Corporate Governance

Shearman & Sterling LLP 14 | The Climate Changes for ESG Proxy Statement Disclosures The annual proxy statement can be a valuable medium for communicating the board's engagement on ESG issues. It provides an opportunity to explain what ESG issues are important to the company and how the board is overseeing ESG matters. The company can also provide details regarding the board's oversight in the descriptions of the responsibilities of board committees. Disclosures around risk management should also reflect how boards consider relevant ESG issues. For some companies, where ESG issues are particularly important for long-term growth, director nomination factors may include knowledge and experience with the relevant ESG issues. Additionally, boards may wish to consider whether performance metrics for executive compensation should also be tied to achieving targets related to ESG matters. If so, integration through disclosure in the "Compensation Discussion and Analysis" section would demonstrate this commitment. REPORTING STANDARDS Several global reporting frameworks provide guidelines and metrics for companies to measure and assess their sustainability initiatives. Reports based on these metrics provide valuable information to a wide range of stakeholders, including investors, suppliers, employees, customers and regulators who are increasingly focused on environmental and social topics and their governance. GRI The Global Reporting Initiative (GRI), established in 1997, developed the first corporate sustainability reporting framework and is used by the majority of companies reporting sustainability information today. GRI standards include a broader scope of disclosure than most other frameworks. SASB The Sustainability Accounting Standards Board (SASB), established in 2011, provides standards for sustainability information that are designed to be financially material to investors. SASB standards are also specifically identified by industry type or sector, and are currently available for 77 different industries. SASB standards are geared towards companies and investors that are focused on analyzing the material sustainability factors that are likely to impact the financial performance of the company, as well as developing standards for disclosure of material sustainability information to investors in SEC filings. Annual Report Disclosures The company's Annual Report on Form 10-K can also be a vehicle for enhanced ESG messaging. Although we are a long way away from incorporating ESG metrics in financial reporting that is central to an Annual Report, investors and other stakeholders are increasingly looking for more integration between financial and sustainability reporting. They want to see that a company's approach to its core ESG issues is part of its business strategy. There are a few small steps that can be taken to ensure that the ESG message delivered in specialized reports is reflected in periodic reporting: • Consider whether the discussion of strategy is consistent with the ESG message that is delivered in the sustainability reporting • Consider whether known trends and uncertainties disclosures required in "Management's Discussion and Analysis of Financial Condition and Results of Operations" should address environmental and other sustainability issues • Revisit environmental risk disclosures to ensure that the tone is consistent with the perspective the company is taking with respect to these risks

• Cover