Additional comments to Item LEA 06.3 -
BHP corporate climate lobbying trade associations - comments from Michael Wyrsch, Chief Investment Officer, Vision Super
“BHP is committed to the goals of the Paris Agreement. However, meeting the Paris goals requires public policy support, and BHP is continuing to fund industry associations that are lobbying against effective government policy to address and limit the effects of climate change, for example by lobbying for government support for new thermal coal mines. This lobbying contributes to a political environment where sensible bipartisan policy on energy and climate change seems unachievable. This is counter to BHP’s long-term interests, and therefore to our members’ interests as shareholders through their superannuation.”
As a member of ACSI, management routinely uses the proxy voting research recommendations provided by ACSI and we review against our policy. On some occasions we may not necessarily come to the same voting recommendations on matters of contentious nature. We disclose all our voting publicly and report internally within the ESG Climate Action Team and at least bi-annually to the investment committee annually in our annual reports.
Vision Super will on occasions provide feedback to managers and companies for their consideration and review on ESG related company holding matters, with the intention of also understanding how and why the investment managers approach to similar issues may be different on occasions. This also applies to our proxy voting relating to resolution ballots on Vision's equity shareholdings, despite our investment managers no longer voting on behalf of the Fund.
Our active fund managers aim to maximize value of their portfolios by ensuring best practice corporate governance through the voting they undertake and engagement initiatives in maximizing these goals. They do this my engaging with respective board and management teams of companies they are shareholders in where such improvements contribute to maximizing performance and business metrics.
IFM Investors Passive Low Carbon Mandate
With respect to engagement, IFM Investors believe active company engagement is critical to the advancement and promotion of responsible investment considerations across the broader corporate and financial sectors. This approach aligns with their Responsible Investment Charter and the values of their clients and their beneficiaries. IFM have an intimate knowledge of their investments and regularly engage with businesses either directly, or through the Australian Council of Superannuation Investors (ACSI). In their activity they seek to encourage positive change in corporate behaviour. Typically, their activity is prioritised around pre-determined themes and objectives, which are reviewed on an annual basis. They also frequently engage with regulators, industry associations and the investment community to promote best practice responsible investment standards.
Resolution Capital GREIT's Mandate
Over the 2019 period, Resolution Capital who manage a GREIT's portfolio for Vision Super, undertook a key engagement activity primarily related to lack of gender diversity on the boards of investee companies (<30%).
The goal of this engagement was to increase female board representation at companies where it’s under-represented. In a similar exercise to that undertaken in previous years, Resolution Capital analysed the gender diversity of the boards of the companies they invest in. On average, women make up 27% of board seats, an increase from 22% in 2018 and 18% the year before that. Whilst they believe this improvement is quite encouraging, more needs to be done to improve the board composition at these companies. On a weighted average basis the global portfolio has 25% female board representation, versus 24% for the index.
Importantly, forty two percent of their holdings have female board representation at or above 30%, up 9 percentage points year on year. As part of their engagement initiatives, during Q4 2019 they contacted all companies in their current portfolio which have less than 30% of women on the board. Resolution Capital outlined their desired target for a minimum of 30% female representation on the boards and asked if they have plans to increase gender diversity on the board. In the majority of case companies they want to increase female board representation but noted that this will also take time.
Gender diversity on listed REIT boards is a metric that Resolution Capital have been actively monitoring and engaging with investee companies on. The manager believes this is an imporant area which is also supported by empirical research where boards that embrace cognitive diversity, through appropriate gender representation and a broad spectrum of skills and experience, are more likely to achieve superior risk adjusted returns.
The other area of main engagement for Resolution capital during 2019 related to insufficient ESG disclosure (partly based on GRESB data) with the purpose to improve ESG disclosure and gain insights at the current level of sustainability within the company and future plans.
Climate Action 100+ Further Engagement Tactics
As a support innvestor of Climate Action 100+, investors are considering a consistent messaging approach going forward with the following direct engagements tactics as options for consideration for relavant companies;
- AGM statements
- Media tactics
- Joint statement with company
- Filing resolutions
- In person meetings
- Investor roundtables
- Public letters/statements (directed at company/sector/other)
Investors may also consider leveraging portfolio managers and investment managers to deliver a unified message to a comany which is targeted and considering meeting with different levels of executives and management in the company.