About ACSI

ACSI was created to be a strong voice on financially material sustainability and corporate governance risks and opportunities. Our members include Australian and international asset owners and institutional investors with more than $1.9 trillion in funds under management.

Through our company engagement, policy advocacy, research and education, ACSI supports members in exercising active ownership, which enhances the long-term value of the retirement savings entrusted to them to manage.

ACSI members can achieve value for their beneficiaries through genuine and permanent improvements to the environmental, social and governance practices of the companies in which they invest.

ACSI's focus is on the ASX300, and our comments reflect this context.
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Summary position

ACSI's focuses on promoting strong, fit for purpose governance of ASX-listed companies, to support sustainable investment outcomes.

Governance mechanisms that promote transparency, accountability and fair treatment of investors help support long-term value creation and bolster Australia's reputation as a trusted investment destination.

Effective governance aligns company decision making with sustainable long-term performance and clear accountability supports better strategic decision making and oversight.

For superannuation fund beneficiaries invested across the ASX, strong governance supports the long-term performance of their retirement savings.

ACSI has long supported the 'if not, why not' approach, and we encourage listed entities to engage with us in relation to their chosen approach to governance. ACSI welcomes the explanations on why each Principle matters to good governance. We encourage listed entities to consider the governance settings appropriate to their organisation, and provide decision useful information to investors.

While we support initiatives that genuinely streamline duplication, we are cautious where messaging suggests that governance is a form of red tape. We also hold reservations that some entities, particularly those at the lower end of the index, will provide less transparency. We recommend that the ASX consider how it can encourage entities to adopt good governance and disclose meaningful information, given the value investors place on these matters.

Our recommendations are consistent with ACSI's support for a principles-based approach. We support greater specificity where it improves the usefulness and comparability of disclosure for investors, addresses matters that may otherwise receive less attention, and prompts boards to explain their approach without prescribing a particular outcome. In keeping with the 'if not, why not' framework, reference points should operate as triggers for explanation, not bright-line rules.

We welcome the focus on skills, experience, knowledge, diversity and independence of the board, and the focus on corporate culture, which are fundamental to shareholder value.

Process disclosure is a helpful start. Investors are looking for comfort that the risks and opportunities are well managed. The provisions can be interpreted sensibly to disclose useful information the aims of the process and how it works in practise, rather than detailed step by step descriptions.

We encourage the ASX to consider how it can strengthen the provisions by reference to internationally recognised standards of corporate responsibility such as the UN Guiding Principles on Business and Human Rights and relevant OECD Guidelines.

The proposal to retain the measurable objective that boards have at least 30 per cent female directors is concerning. While we note the public comments suggesting the 30 per cent figure has been retained to in favour of broadening the diversity conversation beyond gender to encompass skills, background and life experience. This is an unnecessary dichotomy. Entities can and should be capable of setting a measurable objective for gender balance on boards, (such as 40/40/20) while also taking other aspects of diversity into account in board composition and succession planning. While the draft measurable objective is expressed as a floor, there is significant risk that it is interpreted as a goal.

We also recommend:

• reinstating the references to time periods when considering director independence. While ACSI recognises the intent to focus assessment on substance, these references do not act as a bright line rule and their removal risks reduced transparency for investors and greater variability in how 'independence' is assessed and then disclosed across the market
• providing context in the Explanatory Materials to guide listed entities on the broad range of risks that may be material by providing references that include financial, non-financial, strategic, operational, environmental, social, governance or other risks

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Set out below is our response to the each of the draft 5th edition’s Principles, followed by our response to the ASX's specific consultation questions.

Please see attached detailed responses to the consultation questions.