“We will not shy away”: Investors’ warning to ASX’s directors

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Some of the country’s biggest companies have been put on notice to shape up on their climate change policies or risk recommendations to vote against directors.

The Australian Council of Superannuation Investors (ACSI) said it may recommend votes against directors at companies that fall short on managing climate-related risks from 2022.

It comes after ACSI updated its new climate policy which aims to improve how companies, particularly those which are highly exposed, approach climate risks for the long term benefit of investors.

ACSI CEO Louise Davidson said climate change is one of the greatest challenges facing companies and investors.

“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,” Davidson said.

“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.”

Davidson said despite the engagement with ASX200 companies, there are still some who have not listened to investor expectations and the pace of change has been moving too slowly.

“In order to increase the focus on climate-related risks in the companies they invest in, ACSI may recommend members vote against the re-election of directors,” Davidson said.

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 on climate-related action, ACSI will consider recommending to members a vote against directors, which will be decided on a case-by-case basis.

Davidson said these recommendations would occur following extensive engagement and will focus on the individual directors most accountable for oversight of climate change-related risks, such as chairs or those who head sustainability and risk.

The considerations will be applied from 2022, and will initially focus on ASX200 companies in climate exposed sectors including Energy, Utilities, Transport, and Materials.

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,” she said.

“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.”

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