Executive Summary
On November 16, 2023, proxy advisory firm Glass Lewis released its updated voting guidelines for the 2024 proxy season for the United States, Canada, Europe, the UK, and Korea. In the United States, Glass Lewis has made a number of adjustments this year to its approach, including certain specific changes that expand its review of ESG-related oversight responsibilities at the board level.
While none of the ESG-specific changes are new to Glass Lewis, the 2024 guidelines broaden the scope of its scrutiny to cover a larger set of companies and set the stage for additional director voting recommendations tied to these topics in coming years:
- Board oversight of environmental and social issues. Expanding upon a policy established in 2023 for Russell 1000 companies, for 2024 Glass Lewis will begin tracking board-level oversight of environmental and social (E&S) issues for all companies within the Russell 3000. Negative voting recommendations tied to these disclosures (or lack thereof) will continue to be limited to Russell 1000 companies, but the expanded scrutiny opens the door for further voting impacts in the future.
- Board accountability for climate-related issues. Glass Lewis’s 2024 guidelines expand upon a policy that was introduced in 2023 for “the largest, most significant emitters” of greenhouse gases (as identified by groups such as Climate Action 100+). For 2024, Glass Lewis will broaden its review to all S&P 500 companies in industries in which the Sustainable Accounting Standards Board (SASB) cites GHG emissions as a financially material risk. For such companies, Glass Lewis will consider whether disclosures aligned with the Task Force on Climate-related Financial Disclosures (TCFD) have been provided and will look for explicit and clearly defined board-level oversight of climate-related issues. Glass Lewis may recommend against responsible directors when such disclosure is considered either absent or significantly lacking.
For a full summary of changes to the 2024 U.S. policy guidelines, please see pp. 7–11 of the Glass Lewis 2024 Benchmark Policy Guidelines for the United States.
HXE Partners’ Take
While not groundbreaking, Glass Lewis’ increasing focus on board-level ESG oversight comes at a time when investors appear, at least publicly, to be noticeably more hesitant to explicitly seek information or pursue action related to ESG performance. The proxy advisor’s guidelines, which can be considered a pulse-check on broader governance-focused investor sentiment, make it clear that ESG remains a salient topic for the teams that make the voting decisions at annual shareholder meetings. This year’s changes also reinforce the notion that transparent disclosure of how boards are overseeing these key topics continues to be a valuable way to both demonstrate a board’s robust oversight responsibilities and reduce the risk of ESG-related challenges at coming annual meetings.