(Fixes syntax in sixth paragraph to “it will” from “will it”)
March 16 (Reuters) - Top proxy adviser Institutional Shareholder Services on Thursday said it would expand its offering of conservative-leaning counsel, aiming to mend fences with Republican lawmakers who have targeted the firm over its positions on environmental, social and governance (ESG) matters.
The move is part of a vocal debate over the role of the U.S. financial services sector as Red State officials charge that ISS’ advice - used by many pension fund and other asset managers to guide voting at annual company meetings - overly favors environmental and social goals.
Essentially, many Republicans say that executives and investors have lost track of earning the best returns as corporations increasingly consider issues like climate change and workforce diversity. Many Democrats, investors and traditional shareholder activists counter that climate change is an investment risk and that companies still do too little on matters like lowering carbon emissions.
ISS said its new “global board-aligned proxy voting guidelines” favor conservative perspectives by urging votes in support of management as the springtime shareholder meeting season kicks off. It will be available along with other specialized ISS policies such as those for faith-based or socially responsible investors.
ISS created the expanded conservative product after talks with pension funds in Republican-leaning states that invest internationally and could not use an existing U.S.-focused version, said Lorraine Kelly, ISS’ head of Investment Stewardship Solutions.
“We went out, we took their feedback, and we created this global policy. We believe it will satisfy many of the Red State pension funds and their legislatures,” she said in an interview.
Several big asset managers have moved to offer clients more choices in how their proxy votes are cast, which could help blunt criticism they face across the political spectrum. State Street Corp’s asset manager arm for instance offers ISS voting options.
Among other things, Texas Republicans have criticized votes that a state fund cast with input from ISS supporting proposals to restrict fossil fuel financing.
The new policy generally will recommend against ESG shareholder proposals, though ISS said it would back some proposals where “greater disclosure will directly enhance or protect shareholder value.”
A policy tilted toward management would mean more support for executive pay, a subject on which conservative pension funds have split.
Based in Maryland, ISS is majority-owned by Deutsche Boerse AG. (Reporting by Ross Kerber; editing by Simon Jessop and Richard Chang)
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