Apathetic Directors Face Stern Climate & “Greenwashing” Warning
(27 April 2021 – Australia) Australia’s major superannuation funds announced they will vote against directors re-election who they assert are not managing climate risks actively enough, while company directors could also be sued for “greenwashing” their commitments to achieve their net zero carbon pledges or emissions reductions targets.
The Australian Council of Superannuation Investors (ACSI), representing 36 Australian and foreign super and institutional investors with combined assets of more than A$1 trillion, will focus on directors and chairmen of board risk committees and sustainability committees under the policy. ACSI expects large Australian corporates face material climate risks to set emission reduction targets that align to the Paris Agreement, disclose climate risks by adopting the methodology set out by the Task Force on Climate-related Financial Disclosure and stress test their portfolio and strategy against various climate scenarios.
ACSI will begin engagement with boards on the new policy immediately but will not start voting against directors until 2022. Woodside, Santos, Rio Tinto, and Oil Search are among the groups that have already agreed to hold non-binding votes on their climate action reports in 2022.
A 2020 report by Zoe Whitton, previously Citi Senior ESG analyst now executive director of consultancy Pollination Group, found over 3000 major global enterprises have commenced climate-related risk disclosure, inferring that two out of three corporates are furnishing investors guidance with how climate change or the transition to a low-emissions economy could affect operations.
Importantly however, Citi found only a third of current market disclosures are “quality”, and the majority of disclosures are “highly variable”, “challenging to compare” and avoided “disclosing comparable financial impacts”, while often companies were producing lengthy sustainability reports that had little or no connection to company strategy.
“We’ve seen some steps forward but there is still a lot of room for companies to move. In terms of protecting the investment value in these companies, we are really keen for companies to make sure they are embedding climate risk, and consideration of opportunities, into their strategy going forward” stated ACSI CEO, Louise Davidson.
“We’ve really reached the view that the best accountability mechanism for our members as shareholders of companies is to make it really clear to directors that we hold them accountable for the success or failure of their dealing with climate change” she added.