Adviser to offer an ESG-sceptic option

Institutional Shareholder Services (ISS), the influential proxy adviser majority owned by Deutsche Boerse that recommends how shareholders must vote in corporate elections, will offer a new “ESG-sceptic” option, according to executives.

This is “in keeping with our long-standing mission to provide a wide array of voting policy choices,” Institutional Shareholder Services global head of investment stewardship Lorraine Kelly said in a statement.

A strong reception for the guidelines could dampen criticism of Institutional Shareholder Services from US Republican politicians, who have said the Maryland-based firm backs too many shareholder resolutions on environmental, social or governance (ESG) topics.

Institutional Shareholder Services now offers seven types of speciality voting guidelines, beyond its benchmark guidelines, for investors such as climate-focused groups or religious funds. In 2023 it added “board-aligned” investment voting guidelines that opposed many ESG resolutions, though the new offering may appeal to clients who want to go further against ESG.

Kelly said the firm was making available the new guidelines in partnership with Bowyer Research, a fund consulting business based near Pittsburgh, for the upcoming shareholder meeting season.

Initially, Institutional Shareholder Services will make Bowyer’s research available only to public pension plans, according to firm principal Jerry Bowyer.

Bowyer said he called his approach that of an “ESG sceptic” and that he supported ESG resolutions less than 5% of the time, compared to about 50% for the initially benchmark guidelines. Bowyer said he and Institutional Shareholder Services executives started speaking after he criticised the firm on social media site LinkedIn in June 2023, discussions that led to the collaboration.

“This is an effort at depoliticisation. This isn’t an effort to get companies to be more conservative, this is an effort to get companies out of the political process,” Bowyer said.

For example, Bowyer said he recommended votes against shareholder measures at Apple last week related to labour and pay equality issues.

But Bowyer said he backed proposals from conservative groups that he said focused on company policies that created investment risks including a measure calling on Apple to review how it curates app content, citing the removal of religious material in China.

That measure won support from only 2% of votes, a typically low level for conservative proposals. Sponsors blamed a lack of support from proxy advisers, and a petition organised by Inspire Investing — which serves Christian investors with “biblically responsible” policies — called for more speciality policies from proxy advisers.

Inspire portfolio manager Tim Schwarzenberger called the Institutional Shareholder Services offering “a big step in the right direction.”

THIS ISN’T AN EFFORT TO GET COMPANIES TO BE MORE CONSERVATIVE, THIS IS AN EFFORT TO GET THEM OUT OF THE POLITICAL PROCESS

Jerry Bowyer Principal of Bowyer Research