Superannuation funds are under fire after a new report found their support for climate change policies brought forward by other investors was dwindling.
The Australasian Centre for Corporate Responsibility (ACCR) found that super funds in 2019 voted against more climate-related shareholder proposals than they supported.
Shareholder proposals are documents brought before boards of publicly listed companies that advocate for a change in the way they do business.
Shareholders are able to vote on these proposals during the company’s annual general meeting, effectively forcing the board to take action.
In 2019, super funds supported only 42 per cent of shareholder proposals addressing climate change issues.
That’s down from the 55 per cent recorded in 2018, though it still remains above the 35 per cent recorded by ACCR in 2017.
The fall in support for climate-related proposals comes despite many funds increasingly advocating for more socially responsible investment practices.
ACCR’s director of climate and environment Dan Gocher said the results showed some funds’ voting records didn’t match their public commitments.
“Many of the funds which make up the $3 trillion Australian superannuation industry have made public commitments to their members about responsible or sustainable investment,” he said.
This report shows that the voting behaviour of several of these funds is at odds with these commitments.”
Both profit-to-member funds (including industry super funds) and for-profit retail funds were found to have voted against these proposals.
However, ACCR noted that members of associations advocating for more climate and social-conscious investing were more likely to vote in favour.
These organisations include the Australian Council of Superannuation Investors (ACSI), the Investor Group on Climate Change (IGCC), and the Responsible Investment Association Australasia (RIAA).
Support based on effectiveness
Industry fund AustralianSuper – the nation’s largest fund with more than $170 billion in assets – was one of the funds ACCR found to have rejected more climate proposals than it supported.
But Andrew Gray – the fund’s director of environmental, social, and governance (ESG) and stewardship – said AustralianSuper voted on proposals based on their expected effectiveness.
“AustralianSuper actively consider every climate change resolution on which we vote,” Mr Gray said.
“The fund will support shareholder resolutions that are effective in achieving their stated aims.”
Rather than rely solely on shareholder proposals to effect change, Mr Gray said AustralianSuper regularly engages the boards of companies it invests in directly on these issues.
“Irrespective of our final vote, we always include shareholder proposals as an engagement point,” Mr Gray added.
“Accordingly, we have engaged with the companies on all of the Australian 2019 shareholder proposals.”
The fund is not alone in using this strategy.
ACSI chief executive Louise Davidson told The New Daily direct engagement often leads to better outcomes for members than shareholder proposals.
That’s because these proposals need to be well written and thought-out to be effective, and often this is not the case.
In at least one past instance, Ms Davidson said, a shareholder proposal was rejected by voters because its contents were already company policy.
Even when they are well written, Mr Davidson cautioned they might not be the best way to force a business to change.
“Shareholder proposals are quite blunt instruments,” she said.
Other levers for effecting change, like having a dialogue with companies, and making clear what it is investors want and when they want it, is a more appropriate way to approach things initially.”
If those conversations fail, then investors can look to force a company’s hand through a shareholder proposal.
The New Daily is owned by Industry Super Holdings