ACSI launches new climate change policy
The Australian Council of Superannuation Investors (ACSI) may recommend votes against directors at companies that fall short on managing their climate-related risks from 2022, under its new climate change policy.
ACSI’s updated climate change policy aims to improve how companies, particularly those which are highly exposed, approach climate risk for the long-term benefit of investors.
Along with escalation, the policy supports an investor ‘Say on Climate’ and restates ACSI’s support for the Paris Agreement and the need for companies to commit to pathways for net-zero emissions by 2050 to meet those Paris targets.
ACSI CEO Louise Davidson said: “Climate change is one of the greatest challenges facing companies and investors today.”
“Climate change risks are deeply embedded in the financial system and impact all sectors and asset classes. For long-term investors, this poses a serious challenge to long-term value creation across investment portfolios.
“Our active and constructive engagement with ASX200 companies has led to major improvements in company practices – but there is much more to be done to address climate risk.
“Not all companies have listened to investor expectations and in many cases, the pace of change is moving too slowly. In order to increase the focus on climate-related risks in the companies they invest ACSI may recommend members vote against the re-election of directors.”
The policy outlines ACSI and its members’ expectations of companies that are exposed to material climate related risks, including disclosure through Task Force on Climate-related Financial Disclosures (TCFD), undertaking scenario analysis, setting Paris aligned emission targets and aligning policy and advocacy.
Where companies fall short, ACSI will consider recommending to members a vote against directors. This will be done on a case-by-case basis. Such recommendations would occur following extensive engagement and will focus on the individual directors most accountable for oversight of climate change-related risks, for example Chairs, Chairs of the Risk Committee or Chairs of the Sustainability Committee or similar.
These considerations will be applied from 2022, and will initially focus on ASX200 companies in climate exposed sectors including Energy, Utilities, Transport, and Materials.
Ms Davidson said that the policy outlines ACSI’s expectations and how investors may use their ownership rights to address climate risk in their investments.
“As the impact of climate change becomes a reality, the approach that investors take to manage these risks has to be more active. ACSI and our members will constructively engage with companies, however, where a company fails to meet investor expectations we will take action. Our members will not shy away from this responsibility.”
The policy also supports an investor ‘Say on Climate’, calling on climate exposed companies to adopt an advisory investor vote on climate reporting at company annual general meetings in 2022.
ACSI and other investors have already secured commitments for advisory ‘Say on Climate’ votes at company AGMs for Woodside, Santos, Rio Tinto, and Oil Search in 2022.
“Given the high level of exposure of the Australian economy to climate risk, investors are calling for a ‘Say on Climate’ and increased transparency around how companies are managing climate risk.”
“The advisory vote on climate reporting supports engagement between companies and investors as companies develop and execute climate transition strategies. The vote will allow investors to voice concerns where issues arise and provide further focus, transparency and accountability.”
“ACSI members are integrating climate change risk into the investment strategies in order to maximise long-term benefits for superannuation fund members. ACSI’s new policy will assist our members in ensuring companies they invest in are managing and disclosing climate related risk.”
Media contact: Nathan Robertson (0423874662) nrobertson@acsi.org.au
ACSI expectations for companies on climate related risks
- Disclose their approach to climate-related risks by adopting the TCFD
- Align corporate strategy to the Paris Agreement and the objective of net zero emissions by 2050
- Undertake scenario analysis and stress test the resilience of their portfolios and company strategy against climate change scenarios.
- Set short, medium and long-term emissions reduction targets that align to the Paris Agreement.
- Analyse and manage physical risk by undertaking analysis of the physical risks arising for assets within its portfolio.
- Align policy and advocacy activity so that it is consistent with the goals of the Paris Agreement, including activity undertaken both directly and via industry associations.
- Plan for just and equitable transitions by taking employees, communities and other stakeholders into account in transition strategy and planning.