Steil, Hagerty Demand Answers from ISS for Pushing ESG Initiatives

ISS May Be Unlawfully Breaching its Fiduciary Duties

WASHINGTON (April 17, 2024) — Congressman Bryan Steil (WI-01), a member of the House Financial Services Committee and Senator Bill Hagerty (R-TN), a member of the Senate Banking Committee, sent a letter to the President & CEO of Institutional Shareholder Services (ISS) Gary Retelny demanding information and documents regarding recent statements made by Lorraine Kelly, the company’s Head of Governance Solutions.

In a recent public interview, Lorraine Kelly acknowledged that investors are opposing environmental, social, and governance (ESG) proposals because they are not linked to long-term shareholder value. Despite this admission, ISS has continued to recommend that institutional shareholders support such proposals. This raises concerns that ISS may be breaching its fiduciary duties, prompting Hagerty and Steil to launch a probe into the company’s proxy voting services.

“An analysis of ISS’s vote recommendations reveals that in 2023, ISS backed a majority of environmental, social, and political shareholder proposals submitted by left-leaning proponents...  

“ISS’s dominant market position allows it to exert extraordinary influence over proxy voting, corporate governance, and the long-term returns of American investors,” the members of Congress wrote.

Background:

ISS provides proxy voting services to institutional investors. ISS is a Registered Investment Adviser (RIA) and, therefore, has a fiduciary duty to act in its client’s best interests. However, instead of recommending proxy votes that contribute to long-term shareholder value, ISS appears to be exploiting its influence over proxy voting to advance a partisan political agenda. An analysis of ISS’s vote recommendations reveals that in 2023, ISS backed a majority of environmental, social, and political shareholder proposals submitted by left-leaning proponents, while supporting none of the environmental, social, and political proposals submitted by right-leaning proponents.

CLICK HERE to read the letter.  

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