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Super funds back Say on Climate

New analysis from the Australasian Centre for Corporate Responsibility (ACCR) shows seven superannuation funds and many of the world's largest investment firms backed most 'Say on Climate' votes in 2021.

There were 19 'Say on Climate' votes on company transition plans at 17 companies in 2021, most of which were supported by more than 90% of shareholders, with only BHP's (84.9%) and Shell's (88.7%) supported by less than 90% of shareholders, ACCR found.

Seven superannuation funds supported all Say on Climate resolutions at companies they held in 2021: Active Super (8 votes), AMP (1), AustralianSuper (16), CareSuper (5), NGS Super (5), QSuper (15) and Unisuper (2).

Fifteen global investment managers supported all Say on Climate resolutions at companies they held in 2021: Abrdn (18), AllianceBernstein (16), Allianz Global Investors (18), APG (16), BlackRock (19), Capital Group (10), Fidelity (11), Goldman Sachs (13), JP Morgan (13), Morgan Stanley (12), Pendal Group (3), State Street Global Advisors (17), Vanguard (19), Wellington (18), and Wells Fargo (11).

"Say on Climate" resolutions are advisory votes only, and cover three areas of company commitment - annual emissions disclosure; annual reporting of a strategy to reduce emissions, and an annual non-binding shareholder vote on the company's plan at the AGM.

Engagement and governance experts say that advisory resolutions can be a useful tool for assessing shareholder support while allowing for more robust targets and transparency in how companies approach how they will adapt to and mitigate climate change impacts.

Companies around the world, including several in Australia, put Say on Climate votes to their AGMs in 2021 - Aviva, Unilever, S&P Global, Severn Trent, Moody's Corporation, National Grid, Ferrovial, Atos, Ninety One, Sasol, Glencore, Canadian National Railway Company, TotalEnergies, Royal Dutch Shell, and BHP.

Investors are rewarding companies for transparency and their "direction of travel" as opposed to how their plans will align with the Paris Agreement, ACCR director of climate and environment Dan Gocher said.

"The answer we hear a lot is 'direction of travel'," he said.

"Sure, the companies' paths aren't aligned to the Paris Agreement, but they're doing the right things. That's a terrible concept, really, because direction of travel means so long as companies are having a conversation with invertors on climate, we're going to support the say on climate resolution.

"We're not suggesting that investors vote against every plan - that might be going too far, and there are plans that are worthy of support, because perhaps they're not not aligned with 1.5, but they're genuinely taking action."

ACCR's analysis found that Royal Dutch Shell's Say on Climate vote was supported by just 50% of the Australian superannuation funds analysed. BHP Group's Say on Climate vote at its Australian AGM was supported by 78% of investment managers analysed. Overall in 2021, Australian superannuation funds supported 79.82% of Say on Climate votes, while global investment managers supported 89.07% of Say on Climate votes.

ACCR looked at the 30 largest super funds and found that 20 were shareholders in companies that held Say on Climate votes in 2021, and disclosed their proxy voting records for these resolutions.

The Australian superannuation funds included Active Super, AMP, AustralianSuper, Aware Super, BT Financial Group, CareSuper, Cbus, Equipsuper, Colonial First State, HESTA, Hostplus, Mercer, Mine Super, NGS Super, QSuper, Rest, Sunsuper, TelstraSuper, UniSuper and Vision Super.

The 10 remaining funds that make up the 30 largest funds have not disclosed a complete proxy voting record for 2021, including Commonwealth Super Corporation, MLC, ANZ, IOOF, Macquarie, Spirit Super, Netwealth Super, LGIAsuper, CommBank Group, and HUB24 Super Fund. These funds were excluded from this analysis due to a lack of proxy voting disclosure, or the fund did not hold any of the 20 companies that held Say on Climate votes in 2021.

ACCR noted that CommBank Group Super, MLC and Spirit Super disclosed proxy voting data for Australian shares only for the financial year to 30 June 2021. This was insufficient data to include in this analysis.

2022 brings a fresh round of Say on Climate votes, and Gocher noted that "the Say on Climate mechanism will only be as strong as investors are willing to make it".

"If companies are getting 90% support for their climate plans, they're going to see the small amount of proposition as trivial," he said.

"If you're seeing more than 20% of investors voting against climate plans, companies will have to rethink. If, a year from now, companies still haven't made any improvements, investors need to escalate, and that next step is voting against directors.

"Say on Climate can be useful, but there's no point in endorsing every plan."

Read more: AustraliaACCRAustralasian Centre for Corporate ResponsibilityAustralianSuperCareSuperMLCNGS SuperSpirit SuperUniSuperANZQSuperAware SuperCommBank Group SuperCommonwealth Super CorporationDan GocherAbrdnAllianceBernsteinAllianz Global InvestorsAPGAtosAvivaBlackRockBT Financial GroupCapital GroupCbusColonial First StateEquipsuperFidelityGoldman SachsHESTAHostplusHUB24 Super FundIOOFJP MorganLGIAsuperMacquarieMercerMine SuperMorgan StanleyNetwealth SuperPendal GroupS&P GlobalState Street Global AdvisorsSunsuperTelstraSuperVanguardVision SuperWells Fargo