This report shows public data only. Is this your organisation? If so, login here to view your full report.

Institutional Shareholder Services (ISS)

Service Providers Framework 2018

You are in Research and Data Provision » Research/process level

Research/process level

RDP 02. Sources for research and/or rating

02.1. Indicate the types of sources you use for research and/or ratings of companies/sectors/geographies or similar. Tick all that apply.

02.2. Indicate how ESG factors are incorporated into your research and/or rating methodology

02.3. Describe how you define materiality and how this is captured in your research and/or rating methodology as well as final product.

          ISS’ understanding of materiality is sustainability-driven. In our opinion, most aspects of sustainability have a short or     long-term impact on the financial development of a company. The reality is the market sees benefits in ratings that are more disclosure focused, and ratings that are more “materiality” based. E&S QualityScore’s focus on depth of disclosure on metrics most material to the company’s specific industries and peers resonates with investors.
        

02.4. Additional information. [OPTIONAL]

ISS’ ESG data is largely sourced from publicly available data, such as regulated filings, reports, press releases, company web sites, media and NGO reports, and government disclosure.

Proxy Research: ISS’ proxy research reports are based entirely on publicly available data. The key source is usually the most recent publicly-available meeting materials, the contents of which may sometimes be clarified during conversations with the covered company.

Weapons and Sanctions Screening and Sector Based Screening: Data is based on publicly available information, in addition to feedback received from the issuer during the fact-finding dialogue.

Norm-Based Research: ISS Ethix’s norm-based research takes a broader range of sources including input from regulators, stakeholders and NGOs.

Climate Solutions: Climate Solutions data includes both disclosed and modeled emissions data. Publicly reported emissions data is assigned with a ‘trust metric’ to indicate the quality of self-reported data. For all non-reporting companies, or those who report with a low trust metric, ISS-Ethix Climate Solutions utilizes an in-house modeling system which includes over 800 sector and subsector specific models to calculate emissions based on the criteria most relevant to each issuer’s line of business.

Governance and Environment & Social QualityScore: QualityScore indicators focus on corporate disclosure and transparency, therefore all data must be disclosed by a company or by a competent regulatory body, enforcement group, or industry reporting initiative. Data also includes feedback received from the issuer during the data verification process.

In addition, financial data from third party vendors is incorporated in several research report and product profile offerings

 


RDP 03. Stakeholder input

03.1. Describe how you actively include inputs and information, wherever possible, from relevant stakeholders or interested parties, in the research process or in reaching assessment conclusions.

          Quality assurance routines across all ISS products build on extensive peer review throughout the research process and strict enhanced sign-off routines, involving the relevant Team lead and the Head of Research where appropriate.

ISS Proxy Research engages with companies to clarify anything which is not clear in the publicly available information on which the analyst bases the vote recommendations. In certain markets and subject to ISS’ guidelines, a segment of companies are provided with an opportunity to review a draft of their proxy research report for purposes of verifying the factual accuracy of the report. Companies are always entitled to receive a free copy of the final proxy research report which has been published by ISS about that company and issued to subscribing clients. If a material factual error is brought to the attention of the research analyst post-publication, they will correct the error, reissue the report and issue a formal Alert which is provided to all subscribing clients who received the original report.

ISS-Ethix’s Global Norms and Controversial weapons research teams establish the accuracy of any allegations against a company through active company and stakeholder dialogues. ISS-Ethix conducts fact-finding dialogue with companies as soon as research into an allegation is initiated. As part of this dialogue, the company is informed about the allegation and offered an opportunity to present its position. This dialogue is ongoing for as long as ISS-Ethix maintains its assessment that a company is involved in verified or alleged (and unaddressed) violations of global norms, or involved in controversial weapons. As part of this fact-finding dialogue, the company is also informed about the overall conclusion and provided with the analysis. This latter point is particularly important as ISS-Ethix recognises that companies (a) often have information that is not available through other sources, and (b) as a matter of principle, it is essential that companies have the opportunity to review and, as appropriate, challenge the assessments. The quality control function within the ESG research team supports timely, comprehensive and transparent action when errors are detected.

Companies who are within the coverage universe of certain of ISS’ data products, including ISS Governance and Environment & Social QualityScore products, are invited to review, verify and provide feedback on the data used to determine their scores via a complementary a year-round data verification tool, accessed through ISS Corporate Solutions’ Governance Analytics platform. Submissions of corrected or updated data factors can be made online through the platform. 

We greatly value participation in stakeholder initiatives, both internally to inform the development of our research methodologies, and externally in evaluating companies in our research. This is because such initiatives have a threshold of conduct for participation, give access to shared learning on best practice from industry peers, and confirm and reaffirm the company’s commitment to expected standards. In addition to standard industry initiatives, multi-stakeholder initiatives provide a risk-management framework supported by stakeholders. Furthermore, international initiatives enable a standardized and comparable disclosure structure across markets. The selection process of initiatives is stringent, and only a few are considered both reputable and relevant.
        

03.2. Additional information. [OPTIONAL]


RDP 04. Up-to-date assessment and ratings

04.1. Indicate how you ensure that your ESG assessment of companies/ sectors/ geographies or similar is up-to-date and that new information is incorporated or new assessments are conducted at reasonable intervals.

04.2. Additional information. [OPTIONAL]

ISS conducts systematic source monitoring across its research teams so that assessments and ratings can updated as soon as new information becomes available. Additionally, all of ISS’ data products are updated at least annually, with updates scheduled according to financial data release. Information about corporate events is tracked via news sources and updated as financial releases become available.

ISS-Ethix’s Controversy Watch processes information about corporate involvement in ESG controversies on from news and stakeholder sources. ISS-Ethix’s Controversy Watch team is responsible for the review, triage and processing of news from a wide variety of sources. The team processes information about corporate involvement in ESG controversies from more than 4,400 public sources globally in 15 languages and an additional 145 expert stakeholder sources.

Further, ISS engages with certain companies who are within the coverage universe of ISS’ data products as part of the standard research process. The objective of this interaction is to ensure that our research is based on the most comprehensive and accurate information available, and is for the benefit of all ISS clients. The frequency of this engagement varies by product. 

Much of the information included in Governance QualityScore comes from the company’s circular/proxy filing for its annual shareholder meeting, and the ISS Research teams’ interpretation and proxy voting recommendations to our clients for that meeting. While companies have the ability most of the year to update information for Governance QualityScore, this ability is restricted during the time ISS is gathering the information from the proxy and preparing its proxy analysis. Once the proxy voting recommendations report is released to institutional clients, companies are able to once again review their Governance QualityScore data profiles and update/correct information.

The information in Environmental & Social QualityScore is sourced from company publications including mainstream filings, Sustainability and CSR reports, Integrated Reports, publicly available company policies and information on company websites. Confirmation of company participation in or formal endorsement of authoritative multi-stakeholder initiatives is collected from websites or member list made available by the relevant initiatives. Unlike Governance QualityScore, there is no blackout period surrounding company proxy analysis.

Online QualityScore profiles are updated once daily, at approximately 5 am Eastern. QualityScore scores, the online website may not yet reflect the updated scores and profile. The online score and profile will be updated the next day. During the year outside of the annual meeting, ISS reviews new filings to keep QualityScore up to date, incorporating changes to bylaws, adoptions and redemptions of poison pills, and other events.

Companies who are within the coverage universe of ISS Governance and Environment & Social QualityScore products, are invited to review, verify and provide feedback on the data used to determine their scores via a complementary a year-round data verification tool, accessed through ISS Corporate Solutions’ Governance Analytics platform. Submissions of corrected or updated data factors can be made online through the platform.


RDP 05. Balanced research and assessment

05.1. Indicate how you typically ensure a balanced approach to your research methodology and assessing/rating of companies/sectors/geographies or similar. Tick all that apply and explain your approach to each option.

Type of indicators

Explain your approach

          The indicators within the proxy research reports are those which our clients have told us they want to see and consider material. These are typically a mix of quantitative and qualitative indicators, for example when discussing executive compensation.
        

Explain your approach

          In the proxy research reports, ISS will make reference to past performance where it is relevant to the holistic analysis of the resolutions.

ISS-Ethix Norm-Based Research reports will refer to prior actions if relevant, and track a trend indicator on the overall health of the engagement.

In the ISS Governance QualityScore profiles, the trend indicator highlights whether a company's performance by indicator is improving or deteriorating over time. The score graph on the front page of the report shows this graphically for the company level score, and the top-level pillar scores (board, compensation, shareholder rights and audit and risk.)

Similarly in the ISS Environmental & Social QualityScore, features trend indicators, key disclosures, key omissions, and industry alignment. The front page of reports provides a snapshot of the Environmental and Social pillar scores, and each of the four underlying category scores for each pillar.
        

Explain your approach

          As ISS seeks to empower clients in their investment, voting and engagement activities, the environmental, social and governances indicators served to them will be those they have chosen
        

05.2. Additional information. [OPTIONAL]


RDP 06. Consistency and comparability

06.1. Describe the control processes in place to ensure quality of research.

          Quality Management Systems and Standards

Quality assurance routines across all ISS products build on extensive peer review throughout the research process and strict enhanced sign-off routines, involving the relevant Team lead and the Head of Research where appropriate.

Issuer Engagement

ISS engages in a fact-finding dialogue with issuers covered under certain screening products, offering an opportunity for the issuer to present clarifying information. 

ISS Proxy Research engages with companies to clarify anything which is not clear in the publicly available information on which the analyst bases the vote recommendations. In certain markets and subject to ISS’ guidelines, a segment of companies are provided with an opportunity to review a draft of their proxy research report for purposes of verifying the factual accuracy of the report. Companies are always entitled to receive a free copy of the final proxy research report which has been published by ISS about that company and issued to subscribing clients. If a material factual error is brought to the attention of the research analyst post-publication, they will correct the error, reissue the report and issue a formal Alert which is provided to all subscribing clients who received the original report.

ISS-Ethix’s Global Norms and Controversial weapons research teams establish the accuracy of any allegations against a company through active company and stakeholder dialogues. ISS-Ethix conducts fact-finding dialogue with companies as soon as research into an allegation is initiated. As part of this dialogue, the company is informed about the allegation and offered an opportunity to present its position. This dialogue is ongoing for as long as ISS-Ethix maintains its assessment that a company is involved in verified or alleged (and unaddressed) violations of global norms, or involved in controversial weapons. As part of this fact-finding dialogue, the company is also informed about the overall conclusion and provided with the analysis. This latter point is particularly important as ISS-Ethix recognises that companies (a) often have information that is not available through other sources, and (b) as a matter of principle, it is essential that companies have the opportunity to review and, as appropriate, challenge the assessments. The quality control function within the ESG research team supports timely, comprehensive and transparent action when errors are detected.
Companies who are within the coverage universe of certain of ISS’ data products, including ISS Governance and Environment & Social QualityScore products, are invited to review, verify and provide feedback on the data used to determine their scores via a complementary a year-round data verification tool, accessed through ISS Corporate Solutions’ Governance Analytics platform. Submissions of corrected or updated data factors can be made online through the platform.

Methodology Review Boards

ISS maintains a Governance Methodology Review Board and a Responsible Investment Methodology Review Board to ensure that all relevant research methodologies are in line with global norms and market trends. 
Methodology reviews are conducted annually by the Methodology Review Boards, with input from cross-functional teams across the research teams and clients. The mission of the Board is to provide the clearest possible research methodology to all stakeholders and consumers of ISS products while ensuring leadership and alignment with global norms and market trends in the governance, sustainable and responsible investing industries.
Additional reviews occur following significant events, including the following:
•	Normative developments (international law in particular) of relevance to ESG standards
•	Statements by authoritative sources, such as UN bodies, the International Labour Organization, and multi-stakeholder initiatives
•	Updates in local market regulations
        

06.2. Additional information. [OPTIONAL]


RDP 07. Emerging ESG issues and trends (Private)


RDP 08. Client use of outputs (Private)


Top