HESTA demands energy company boards act on climate change

In the outline of engagement priorities, HESTA said it would factor companies’ capital expenditure plans regarding climate change into its voting decisions in upcoming AGMs, and their commitment to close or cease development of emissions-intensive assets.

On the hydrogen front, it would consider how companies were accelerating its commercialisation through “a concerted focus on technological breakthrough, complemented by positive policy advocacy”.

CEO Debby Blakey said HESTA would especially scrutinise whether the boards of energy companies had the necessary skills and composition to take on the low carbon transmission when deciding its votes.

“We are calling on Australia’s energy companies to appoint directors experienced in energy policy, clean energy and workforce transformation,” she told The Australian Financial Review.

Climate change was a “systemic risk that can impact long-term returns for members”, she said, with the priority list as a whole targeted to creating “a growing, sustainable and inclusive economy, so we can continue to deliver strong returns”.

Gender pressure

HESTA also planned to vote against some director elections or reappointments onto boards with less than 30 per cent female representation and against chair of companies with single gender executive teams in the upcoming AGM season.

Representing the female-dominated healthcare industry, the super fund has long been one of Australia’s staunchest advocates of gender equality in business.

It warned it would also likely further toughen its voting policy before 2030 to work towards having a 40:40:20 gender split (40 per cent women, 40 per cent men, 20 per cent any gender) on both the boards and executives of the companies it invested in.

The super fund also flagged “decent work” as a priority engagement area with the ASX 300, which included job security, conditions and fair pay.

Disclosure on these issues is currently inconsistent across corporate Australia, but Ms Blakey pointed out that there were new national guidelines setting out metrics relevant to wellbeing at work after Treasury released the Measuring What Matters statement in July.

She said that there was “value for investors” in companies matching their disclosure around the framework.

Natural capital

Finally, HESTA also said that how companies protected natural capital and limit biodiversity loss was a key priority for its engagement given the “profound economic implications” of the rapid depletion of natural resources.

It follows the final release of the Taskforce on Nature-related Financial Disclosures’ global framework requiring companies consider nature alongside financial, operational and climate risks last week.

Ms Blakey said HESTA’s focus areas were already priorities for companies in “the fast majority of instances”, leading to “positive and constructive” engagement.

But for those that did not respond to engagement, escalation options included votes against resolutions and director elections, filing or support of shareholder resolutions, or ultimately divestment.

Any decision to divest would be in members’ best financial interests, Ms Blakey said, when there was “inadequate evidence of progress to address risks”.