Background

Environmental, social and Governance (ESG) issues have become an area of increased focus for institutional Investors in recent years with many proxy advisors to institutional investors producing specific guidance on ESG matters and making Recommendations to their institutional shareholder clients, on voting strategy and other aspects of good stewardship.

Given the significant shareholdings in listed companies held by institutional investors and the fact that many investors rely heavily on proxy advisors when making voting decisions, many listed companies play close attention to proxy advisors’ guidelines and voting recommendations. For further details on proxy advisors, including how they are regulated and their influence on listed companies, see Practice Note: Proxy advisors and ESG rating agencies—fundamentals.

This Practice Note focuses on these institutional investor guidelines. For general information on the legal and regulatory framework governing company’s reporting on ESG issues, including the requirements under the Listing Rules, the UK Corporate Governance Code (UKCG Code), the Task Force on Climate-related Financial Disclosures (TCFD) and other reporting frameworks, see Practice Notes: CSR, ESG and human rights reporting