ESG accountability high priority for shareholders, new report says
ASX 300 company remuneration reports have received the highest level of investor support in a number of years, while support for climate resolutions saw increased opposition from shareholders, a new report has revealed.
Over the course of 2022, remuneration received increased levels of shareholder support, according to Georgeson’s 2023 AGM Intelligence Report, which showed 22 per cent fewer “strikes” (more than 25 per cent of votes against), recorded against Australia’s largest 300 listed companies (ASX 300) companies.
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The report has revealed that in 2022, across ASX 300 companies, 21 received a strike compared to 27 in 2021, with a further 11 companies narrowly avoiding a strike.
However, “Say on Climate” resolutions, by contrast, saw more than double the shareholder opposition when compared to global levels in 2022. ASX 300 companies experienced, on average, nearly 25 per cent shareholder opposition: more than double the average global opposition of 9.6 per cent.
“In Australia, eight companies (AGL Energy Limited, APA Group, Origin, Rio Tinto, Santos, Sims Metal, South32 and Woodside) included climate plan-related resolutions at their AGMs, all of which passed. Votes ranged from 94.5 per cent in favour (Origin) to 51 per cent (Woodside); the other six all recorded less than 90 per cent,” the report stated.
“Of six shareholder resolutions, three were withdrawn (Origin, Santos and Woodside) in favour of company resolutions and three (BHP, Whitehaven and New Hope) were withdrawn when the enabling constitutional change resolutions failed.”
The report also noted that during the 2022 proxy season, more investors voted against corporate climate strategies than in 2021.
Furthermore, the report found that only eight ASX 300 companies included climate plan-related resolutions, all of which passed, with support ranging between 51 per cent to 94.5 per cent. Shareholders put forth six proposals, all being withdrawn either in favour of company resolutions or the enabling constitutional amendment resolution failed.
Reflecting on the report, Andrew Thain, country head and managing director of Australia at Georgeson, said that shareholders’ resistance towards Say on Climate resolutions would make way for increased environmental, social and governance (ESG) accountability.
“The increased remuneration support indicates companies continue to engage in robust stakeholder discussions throughout the year, helping their investors better understand the metrics and reasoning behind their compensation plans,” he explained.
“On the other hand, the continued high levels of opposition to Say on Climate resolutions suggests investors are seeking more meaningful ESG-related disclosures, particularly around climate change. Shareholders continue to use their votes to express their dissatisfaction and expect companies to step up their ESG practices and reporting.”
According to the report, ESG is now a “fundamental, front-line issue”, with 80 per cent of company balance sheets worldwide comprising intangible assets.
“ESG exposure is likely to grow as environmental and social issues increasingly draw public and investor attention,” the report stated.
“It is not clear that all directors are yet fully across the need to understand ESG and to regard it as a core and fundamental part of their duties. They can no longer afford to view governance solely as a compliance issue.”
During 2022, female directors accounted for 35.7 per cent of ASX 200 director positions: up from 34.9 per cent the previous year, according to the report. Nearly 45 per cent of new director appointments to ASX 200 boards were women.
However, women still only account for 10 per cent of all ASX 200 and ASX 300 chair positions, with four ASX 200 companies still with zero female directors.
“Much progress has been made around gender diversity on ASX company boards, however research shows that there is still work to be done,” the report confirmed.
Lastly, the report also emphasised that shareholder activism continued to be a big challenge for issuers in 2022, particularly on the ESG front.
“We saw ESG-related activism arrive with a bang, most notably at AGL Energy Limited with the derailing of its planned demerger and the election of non-board endorsed directors at its AGM. The ESG flavour continued with shareholder proposals at fossil fuel producers and the banks that finance them. The proponents of shareholder proposals moved away from filing resolutions related to supply chains, modern slavery and First Nations engagement, as they have [sic] in previous years,” according to the report.
“As the Australian economy slows due to high inflation, interest rates and reduced demand, issuers will remain under pressure to deliver for shareholders, so boards need to be prepared for shareholder activism.”