Taking action: Holding companies to account for a better future
31 August 2018
Many green funds avoid investing in companies that don’t adhere to certain standards of social and environmental practices, but we at LGS go one step further.
When the conduct of the companies in which we invest doesn’t meet expectations, we speak up. Rather than sell our investment in those companies, we aim to change their long-term behaviour for the benefit of our members and future generations.
As long-term investors, we not only select investments based on their potential to generate consistent returns for our members, we also ensure that the companies in which we invest achieve certain environmental, social and governance standards. If a company doesn’t meet these expectations, we don’t shy away from addressing the situation.
We do this through what we call ‘active ownership’ and this is achieved through engaging with the companies in which we invest through actions such as voting at annual general meetings (AGMs) and meeting directly with companies’ senior management and Board. And when we aren’t getting the progress we would like on certain issues, we lodge shareholder resolutions at company AGMs.
Making our vote count
We treat our ability to vote at AGMs as a privilege, not a right. As shareholders in most of Australia’s largest listed companies, we see voting as a key tool to influence how organisations are run, and ensure they are maximising future value generation while managing any social, environmental and governance issues. In 2017 we voted at 100% of the AGMs of the companies in which we invest, and voted against 11% of the resolutions put forward at those meetings.
Of note, we voted against the re-election of a Commonwealth Bank of Australia director due to concerns about accountability for recent issues including money laundering. We also voted against the proposed remuneration increases for senior executives at CSL Limited. In this instance, we believed that their performance targets would be too easy to achieve.
As part of our ongoing commitment to holding companies accountable for their actions, we also propose shareholder resolutions. These are recommendations to the Board of listed companies about management and business practices. This year, we have put forward two shareholder resolutions to date–one concerning mining giant Rio Tinto Group and the other concerning major insurer QBE Insurance Group.
LGS was the only Australian super fund to co-file a resolution that requested Rio Tinto to review its oversight of a number of industry associations who advocate anti-climate change views and policies that are at odds with the company’s public support for the Paris Agreement. The Paris Agreement aims to limit global temperature increases to below two degrees Celsius.
We also recently filed a resolution with QBE Insurance Group, partnering with the NGO, Market Forces. The resolution urged QBE’s Board to address and disclose how they are managing climate change risks.
These activities play a key role in our commitment to being an active owner–a strategy that we think is vital to generating better long-term returns, and a future which is sound and prosperous for generations to come.
Find out more about our approach to responsible and sustainable investment here.