HESTA urges ASX300 to engage on environmental, social issues

HESTA has completed its fifth annual letter to the chairs and CEOs of the top 300 companies on the Australian Securities Exchange (ASX), urging them to increase their engagement with environmental and social issues to boost members’ retirement savings.

The superannuation fund said it would engage with ASX300 companies on climate change, nature loss, gender equality and decent work, with chief executive, Debby Blakey, encouraging companies to “demonstrate foresight and ambition by putting appropriate plans and targets in place to address risk and create long-term [investment] value”.

She said the four themes were selected due to their material and financial risk to companies, shareholders, the global economy and society.

“Through constructive engagement with companies, investors have encouraged big emitters to act faster on climate and significantly improved gender diversity on boards and executive teams across the ASX,” she said.

“But more needs to be done. That’s why HESTA is encouraging companies to act now on climate change, nature loss, gender equality and decent work, supporting us to deliver strong, long-term investment performance.

“This year our engagement on climate action will focus on ensuring boards have the right mix of skills and capabilities needed to transition their business to a low-carbon future. We’re also looking for credible climate plans, especially from energy, resources and industrial companies, that bring forward investment in new technologies.

“On gender equality, this year we’ll be monitoring gender pay gaps closely and asking companies to set gender balance targets – at least 40 per cent women – not only at the board and executive level, but right across their organisation.

“Nature loss and decent work are emerging areas of concern for investors and we’re encouraging the ASX300 to prioritise these issues given the potential negative impact to long-term financial performance.”

According to data released by the Australian Council of Superannuation Investors (ACSI), 75 per cent of the ASX200 had either committed to or were reporting against the Task Force on Climate-related Financial Disclosures framework in March 2023, increasing from 66 per cent when compared to the year before.

“Even before we started writing to companies five years ago, HESTA was voting against all-male boards and we continue to do so. Now just 30 more appointments of female directors are needed to hit gender balance in Australia’s top 200 listed companies,” Blakey said.

“More than one million Australians trust HESTA to look after their hard-earned retirement savings and expect us to do everything we can to protect and enhance the value of their investments.”

A statement from the super fund confirmed the underlying priorities that belong with each issue it is targeting for this financial year, including:

• Balancing climate goals and practical steps
  • Companies must balance climate ambition with an orderly transition to a low-carbon economy that’s in the best financial interests of members.
  • HESTA will focus on ensuring boards have the right mix of skills and capabilities needed to transition their business to a low-carbon future.
  • Especially in energy, resources and industrial sectors, HESTA wants to see credible climate plans align with the Federal Government’s sector transition pathways and that bring forward investment in new technologies.
• Connecting nature and climate
  • Climate change worsens the loss of nature and biodiversity, which are our largest carbon sinks. Over half of global GDP is highly or moderately reliant on nature.
  • To cap global temperatures, we need to balance land use for food, industry and nature, and develop markets for nature-based carbon offsets.
  • HESTA wants companies to understand their impact on nature, their dependence on nature, and take urgent action to halt and reverse nature loss.
• Accelerating gender equality
  • Gender balance in leadership can improve decision-making and company performance, which can benefit the retirement savings for HESTA members, around 80 per cent of whom are women.
  • HESTA is encouraging companies to set public targets to achieve gender balance in their boardrooms, in executive teams, and across their organisations, and develop strategies to reach these goals.
  • HESTA will monitor ASX300 gender pay gaps and engage with select companies on the drivers of these gaps.
•  Promoting decent work
  • HESTA believes companies that provide decent work, may experience stronger employee engagement and perform better over the long term.
  • A new HESTA-commissioned report from Bankwest Curtin Economics Centre shows Australian jobs post-pandemic have generally become more secure with better conditions and more flexibility, but work has become more stressful, especially for women.
  • HESTA assesses decent work based on security, stress, conditions and flexibility, and will engage with large employers in sectors with weaker decent work outcomes to improve their disclosure and enhance job quality.