SSGA’s support for key ESG shareholder resolutions increased to more than 70% in 2021, compared with roughly 50% support in 2020. Board diversity and climate risk disclosures rank among the major initiatives driving SSGA’s proxy-voting strategy across all portfolio companies. It also signed on to the Net Zero Asset Managers Initiative and has undertaken efforts to improve its own climate footprint and the diversity of its workforce.
The firm’s stewardship team uses its in-house R-factor tool to evaluate ESG risks unique to each portfolio company. This is a distinct and solid approach that helps the team prioritize certain engagements over others to make the most efficient use of its effort.
The stewardship team is integrated across multiple business units and continues to grow. It favors dialogue with companies to drive positive change, but it largely limits its effort to engagements and proxy voting. It does not take a more activist stance—such as initiating shareholder proposals — to push for change, which limits the strength of SSGA’s ESG agenda.
Most of the assets SSGA oversees track indexes that do not have an ESG focus, making it a permanent source of capital to many publicly traded companies that don’t have strong ESG profiles, such as those in the oil and gas industry. That means it often cannot take certain actions, such as divesting, when portfolio companies don't comply with its requests.
While most of the index-tracking strategies that SSGA offers do not have an ESG focus, it has started to offer more in the major markets that it serves, including the United States and Europe. Additionally, the firm has made efforts to integrate financially material ESG analysis across its actively managed strategies, but these represent about 15% of the firm's assets under management, so the impact likely won't be big compared with the AUM opportunity set that it oversees. Despite efforts to strengthen its ESG credentials, SSGA’s mix of assets adds some enduring challenges to its ESG program.