Benchmarks, bushfires and board access – Andrew Gray on CA100+ in Australia

According to the Australasian Centre for Corporate Responsibility, support for shareholder resolutions by the Australian superannuation industry fell last year.

After a huge leap from 33% in 2017 to 53% in 2018, aggregate support for proposals fell back down to 48% in 2019; with at least eight members of Australia’s Investor Group on Climate Change supporting less than half of climate-related proposals during the period.

“The reasons for this decline warrant further research,” said the report, published in June.

But Andrew Gray, Director of ESG & Stewardship at AustralianSuper and the current Chair of Climate Action 100+, says there is a perfectly logical reason for the drop.

“What’s driving those numbers isn’t investors not being supportive of climate change as an issue, it’s investors making informed decisions about the effectiveness of resolutions,” he says. A big part of that centres on whether discussions are already underway with the company, and in many cases, he claims – because of CA100+ – they are.

“If, as investors, we're talking to the company and we've got comfort that it is already moving towards that commitment, then supporting the resolution isn’t necessary.”

Gray says that although Australia’s notoriously conservative climate change policies haven’t helped CA100+, the country’s “very advanced engagement culture” has. “I know there can be difficulties in other countries and regions with accessing the board, but in Australia boards are typically open to engaging with shareholders, so when you have a large group of investors like CA100+, access is quite easy, right the way up to the company Chair.”

He highlights climate engagement with Qantas, for which AustralianSuper is CA100+’s ‘lead investor’, and which joined fellow airline AIG in making a Net Zero 2050 commitment last November, without a vote at AGM. It said it planned to cap its emissions at 2020 levels and will pump tens-of-millions of dollars into developing greener fuels over the next decade. 

AGM season in Australia isn’t until the autumn, but the few annual meetings that have already taken place this year suggest that support is on the rise again – to record-breaking levels. In April, 43% of shareholders backed a vote at Australian oil & gas company Santos, asking it to set and disclose targets aligned with the Paris Agreement across its Scope 1, 2 and 3 emissions. The same proposal a few weeks later at rival Woodside Petroleum garnered more than half the vote, making it the most supported resolution in Australian corporate history.

“That was the first resolution ever in Australia to attract more than 50% shareholder support, which is incredible,” says Gray, reflecting that the growth in support this year has been a response, in part, to the dramatic Australian bushfires that made global headlines at the start of the year, killing tens of people and destroying hundreds of homes. Scientists concluded that the hot, dry conditions exacerbated by rising climate temperatures increased the risk of bushfires by at least 30%. “That has certainly added some urgency to the way the general community has perceived the issue,” he observes.

There are 13 companies covered by CA100+ in Australia. “I think realistically, we can say that we’ve had six of those make Net Zero 2050 commitments,” says Gray, referring to Rio Tinto, Qantas, BHP, South 32, Origin Energy and – most recently – AGL Energy. In addition, Woodside and Santos have announced sketchier “Net Zero ambitions”, rather than targets. 

“So now we want the others [Adelaide Brighton, Bluescope Steel, Boral, Wesfarmers and Woolworths] to follow, and I’m pretty sure that will be helped by the benchmarking framework we’re launching later in the year.”

The benchmark Gray is referring to has been a long time in the making. It is slated to be launched alongside CA100+’s next annual “progress report” in the autumn, and aims to move the project on from capturing the commitments of companies, to capturing their progress – enabling investors to track the performance of investee companies against their climate pledges. 

According to an RfP published earlier this year, the benchmark will be based on around 10-20 criteria “that will be used to assess and evaluate each CA100+ focus company’s progress against the key commitment areas of the initiative”.  

The initiative is working with its research partners, which include Carbon Tracker, the Transition Pathway Initiative and 2 Degrees Investing Initiative, and an internal working group, to create comparable KPIs and metrics for sectors and companies, setting out expectations around short- and medium-term goals to them meet their ultimate commitments.   

CA100+ says on its website that the benchmark results will enable investors to identify “companies that deliver upon all expectations” and promote them “as positive and leading examples of how the low-carbon transition may be undertaken in their market or sector”. 

“One of the things that makes engagement effective is having really clear requests, and the company understanding what you’re asking for,” Gray says. “And that's where I think we're heading into a really exciting period for CA100+ with the benchmarking framework. It’s going to be a step change for us.”