ACSI seeks companies disclose reliable and sufficiently granular information for investors in line with the TCFD Framework that provides insights into how the company manages climate risks and how they are resilient under a low carbon economy. ACSI assesses companies against the following areas:

• Climate transparency, governance & policy
• Transition risk management and disclosure
• Physical risk management and disclosure
• Paris-aligned targets
• Just transition
• Industry associations

ACSI’s focus is on 20 ASX300 companies from materials & building, energy, transport and insurance sectors.

Targets are bespoke to each company and are around improving their disclosure, governance, oversight and management of risks across the following areas:

• wage fraud
• supply chain and human rights
• franchising
• modern slavery

ACSI sought to have the company report to a best practice standard on their labour hire supplier’s performance.

ACSI focus is on 10 companies in the ASX300 who have a material exposure to human capital risks. This includes wage fraud, supply chain and human rights, franchising and modern slavery risks.

ACSI’s extended our gender diversity campaign to the ASX300 with the aims to increase the representation of women on company boards to 30% - out objectives were to see women appointed to the board and/or a commitment or demonstration of how they plan to achieve 30%.

ACSI targeted 81 ASX300 companies who have either zero or one women on their board, at the start of 2019. The engagement was conducted through a means of face-to-face meeting, teleconferences, and formal letters and through proxy voting. Of the target list of 81 companies, 34 appointed a female board member. 

Improve aspects of remuneration practices and structure. These improvements included improving pay-for-performance alignment, the cessation of retention plans, making hurdles more challenging, introducing executive and director minimum shareholding requirements.

ACSI had 37 ASX300 companies as priority targets for remuneration issues. 

EOS has pressed companies to set science-based targets, conduct climate-risk stress tests, and make enhanced disclosures. It has also asked companies to link executive pay to the achievement of climate change outcomes, and to ensure they do not lobby policymakers or regulators to hinder the achievement of the Paris Agreement goals. In 2019, EOS continued to participate in collaborative investor initiative Climate Action 100+, which targets over 100 of the world’s largest corporate greenhouse gas emitters. The aim is to curb emissions, strengthen climate-related financial disclosures, and improve governance on climate change risk and opportunities. The ultimate goal is to help limit global warming to less than 2°C, consistent with the Paris Agreement.

EOS took an active role as lead or co-lead engager for 27 companies in this initiative, which has attracted over 370 investors with over $35 trillion under management. In 2019 EOS attended six annual shareholder meetings to promote action on the climate crisis – a mining company, an oil major, a utility, and three car manufacturers.

EOS also helped to co-ordinate the work of the Institutional Investors Group on Climate Change’s shareholder resolutions sub-group, identifying companies that could be potential targets for climate change-related resolutions, and the utilities sector sub-group, formulating and co-ordinating engagement strategies for the sector.

EOS engages on critical human rights issues including eradicating forced labour and child labour in supply chains. Many companies rely on global supply chains to access labour in low-cost regions, but the fragmented and opaque nature of these chains heightens the risk of human rights abuses. Traditional, announced audits may not uncover issues – more robust due diligence is needed. EOS engages with companies across five key areas: forced labour and modern slavery, child labour, living wages and purchasing practices, worker voice and gender-specific issues.

EOS engaged with a Malaysian palm oil company over several years following NGO and media reports in 2012 of poor labour conditions at the company’s plantations in Liberia and its suppliers in Indonesia. 2013 saw further allegations of poor labour conditions in its supply chain and EOS urged it to provide clarity on how it was investigating and assessing the steps taken to avoid similar issues in the future. EOS continued to raise these concerns in further calls and correspondence over several years, during which the company appeared to be responding positively to consider improved disclosure and stakeholder outreach. During a call in 2017 the company committed to disclosing its migrant worker management process in its sustainability report – a significant improvement on transparency. In 2018 EOS asked the company to align its labour standards programme and move to industry best practices by reporting in line with the UN Guiding Principles on Business and Human Rights. EOS reiterated this request during calls in 2019 with the head of sustainability.

Regnan sought:

• more detailed disclosure of analysis taken by this infrastructure operator into the physical risks of climate change
• that  future analysis give consideration to interdependency risks, including the resilience of supporting infrastructure for instance roads and public transport links, the disruption of which has the potentially to severely disrupt its operations.

Engagement occurred under a climate resilience thematic approved by clients in 2013 and updated in 2016 at which time this company was added to the priority list of stocks for engagement. Regnan first met with management in 2016, and in all met with the company five times, including a meeting with chair at the mid point of our engagement. They conveyed investor interest in understanding more about the parameters of the work undertaken to date and the extent to which mitigation of these risks was possible. In response the company's description of the scope of work they raised the need to consider physical risks of climate change not just to the direct operations of the business, but to the infrastructure on which it was reliant as well as the potential macro economic impacts of a major event in key markets. Public disclosures released in 2018 confirmed that these items are now formally on the company's risk register, together with a more detailed description and relative weighting of the risks identified. In our view this expansion of its climate analysis sees the company better placed to mitigate these risks.

A change in strategy saw this company take a greater customer focus. Accordingly Regnan sought an improvement in measures used to assess this dimension of the strategy (including within remuneration). More specifically Regnan sought measures that considered both end users of its products as well as from those commissioning the work. In addition Regan sought that the company more formally measured and tracked the social impacts/contributions of the its work to support information sharing within the business and provide a factbase in support of future tenders, especially amongst government clients.

Regnan first raised interest in how performance against the customer dimension of this company's strategy was being measured in two meetings with the chair and in a subsequent meeting with management to provide detailed disclosure feedback. At the request of chair they wrote to the company setting out in more detail the potential benefits of  considering measures that included end users as well as the paying client. Further they highlighted the potential opportunity from more systematically measuring the social impact of its work as a potential differentiator in future tenders. This led to a further meeting with management to provide input to strategy development in this area. In all they engaged with company six times on this matter (three meetings with the chair, two with management and 1 letter to the chair). The company now collates and benchmarks impact data in a bespoke, formal tool to demonstrate both impact and leadership and serve as an important source of knowledge for future projects. Further evidence of the consideration of end users is provided in the scope of NPS participants with the definition of customers expanded to include selected end users.

Seek consideration of physical risks of climate change by a telecommunication company under our thematic engagement on climate resilience given the potential impacts on business continuity from extreme weather events. Specific change objectives included:

• clear acknowledgement of risks associated with a changing climate (not merely weather risk)
• evidence of processes in place to identify and assess risks using data at appropriate scaling and with consideration of interdependencies
• implementation of tailored mitigation and adaptation strategies

Regnan met with management in 2018. During the meeting the company expressed confidence that business as usual resilience activities were sufficient, specifically with respect to sea level rise and storm surge, but was evident that climate risks had not been specifically considered. The meeting also provided an opportunity to promote the TCFD as a useful framework against which to consider and disclose how the company could identify and manage material climate-related risk. Approximately 12 months later the company disclosed that it had undertaken an analysis of physical risks during the year and identified that key assets were in fact at risk with climate change now formally considered a potential risk to the business.

In this instance Regnan engaged with a company entering a strong cost controls environment to seek assurances that earlier gains on environmental, health and safety issues would not be eroded. Specifically they sought:

• Evidence that this company with high exposure to environmental health and safety risks, elevated by community stakeholder concerns, is sufficiently prioritising EHS management including through active board management and adequate resourcing.
• Adoption and improved disclosure of leading metrics on the efficacy of controls.

Regnan met extensively with company management during 2016 and 2017 (four times in all). They raised concerns that current cost cutting had the potential to undermine strong gains made in EHS performance over recent years. Examples of good practice were provided to the company following our discussions to further illustrate our requests both with respect to governance practice over EHS matters as well as the disclosure of leading indicators. Over time the company has progressively improved its disclosure on this issue, including the reporting of leading measures consistent with our feedback. A number of these measures provided assurances that cost cutting requirements were not being achieved at the expense of EHS performance. While EHS was already included in executive pay this has been expanded to include a leading metric relevant to this concern and the risk statement provides more detail on how EHS risks are managed. The company has commenced engaging with ESG analysts seeking input for forthcoming disclosures, suggesting that further disclosure enhancements are likely.