ESG Research Update

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Single shareholder ESG proposal has biggest impact

New research from International Shareholder Services (ISS) reveals those companies that received just one ESG-related shareholder proposal had greater sustainability improvement versus those with many such proposals.

Even though just a fraction of shareholder proposals are agreed to by companies, the first shareholder proposal seems to have the greatest impact.

Key findings include:

  • Since 2014, 30 per cent of the environmental and social proposals examined in the paper received a passing vote - just 3.26 per cent of all relevant proposals

  • Corporate responses to shareholder resolutions can provoke improved sustainability outcomes for companies over the medium and long-term

  • Sustainability scores increased notably after the first ESG shareholder proposal

  • Once many proposals were received over consecutive years, no correlation is found regarding improvements in sustainability scores

  • Companies that are slow to move on ESG issues are targeted by shareholders over and over, with companies receiving the greatest number of proposals the most concerning when it comes to ESG

  • Investors identify slow-to-improve companies and target them repeatedly

  • The researchers say investors should be mindful of companies that don’t adequately address shareholder proposals the first time around, or those that are unconvincing in terms of whether concerns will be addressed in future

  • Higher shareholder support of ESG proposals wasn’t found to correlate to any significant improvement in sustainability, in fact, the opposite was true as it showed a lack of responsiveness by the company

  • Vote support increases after many failed proposals or engagements with investors

  • Low voter support and less frequent shareholder proposals may show shareholders have faith in the company’s ability to address ESG issues and mean the company is engaging with shareholders prior to voting

For the full report, contact ISS

ACSI reports on ASX 200 climate change strategies

The Australian Council of Superannuation Investors’ (ACSI) annual benchmark analysis reveals ASX 200 companies’ climate disclosures are getting better, with a few crinkles to iron out. ACSI’s research shows the Task Force on Climate-related Financial Disclosures (TCFD) framework is being used the most by high-risk sector companies - 60 ASX 200 companies so far use the framework. This number is five times 2017 numbers.

Within those 60 companies, 83 per cent of energy companies are using it, an huge increase on 2018 numbers (36 per cent). Half ASX 200 utility companies are using the framework, up from 25 per cent in 2018; 83 per cent of transport companies, up from 50 per cent; and 71 per cent of banks, up from 29 per cent.

Within those 60 companies using the framework, 32 engaged in scenario analysis, which was up from 18. The most common scenario was a 1.5-degree pathway. Twenty-eight are undergoing scenario analysis or have it in the pipeline for the coming financial year.

So far 18 companies listed in the ASX 200 have set net-zero targets:

  • BHP Group, Dexus

  • Fortescue Metals

  • Graincorp

  • Insurance Australia Group

  • Qantas

  • South32

  • Scentre Group

  • Stockland

  • The Star Entertainment Group

  • Santos

  • Suncorp

  • Vicinity Centres

  • Woodside

Thirteen out of the 18 haven’t revealed the alignment between their short and medium-term strategies and the target. Four companies have revealed short, medium and long-term emissions targets.