Australian superannuation funds wield enormous influence through their shareholdings in major publicly-listed companies, but the level of that influence is not reflected in the way they vote their shares on key ESG issues.
That is the bottom line finding of a report produced by the Australasian Centre for Corporate Responsibility (ACCR) ‘Two Steps Forward, One Step Back’.
The report focused on the voting records of Australia’s largest superannuation funds on shareholder proposals between 2017 and 2019 and found that there was a lack of sufficient transparency and, in a number of instances, a failure by funds to live up to their green rhetoric.
What is more, retail superannuation funds who were members of the Financial Services Council (FSC) were found to have supported fewer shareholder proposals and to have not entirely lived up to their obligations with respect to disclosure of their voting records.
Commenting on the report findings, ACCR director of climate and environment, Dan Gocher, said many of the funds which made the superannuation industry had made public commitments to their members about responsible or sustainable investment, and their oversight of environmental, social and governance (ESG) issues.
“This report shows that the voting behaviour of several of these funds is at odds with these commitments,” he said.
“Disclosure across the industry remains poor, with just 18 of 50 funds disclosing a complete voting record. The sooner ASIC mandates disclosure of holdings and voting records the better, because if members are forced to wait for their funds to do the right thing, they will be waiting a very long time.”
Gocher pointed out that just seven out of 50 funds had shown sustained support for shareholder proposals over three years, putting into question the responsible investment practices of a large number of funds.
“Shareholder proposals tend to address issues of broad public concern, such as climate change, workers’ rights, human rights, and corporate political influence. Proposals typically seek greater disclosure or a specific commitment from a company, such as emissions targets. These issues are relevant to super fund members and the society they live in and will retire into.
“Particularly in the United States, where shareholder proposals are an ordinary feature of the corporate landscape, and subject to an independent arbiter (the Securities and Exchange Commission), it makes little sense why Australian investors are not supporting a majority of these proposals.”
Gocher said that while the trend in support for proposals at Australian companies was on the rise, only one proposal (at Woodside Energy this year) had ever received majority support, suggesting that investors are relying on private engagement to achieve change.
“While ACCR encourages that engagement, super funds must show their members that it actually does what it says on the box. Is their engagement driven by outcomes? Are they escalating issues with companies when their expectations aren’t met? Shareholder proposals are a vital tool in the options available to investors to affect change.
“Retail funds stand out as the sector that regularly underserves its members in terms of disclosure and voting behaviour.”