Industry super drives increase in ESG support

In the US, proxy voting disclosure by mutual funds has been mandatory since 2004, but Australian super funds are not required to disclose their voting behaviours. “As a result, the voting records of Australian super funds are highly individualised,” the ACCR said.

While eight of the 50 largest money managers did not disclose any voting record (down from 11 two years ago), some bigger funds also had patchy records, with AMP, Westpac’s BT Financial, Colonial First State, Commonwealth Super Corp, MLC and QSuper either not voting, failing to disclose their voting or support far fewer proposals than their peers, according to the ACCR.

“Together these six funds manage more than $748 billion, or approximately 38 per cent of APRA-regulated funds,” said ACCR director of climate and environment Dan Gocher.

“Their members deserve better transparency and stronger support for ESG issues,” Mr Gocher said.

While the overall rate of support for ESG resolutions held largely steady over the past 12 months, there was an underlying rise in the number of resolutions being supported by union-and-employee-backed industry funds over that period.

Just a handful of funds was responsible for this push: VicSuper, Cbus, Macquarie, UniSuper, Qantas Super, CareSuper, Energy Super and AustralianSuper.

However, public sector funds remained most likely to vote in favour of ESG proposals, while corporate funds were the least supportive.

The funds most supportive of ESG proposals over the past four years were Local Government Super (now branded Active Super, supporting 76 per cent of proposals), HESTA (65 per cent), Cbus (63 per cent), Macquarie (62 per cent), NGS Super (58 per cent), Mercer (54 per cent) and Qantas Super (50 per cent).

The country’s biggest fund, AustralianSuper, voted in favour of ESG proposals 51 per cent of the time.

While the ACCR said it did not suggest super funds vote blindly in line with ESG recommendations, but consider it as part of company engagement, Mr Gocher said many funds that claimed to incorporate ESG into their investment processes were not supporting ESG proposals.

“The vast majority of funds continue to pay lip service to ESG when it comes to proxy voting,” he said.

“Incidentally, the best performing funds (according to APRA) tend to have better disclosure and are more supportive of ESG proposals.”

Shareholder resolutions relating to lobbying were the most popular ESG item last year, with lobbying votes receiving the support of 31 per cent of funds. Climate-related proposals garnered support from 27 per cent funds, while social items received just 18 per cent of support.

Rio Tinto last year became the first Australian company to support activist shareholder resolutions on climate change filed against it, urging shareholders to support a resolution filed by campaigner and Friends of the Earth affiliate Market Forces to independently verify Rio’s emissions targets, and the other, filed by the ACCR, which asked Rio to immediately review its links to powerful fossil fuel lobby groups.

In 2020, there were 13 environmental resolutions put to major companies, 15 governance items and only one related to social issues.

The average support an individual environmental item has registered at an AGM has risen to 24.7 per cent of shareholders last year, up from 6.9 per cent in 2017.

Of the 22 funds, of the 50 largest, which published complete voting records in 2020, almost 60 per cent were industry funds.

The ACCR also found members of the industry fund-owned proxy adviser, the Australian Council of Superannuation Investors, the UN-supported Principles for Responsible Investment, and the Responsible Investment Association of Australia were generally more supportive of ESG proposals than non-members.

“Despite every Australian having an interest in superannuation, there is no legal requirement for funds to disclose their voting record or how they have voted on ESG issues,” Mr Gocher said.

“Since ACCR began reviewing the voting records of Australia’s largest superannuation companies in 2018, disclosure has improved, but only 22 of the 50 largest funds publish a complete proxy voting record,” he said.