The Australian Council of Superannuation Investors is seeking the integration of climate change risk in super fund investment strategies.
The ACSI (Australian Council of Superannuation Investors) has announced a new climate change policy under which it could recommend that its members vote against directors at companies that fall short on managing their climate-related risks from 2022.
Established in 2001, the ACSI represents investors managing more than AUD 1 trillion (USD 780 billion) in retirement savings and hold about 10 percent of the shares in the top 200 companies listed in Australia.
The ACSI tougher stance comes soon after APRA (Australian Prudential Regulation Authority) issued new draft guidance for banks, insurers and superannuation trustees on the proper identification and mitigation of climate-related risks.
“Climate change risks are deeply embedded in the financial system and impact all sectors and asset classes,” said ACSI CEO Louise Davidson. “For long-term investors, this poses a serious challenge to long-term value creation across investment portfolios.”
“Not all companies have listened to investor expectations and in many cases, the pace of change is moving too slowly,” she added.
According to Davidson, the ACSI may recommend that members vote against the re-election of directors in order to increase the focus on climate-related risks in the companies they invest.
Such recommendations would occur following extensive engagement and will focus on the individual directors most accountable for oversight of climate change-related risks. This could refer to chairs, chairs of the risk committee or chairs of the sustainability committee or similar, for example.
These considerations will be applied from 2022 and will initially focus on ASX200 companies in climate exposed sectors including energy, utilities, transport and materials.
Under the new climate policy, the ACSI expects companies to adopt and detail a corporate strategy in line with the international Paris agreement – which aims to limit heating to 1.5 Celsius and commit to net zero emissions by 2050.
“ACSI members are integrating climate change risk into the investment strategies in order to maximise long-term benefits for superannuation fund members,” Davidson said, adding that the new policy will assist council members in ensuring companies they invest in are managing and disclosing climate-related risk.
She iterated that the approach that investors take to manage climate-related risks has to be more active as the impact of climate change becomes a reality.
“ACSI and our members will constructively engage with companies, however, where a company fails to meet investor expectations, we will take action,” she said. “Our members will not shy away from this responsibility.”
The ACSI’s climate policy also supports an investor ‘Say on Climate’, which calls on climate exposed companies to adopt an advisory investor vote on climate reporting at company annual general meetings in 2022.
“The vote will allow investors to voice concerns where issues arise and provide further focus, transparency and accountability,” Davidson said.