purpose acquisition companies (SPACs). Where Glass Lewis determines that the company has adopted overly restrictive governing documents prior to becoming publicly traded after a business combination with a SPAC, the advisory firm will recommend voting against all members of the board who served at that time if the board did not also submit these provisions for an advisory vote at the time of the shareholder vote on the business combination, commit to submitting the provisions at the first shareholder meeting after becoming publicly traded, or provide a reasonable sunset for the provisions. In addition, Glass Lewis will recommend voting against a director who serves an executive role at a SPAC while serving on five public company boards.

Finally, in cases where the board has waived its term/age limits for two or more consecutive years, Glass Lewis will recommend voting against the nominating and/or governance committee chair unless a compelling rationale is provided for why the board is proposing to waive this rule.

Updates From Major Institutional Shareholders

Large institutional shareholders including BlackRock, Vanguard and State Street have also released updates to their 2022 proxy voting guidelines setting out the core principles of corporate governance that guide their investment activities.[1]


For 2022, BlackRock has updated its policies for board diversity, sustainability and changes to the corporate form. To start, BlackRock has adopted a similar policy regarding board diversity as Glass Lewis, and has stated that companies should aspire to reach 30% member diversity on their boards, with at least two directors who identify as female and at least one director who is a member of an underrepresented group. On sustainability, BlackRock is encouraging companies to demonstrate that their climate plans are resilient under likely decarbonization pathways and the global aspiration to limit warming to 1.5° C. BlackRock has adopted similar policies to ISS regarding company disclosures, urging companies to set short-, medium- and long-term goals for GHG reduction and to report in line with TCFD recommendations, although BlackRock recognizes that some companies may use other standards. Finally, where companies propose changing their corporate form to a public benefit corporation or similar entity, BlackRock states that such changes should be put to a shareholder vote. BlackRock will generally support such proposals if its analysis suggests that shareholder interests would be adequately protected.


Vanguard has updated its proxy voting guidelines in areas such as board diversity, oversight and ESG matters. Unlike the policies proposed by the advisory firms, Vanguard has not adopted minimum diversity requirements, but stated it will vote against the chair of the nominating or governance committee of the company if it is making “insufficient progress” with regard to board diversity. Vanguard will also vote against relevant committee chairs at companies where there have been material oversight failures, such as the failure to identify and manage environmental risks. Next, while Vanguard has a policy of voting against directors it deems “overboarded” (sitting on too many public boards), Vanguard announced it may still vote in favor of an overboarded director based on company-specific circumstances, such as the board’s diversity and skills composition, and indications that the director has the capacity to fulfill their obligations. Finally, regarding shareholder proposals on ESG issues, Vanguard has dropped its requirement that the plans have a demonstrable link to long-term shareholder value in order to gain its support. Vanguard is likely to support shareholder proposals that are linked to market norms or widely accepted frameworks referenced by Vanguard’s Investment Stewardship Program (i.e., TCFD).

State Street[4]

State Street Global Advisors’ main focus for 2022 is supporting “the acceleration of the systemic transformations underway in climate change and the diversity of boards and workforces.” As such, beginning in the 2022 proxy season, State Street expects companies in major indices to align their disclosures with those requested by TCFD, and if a company fails to do so, State Street[5] will take voting action against its directors. On diversity, starting in 2022, State Street expects each of its portfolio companies to have at least one woman on the board of directors, and in 2023 will increase this requirement to 30% women for companies in major indices.[6] State Street will vote against responsible directors if (i) companies in the S&P 500 and FTSE 100 do not have a person of color on their boards, (ii) companies in the S&P 500 and FTSE 100 do not disclose the racial and ethnic diversity of their boards, and (iii) companies in the S&P 500 do not disclose their EEO-1 reports.

Updates From the SEC

The SEC staff have also published new guidance and clarified some of the procedural rules governing the shareholder proposal submission process. Staff Legal Bulletin 14L (SLB 14L)[7] was issued to streamline the process and update the standards applied in reviewing no-action requests seeking the exclusion of shareholder proposals, based on the “ordinary business” exception in Rule 14a-8(7) and the “economic relevance” exception in Rule 14a-8(i)(5).

First, when evaluating the “significant social policy” exception to the “ordinary business” exception, the SEC staff will now focus on the social policy significance of the issue that is the subject of the shareholder proposal, considering whether the proposal raises issues with a broad social impact such that it transcends the ordinary business of the company. Second, the SEC announced that going forward it will take a “measured approach” in evaluating companies’ arguments that a proposal falls under the “ordinary business” exception because the proposals micromanage. Staff stated that this determination will focus on the level of granularity the shareholder proposal contains and the extent to which the proposal limits board or management discretion in reaching the proposal’s goals. Finally, regarding the “economic relevance” exception, which allows a company to exclude shareholder proposals that pertain to operations that account for less than 5% of a company’s total assets, net earnings and gross sales and that are not otherwise significantly related to the company’s business, the staff will return to the approach it took prior to the issuance of SLB 14L. Under this analysis, proposals that raise social or ethical issues may not be excluded, even if they fall below the economic thresholds of Rule 14a-8(i)(5).

The SEC has also adopted new procedural guidance on the shareholder proposal process, including on the use of email for submission of proposals, delivery of notice of defects and responses to those notices.

[1] As of the date of this publication, Fidelity Investments has not released its 2022 guidance.

[2] BlackRock 2022 proxy voting guidelines,

[3] Vanguard, Proxy Voting Policy for U.S. Portfolio Companies,

[4] State Street Global Advisors, CEO’s Letter on Our 2022 Proxy Voting Agenda, Jan. 12, 2022,

[5] State Street Global Advisors, Guidance on Climate-related Disclosures, January 2022,

[6] State Street Global Advisors, Guidance on Diversity Disclosures and Practices, January 2022,

[7] Securities and Exchange Commission, Division of Corporate Finance, Shareholder Proposals: Staff Legal Bulletin No. 14L (CF), Nov. 1, 2021,