Australian investor group targets boards over climate-related risks

Australian companies are set to come under greater pressure over climate change after a major investor group released new expectations for boards covering disclosure, scenario planning and advocacy.

The Australian Council of Superannuation Investors (ACSI), which represents 36 investment firms that together manage around 10 percent of each ASX 200 member, has published a list of requirements for companies that face ‘material climate-related risks’.

The move is the latest by an investor or investor group that seeks to align business strategies with the goals of the Paris Agreement on climate change, which aim to keep global warming below 1.5°C. 

The ACSI calls on companies exposed to climate risk to report under the TCFD framework, align their strategy with the Paris goals and set a target of net-zero emissions by 2050. It also says companies should align their ‘policy and advocacy activity’ with global climate targets, among other measures. 

The organization says it may recommend its members vote against the boards of ASX 200 companies that fail to meet its expectations, although action will be decided on a case-by-case basis. 

‘Our recommendations will focus on the individual directors most accountable for oversight of climate change-related risks – for example, company chairs and the chairs of the rsk and sustainability committees or similar,’ it says in a statement.

The ACSI has also endorsed the say-on-climate campaign launched by British hedge fund The Children’s Investment Fund (TCI). The campaign is pushing companies to produce a ‘credible’ transition plan to achieve net-zero emissions and offer a shareholder vote on progress each year at the AGM. 

‘While much of this work is already conducted through engagement between investors and companies, a say-on-climate advisory vote would provide further focus, transparency and accountability,’ says the ACSI.

So far, 18 companies have voluntarily adopted a say-on-climate vote, according to the campaign’s official website. They include ASX-listed Rio Tinto, Santos and Woodside Petroleum.

Australian companies already have a strong culture of ESG reporting and tying sustainability issues to executive pay, according to a recent article on IRmagazine.com. 

That’s due to a range of factors such as the regulatory focus on climate risks, long-term investment culture and high proportion of energy and mining companies, which have a big impact on the environment, explains the article.