Further to our prior report: "ISS Launches Climate Change Voting Framework & 'Service' for Investors," Aon described the new ISS Climate Awareness Scorecard that ISS informed in this August 3rd post it would begin to include in certain of its proxy voting/research reports as part of its new custom climate voting service - purportedly to provide investors "a comprehensive climate risk profile of the companies under review." According to Aon, the 3-part scorecard addresses climate risk exposure, climate performance, and climate disclosure, as follows:
- Climate Risk Exposure: Acknowledging that different industries have different exposure to climate change, this section is made up of two components:
- Industry Climate Risk Exposure – Companies are assigned a low, medium, or high climate risk exposure based on their specific industry and business activities.
- Incident-Based Risk Exposure – This indicates whether the company is violating the standards of the Paris Agreement or other universally accepted climate norms.
- Climate Performance: Current and future climate performance relies upon meeting climate targets, as well as avoiding climate-related risks. This section is also comprised of two components:
- Current Climate Performance – This portrays a company’s current direct and indirect greenhouse gas (GHG) emissions. Emission Intensity (direct GHG emissions, normalized by revenue) is contrasted with Average Peer Emission Intensity.
- Forward-Looking Climate Performance – Each company is assigned a Carbon Risk Category (Leader, Performer, Underperformer, or Laggard) and Rating (0-100 scale, where 100 is best).
- Climate Disclosure: This section follows the nomenclature of the Task Force on Climate-Related Financial Disclosure (TCFD) to rate a company on its disclosure across four categories — climate governance, strategy, risk management, and metrics and targets — with a classification of Standard Unmet, Partial Alignment, Meets Standard, or Exemplifies Standard.
In its August post, ISS elaborated on these three topics, and noted that the scorecard inputs would be sourced from publicly available data and its proprietary analysis of a company’s climate change-related disclosures, practices, and performance record (including its industry risk group), and draw on other ISS data and analysis offerings such as ISS ESG Climate Solutions, ISS ESG Carbon Risk Rating, and ISS ESG Norm-Based Research.
Aon indicates that the scorecard has recently been added to some ISS Benchmark and Specialty policy research reports.
Access additional resources on our Proxy Advisors page. This post first appeared in the weekly Society Alert!