How Goldman Sachs Encourages Companies to Disclose Emissions Data

The Securities and Exchange Commission recently proposed new rules that would require public companies to provide information to investors about their exposure to risks related to greenhouse gas emissions and other climate change issues. Institutional investors are now asking for more information, with some requests being made ahead of annual shareholder meetings that often take place in the spring.

Large investors can have a big impact if they vote in favor of shareholder proposals asking for corporate changes or against board members, which increasingly happens if a company fails to meet the ESG-related requirements.

The Wall Street Journal’s Emily Glazer spoke with Catherine Winner, global head of stewardship at Goldman Sachs Asset Management, about the SEC’s proposed new rules, Goldman’s proxy voting changes and advice for companies in their sustainability reports. Edited excerpts from the interview follow.

WSJ: What was your reaction after the publication of these long-awaited rules?

MRS. WINNER: Our voting framework is very supportive of the climate risk disclosure rules proposed by the SEC. The SEC and the TCFD [Task Force on Climate-Related Financial Disclosures] are really pushing for greater disclosure of shows based on materiality.

In the United States in particular, our policy will support progress on emissions reporting as we approach the proposed implementation deadline for the SEC rule. As one of the world’s leading asset managers, we have $2.5 trillion in assets under watch. We will use it to help us bring about positive change on this subject, both inside and outside the United States.

WSJ: When the proposals came out, were you surprised or did you have any idea what Goldman Sachs Asset Management would do?

MRS. WINNER: We truly believe that climate risk is an important investment consideration. We have worked with companies for a number of years on disclosure and encourage the disclosure of greenhouse gas emissions that are material to their business.

We have engaged with 271 companies since 2020. We are committed to encouraging better disclosure. And 42% of the companies we engaged improved their information.

Because we believe this is an important investment consideration and that boards should be held accountable for these climate risks and the disclosure of climate-related data and reporting, we have l intention to vote against chairs of committees responsible for overseeing ESG risks at companies who are still not disclosing or have made no improvements to the disclosure of emissions data.

WSJ: What would be an improvement?

MRS. WINNER: We use the materiality framework of the not-for-profit Sustainability Accounting Standards Board [SASB] when we interact with companies to encourage them to disclose. We have defined and classified companies according to whether they disclose fully, partially or not. We are committed to non-disclosure or partial disclosure companies. And we are encouraged to see any improvement in that status. Thus, 42% of the companies with which we have engaged have improved their information. Among the companies that have made no progress, there are still less than 100 worldwide.

WSJ: At the annual shareholders meeting, if there is a vote to replace someone on the audit committee or some kind of director, what would you say to such a company then?

MRS. WINNER: We publicly launch our policy in March each year. And since we’ve engaged on the subject with the select companies that are targeted for potential escalation in voting to the director level, we hope this comes as no surprise.

But that being said, we make our policy public on our website, and also try to encourage companies to read it and alert them to the download of the policy every year, to direct them and show them what our expectations are. And it’s not just the responsibility of audit committees.

WSJ: It’s increasingly common for institutional investors to say, “If that doesn’t happen, we’ll vote out a director.” And that wasn’t common years ago.

MRS. WINNER: This is an increasingly common practice. We take a very holistic and robust approach to how we evolve our policies over time. We look at the landscape of how we voted over the past year, what new proposals are developing, what our clients expect of us in terms of advocating for positive change with business.

How to climb appropriately? We want to make sure that we communicate directly with companies in a dialogue. We are partners of the companies with which we engage. We want to be proactive and solution-oriented.

WSJ: Is there certain information that you consider difficult for companies to produce?

MRS. WINNER: We are not prescriptive about where sustainability reports go. We understand that there are many ways to produce this and make it available to your investors. But we recognize that there are different implications. So, for example, information contained in a power of attorney versus an annual filing such as a 10K or an 8K may be subject to different scrutiny. We are aware of these challenges. But we really leave it up to the companies to determine where that would be disclosed.

Two tips on this:

—Be consistent in messaging. If a company is discussing climate at an investor day, for example, and you see slides, metrics, and targets, I encourage you to make that disclosure consistent in what’s reflected in your sustainability report, for example.

—And make it easy to get to. We often ask ourselves, “How many clicks did it take to find this report on a website?” This is important information because we are not looking for it, it is a number of stakeholders who are trying to obtain this information.

WSJ: Are you very attached to the TCFD framework compared to the SASB? Or does it depend on the company or sector?

MRS. WINNER: TCFD is most useful with a climate focus lens. SASB also has a materiality perspective on climate, but it also incorporates social and governance issues. So if you’re looking for more climate-heavy disclosures, TCFD gives a much deeper dive into the environmental side, while SASB can talk about ESG, which is also important when evaluating a company.

This story was published from a news agency feed with no text edits

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