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Australian Capital Territory

PRI reporting framework 2020

You are in Direct - Listed Equity Active Ownership » (Proxy) voting and shareholder resolutions

(Proxy) voting and shareholder resolutions

LEA 12. Typical approach to (proxy) voting decisions

12.1. Indicate how you typically make your (proxy) voting decisions.

Approach

Based on

12.2. Provide an overview of how you ensure that your agreed-upon voting policy is adhered to, giving details of your approach when exceptions to the policy are made.

Treasury utilises the services of a global proxy voting advisor.  The global proxy advisor provides for a number of proxy voting policy frameworks, as well as the ability to customise a proxy voting policy framework.

The Sustainability voting policy framework utilised by Treasury is for Principles for Responsible Investment (PRI) Signatories or similarly aligned investment managers and asset owners with an orientation that focuses on the PRI. The Sustainability policy generally supports standards-based ESG shareholder proposals that enhance long-term shareholder and stakeholder value while aligning the interests of the company with those of society at large.  In particular, the focus is on resolutions seeking greater transparency and/or adherence to internationally recognised standards and principles. The Sustainability policy has been developed to align with the requirements of being a signatory to the PRI.   

The Sustainability policy also aligns with the ACT Government's Responsible Investment policy due to the focus on the adoption of, or adherence to, relevant norms, standards, codes of conduct or universally recognised international initiatives to promote disclosure and transparency, as well as the requirements of being a signatory to the PRI.

Treasury reviews all voting research and voting recommendations by the service provider that are on contentious issues or topics, are against management's recommendations, or that are a shareholder resolution through automatic alert notifications via email. Treasury has the ability to change any voting recommendation before the vote is cast if, and when, it is considered appropriate. 

Importantly the service provider includes confirmation that the vote recommendation is in-line with the relevant proxy voting policy framework.

 

12.3. Additional information.[Optional]

 

 


LEA 13. Percentage of voting recommendations reviewed

13.1. Of the voting recommendations that your service provider made in the reporting year, indicate the percentage that was reviewed by your organisation, giving the reasons.

Percentage of voting recommendations your organisation reviewed

Reasons for review

13.2. Additional information. [Optional]

Over the 2018-19 financial year there were 1,804 meetings and 21,877 voting proposals, with 569 shareholder proposals and 1,929 votes cast against management. 


LEA 14. Securities lending programme

14.1. Does your organisation have a securities lending programme?

14.2. Describe why your organisation does not lend securities.

Treasury has not previously, and currently does not have a securities lending programme.

A securities lending program can provide benefits in the form of additional income through the fees earned for lending securities.  However there are many risks inherent in lending securities which must be carefully considered when operating a securities lending programme. In particular, while the lender has the right to recall securities on loan at any time, the legal title of securities passes from the lender to the borrower with the lender losing voting rights over the lending period.  At the present time the ACT Government's Responsible Investment policy advocates for active share ownership in terms of exercising full voting rights.

Any future use of a securities lending programme by Treasury would need to be considered in the context of a full analysis of the financial and operational risks, including counterparty risks, collateral management, operational due diligence on the controls and procedures of the securities lending service provider, level of potential income derived from the types of securities to be included in the programme, and consideration of any potential impacts on the external fund managers and their trading activity with the removal of securities from their portfolios.

14.4. Additional information. [Optional]

Treasury notes that the past financial year has been more challenging for securities lending markets. Political and economic uncertainty has had a major impact on broader capital markets, and in conjuction with regulatory changes, has lowered demand for securities lending and increased pressure on spreads.

The rise of ESG investing is also impacting on securities lending programmes with a key pillar being investors fully exercising their voting rights. As the right to vote passes in a securities lending transaction, lenders must recall securities from a borrower to ensure that the right to vote is maintained.  There is also a need to improve technology offerings and increase the availability of data and analytics for the lending programme.


LEA 15. Informing companies of the rationale of abstaining/voting against management

15.1. Indicate the proportion of votes participated in within the reporting year in which where you or the service providers acting on your behalf raised concerns with companies ahead of voting.

15.3. Additional information. [Optional]

The proxy voting service provider does not raise concerns with companies ahead of voting, but does engage in ongoing dialogue with companies in relation to their proxy voting research and presented facts.


LEA 16. Informing companies of the rationale of abstaining/voting against management

16.1. Indicate the proportion of votes where you, and/or the service provider(s) acting on your behalf, communicated the rationale to companies for abstaining or voting against management recommendations. Indicate this as a percentage out of all eligible votes.

16.4. Additional information. [Optional]


LEA 17. Percentage of (proxy) votes cast

17.1. For listed equities in which you or your service provider have the mandate to issue (proxy) voting instructions, indicate the percentage of votes cast during the reporting year.

Votes cast (to the nearest 1%)

99 %

Specify the basis on which this percentage is calculated

17.2. Explain your reason(s) for not voting on certain holdings

17.3. Additional information. [Optional]

Over the 2018-19 financial year Treasury exercised 98.7 per cent of voting rights. This exceeded Treasury's annual budget accountability measure with a voting target of >95 per cent.

The very small percentage of voting rights not exercised by Treasury mainly reflects the current proxy voting policy framework and the do not vote instruction in relation to companies domiciled in countries that require 'share-blocking' or where there were excessive administrative impediments.


LEA 18. Proportion of ballot items that were for/against/abstentions

18.1. Indicate whether you track the voting instructions that you or your service provider on your behalf have issued.

18.2. Of the voting instructions that you and/or third parties on your behalf have issued, indicate the proportion of ballot items that were:

Voting instructions
Breakdown as percentage of votes cast
For (supporting) management recommendations
90 %
Against (opposing) management recommendations
9 %
Abstentions
1 %
100%

18.3. In cases where your organisation voted against management recommendations, indicate the percentage of companies which you have engaged.

0

18.4. Additional information. [Optional]

Our engagement strategy and arranagements have been clearly addressed previously


LEA 19. Proportion of ballot items that were for/against/abstentions

19.1. Indicate whether your organisation has a formal escalation strategy following unsuccessful voting.

19.3. Additional information. [Optional]


LEA 20. Shareholder resolutions

20.1. Indicate whether your organisation, directly or through a service provider, filed or co-filed any ESG shareholder resolutions during the reporting year.

20.7. Additional information. [Optional]

Over the 2018-19 financial year there were 1,804 meetings and 21,877 voting proposals, including 569 shareholder proposals.  Treasury voted in favour of 63 per cent of the shareholder proposals. While shareholder resolutions are non-binding, support of appropriate resolutions by the ACT Government can still have a positive influence on the operations and behaviour of companies.

To sponsor, co-file or vote on a shareholder resolution the ACT Government must own shares in the companies in question. The ACT Government's Responsible Investment policy framework uses negative screening, non-investment or divestment as the primary strategy to reduce assessed portfolio or company ESG risks. Significant time and resources, in terms of thorough research and company dialogue, are required before commencing a process to either sponsor or co-file shareholder resolutions. And depending on the legal jurisdication in question sponsoring or co-filing a resolution may require a material minimum shareholding or a minimum number of shareholders to proceed. This is not a process that can be simply outsourced to a third-party agent.

The unique circumstances applicable to Treasury in the context of being a body politic have been highlighted previoulsy.


LEA 21. Examples of (proxy) voting activities

21.1. Provide examples of the (proxy) voting activities that your organisation and/or service provider carried out during the reporting year.

ESG Topic
Political spending / lobbying
Conducted by
Objectives

To have the company report on lobbying payments and policy. 

Scope and Process

A vote for this resolution was warranted, as additional reporting on the company's lobbying-related practices and policies, such as trade association memberships and payments and board oversight mechanisms would benefit shareholders in assessing its management of related risks.

A vote was cast in favour of the Shareholder proposal and against Management's recommendation.

 

 

Outcomes
ESG Topic
Diversity
Conducted by
Objectives

To have the company report on Gender pay gap.

 

Scope and Process

A vote for this proposal was warranted as the company lags peers in addressing gender pay disparity and is put at a competitive disadvantage in the recruitment and retention of employees. By reporting gender pay gap statistics the company could provide shareholders with a better gauge of how its diversity initiatives are improving opportunities for women.

A vote was cast in favour of the Shareholder proposal and against Management's recommendation.

Outcomes
ESG Topic
Executive Remuneration
Conducted by
Objectives

To have the company incorporate environmental, social and governance metrics in senior management compensation.

 

Scope and Process

A vote for  this proposal was warranted as incorporating ESG metrics as a broader component of senior management compensation setting decision making would serve to further incentivise executives to ensure that company performance on environmental, social and sustainability considerations, alongside financial factors, is appropriately alligned with management's interests, the company's commitments to sustainability and long-term corporate strategy.

A vote was cast in favour of the Shareholder proposal and against Management's recommendation.

Outcomes
ESG Topic
Sustainability reporting
Conducted by
Objectives

To have the company report on sustainability.

 

Scope and Process

A vote for this proposal was warranted as investors would benefit from additional information on the company's sustainability policies and practices as well as its management of related risks and opportunities.

A vote was cast in favour of the Shareholder proposal and against Management's recommendation.

Outcomes
ESG Topic
Climate Change
Conducted by
Objectives

To have the company adopt quantitative company-wide GHG goals.

 

Scope and Process

A vote for this resolution was warranted as additional information on the company's GHG emissions, GHG reduction goals and oversight mechanisms for reduction activities would allow shareholders to better assess the company's climate change management and related risks.

A vote was cast in favour of the Shareholder proposal and against Management's recommendation.

Outcomes
ESG Topic
Labour practices and supply chain management|Deforestation
Conducted by
Objectives

To have the company report on mitigating impacts of deforestation in the company's supply chain.

Scope and Process

A vote for this resolution was warranted because the requested report should serve to complement the company's initiatives in place to reduce the deforestation impact of the company's cocoa supply chain.

A vote was cast in favour of the Shareholder resolution and against Management's recommendation.

Outcomes
ESG Topic
Other governance
Conducted by
Objectives

To have the company adopt an independent Board Chairman.

Scope and Process

A vote for this proposal was warranted given the importance of having an independent chairman of the Board.

Outcomes
ESG Topic
Political spending / lobbying
Conducted by
Objectives

To have the company report on political contributions.

Scope and Process

A vote for this resolution was warranted as increased disclosure of the company's trade association policies, memberships, and executive-level oversight mechanisms can help shareholders assess the company's comprehensive political contribution activities and the company's management of associated risks and benefits.

A vote was cast in favour of the Shareholder Resolution and against Management's recommendation.

Outcomes
ESG Topic
Climate Change
Conducted by
Objectives

To have the company assess portfolio impacts of policies to meet 2 degree scenario.

Scope and Process

A vote for this resolution was warranted because the company does not disclose the impacts that climate change regulations might have on the company and its operations, not does the company discuss the actions being taken to mitigate these regulatory risks.

A vote was cast in favour of the Shareholder Resolution and against Management's recommendation.

Outcomes
ESG Topic
Human rights
Conducted by
Objectives

To amend Company Articles to require the company to disclose individual compensation for Directors.

Scope and Process

A vote for this resolution was warranted as adoption of the proposal should serve to further strengthen the company's committment to human rights, as well as augment the company's existing human rights-related oversight mechanisms, and thus help safeguard the company's reputation and long-term shareholder value.

A vote was cast in favour of the Shareholder Resolution and against Management's recommendation.

Outcomes

21.2. Additional information. [Optional]


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