Australian investors push companies for impact of ESG issues

Aug 02, 2012
<p>Survey finds IROs fielding more questions on environmental impact and governance following legislative changes</p>

Institutional investors are increasingly pressing Australian and New Zealand companies for information on how ESG issues will affect the bottom line.

The Australasian Investor Relations Association’s (AIRA) biannual survey of IROs finds two thirds of respondents have fielded more questions on ESG issues in the last 12 months than before.

Almost three quarters also say they have received requests for more information on the ‘broader impact’ of company operations and governance.

The findings come a month after Australia finally introduced its controversial carbon tax, which will force the biggest polluters to pay a levy based on how much carbon they produce.

The tax, which took years of political wrangling to implement, is expected to hit hard Australia’s large mining and metals industry. Australia’s opposition party says the tax will cost jobs and has pledged to remove it if elected at the next election.

‘Major investors need to know how corporations are tackling issues like carbon emissions, water use and other important ESG concerns because they want to quantify any bottom-line costs,’ comments AIRA’s CEO Ian Matheson in a statement announcing the results of the survey.

‘In many cases, the impact can be very significant not just in the immediate term but also for the long-term viability of a business.

‘With respect to governance, there is also a much sharper focus on board structure and remuneration practices thanks to the new two-strike law, which could see a number of directors being voted out by unhappy shareholders this year.’

Under Australia’s two-strike law, any company that sees a protest of more than 25 percent against its remuneration report in two consecutive years will be forced to put its board up for re-election.

Conducted in May, the AIRA survey asked a range of questions on IR practices and investor sentiment, receiving responses from 60 Australian and New Zealand companies listed on the ASX 200 benchmark index.

The survey also finds that IR professionals are getting more involved in board-level discussions: respondents say they are receiving more requests for advice from directors, while more than two thirds attend board meetings.

In the area of trading, a majority of IROs call for more oversight of market participants such as high-frequency traders and dark-pool operators.

Underlining their concern over current trading practices, 50 percent of respondents say high-frequency trading leads to increased volatility and 70 percent believe short-selling ‘negatively’ affects stock trading.

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