AGMs have become forums for ESG agenda

The annual general meeting (AGM) season in Australia has become more of a forum for companies to update shareholders on the outlook for earnings, and for shareholders to push the environmental, social and governance (ESG) agenda, according to Martin Currie Australia.

The manager said the key themes coming out of AGMs had ESG undertones and that there was a generally positive tone across the outlooks, with companies dependent on their customers being ‘on-premise’ having provided the most upbeat outlooks and guidance. This was particularly prevalent in the housing (Stockland, Mirvac) and construction (Fletcher Building), bricks and mortar distribution retail channels (Super Cheap Retail, Wesfarmers Bunnings and Kmart divisions).

At the same time, Martin Curries stressed that a number of companies exposed to the external economy, especially China, expressed more caution as it remained unclear how the China trade issues would be resolved, and what the duration of trade embargoes for Australian products would be.

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Following this, the key AGMs’ themes revolving around ESG included focus on ‘reasonable’ remuneration measure, increasing regular sustainability reporting with a focus on indigenous heritage, greater focus on stakeholder rights and shareholder accountability as well as trend towards virtual AGMs.

“We believe that ESG factors create risks and opportunities for investors and that it is important to consider these when making an investment in a company, and for the companies themselves to manage these appropriately. As such, we welcome the increased focus on ESG by both companies and investors at recent AGMs,” Reece Birtles, chief investment officer and Will Baylis, portfolio manager, Martin Currie, said.

They stressed that the more upbeat tone to consensus revisions, the muted price reaction to bottom of cycle earnings data, and the positive outlooks from companies themselves would be keeping with his firm’s positive outlook for the Australian market. 

“The resolution of the US election and a COVID-19 vaccine have also removed two significant risks going into 2021, and we expect the positive global outlook to reflect well on prospects for Australia and Australian equities. Australia is also recovering quickly from the COVID-19 recession, as virus transmission is brought under control and lockdowns have ended,” they said.

“We are expecting that the full COVID-19 impacts will have materialised in Australia during 2020, and that a recovery in company earnings and dividends will be seen into 2021 and 2022.”

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