Climate stewardship in Australian listed equities

Climate risk management has been a priority theme in our stewardship activities for several years, and the 2022 Australian AGM season was no exception. The number of climate-related shareholder resolutions is increasing, providing shareholders with a ‘say on climate’ is gaining traction and our collaborative engagements continue to gather steam.

Shareholder resolutions

In our 2022 Responsible Business Report, we reported that shareholder resolutions were a prominent feature in the 2021 AGM season. They continued to be so in the 2022 AGM season. Shareholder resolutions relate to a range of issues, however we are seeing an increasing proportion relating to climate change. These resolutions include those centering on requests for greater disclosure of emissions reduction targets and plans to cease financing of fossil fuel projects, as well as capital expenditure and asset decommissioning plans in the context of the energy transition. Read more about shareholder resolutions in 2022 AGM season and how we voted in our Engagement and Voting report.

Say on climate

In late 2021, ASX-listed BHP Group Ltd. became the first Australian company to provide shareholders the opportunity to have a ‘say on climate’ - a company-initiated non-binding advisory vote on its climate change policy, actions, targets, and disclosures. Several companies followed suit in the 2022 AGM season, including AGL, South32 and Origin Energy. We believe that ‘a say on climate’ is an effective way for companies to gauge investor support for their climate targets and activities by providing an avenue for shareholders to communicate their views.

Collaborative engagements

We are active members of or signatories to a number of climate-focused organisations and initiatives, including:

• International Investor Group on Climate Change

• Investor Group on Climate Change

• Climate Action 100+

• Net Zero Asset Managers Initiative

• Glasgow Financial Alliance for Net Zero

• Australian Sustainable Finance Initiative

• Ceres

• Climate Disclosure Project

• United Nations-supported Principles for Responsible Investment

As members and/or signatories to these initiatives, we are part of collective efforts that aim to improve the management of climate-related risks and opportunities at the company, industry and broader system levels.

ESG themes gaining momentum in 2023 and beyond

We expect climate to remain an important engagement theme in 2023 and beyond, and we note the increasing focus on interrelated themes for key areas of risk for businesses, particularly biodiversity and nature loss. We continue to follow the development of the Taskforce on Nature-related Financial Disclosures’ draft framework for reporting nature-related financial risks, as well as the introduction of standardised sustainability reporting via adoption of the ISSB standards.

We also expect the social elements of climate change to increase in prominence as many stakeholders grapple with managing the risks and opportunities relating to workforces and communities as the energy transition progresses - i.e. the just transition.

Active ownership helping drive shareholder value

We believe that an active ownership approach is critical to encouraging companies to manage ESG risks and opportunities sustainably and responsibly to support shareholder value.

Our approach is underpinned by principles relating to a healthy environment, inclusive society and strong governance. Our stewardship activity also aligns to the requirements of the Australian Asset Owner Stewardship Code.

In addition to exercising our proxy voting rights, we engage with companies on material issues both directly and via our participation in collaborative initiatives. It is through these activities that we seek to build value in pursuit of our purpose, which is to protect and grow the long-term retirement savings of working people.

For more updates on our Australian listed equities stewardship activities in relation to climate and other material ESG issues, please read our Australian Listed Equities Engagement and Voting Reports.