How industry funds flex their muscle on ESG

Environmental, social and governance (ESG) factors represents the sole area in which industry funds have acknowledged exerting their influence on the publicly-listed businesses in which they hold shares.

Amid months of submissions and Parliamentary Committee questioning around capital concentration and the influence of superannuation funds, ESG has emerged as the only area in which the exertion of influence has been freely acknowledged.

This much was made clear by the industry funds-owned investment manager, IFM Investors which while generally ruling out using its shareholdings in publicly-listed companies, signalled it made an exception with respect to ESG.

Responding to the question “has IFM ever given an ultimatum to a board or board directors, that if they do not do or do not act, they will lose support in voting at an AGM and/or their positions”, the investment manager made its position clear.

“IFM believes that environmental, social and governance (ESG) factors can impact the value of our investee companies over time. We therefore take an active stewardship approach to our investments in listed companies to encourage responsible corporate behaviour and improved transparency around how material ESG risks are being managed. As part of this approach, we regularly engage with companies and exercise our ownership rights to vote on company resolutions at AGMs.”

“When we have concerns about an investee company’s approach to a particular matter we will engage with that company. Sometimes if the matter is not resolved through this engagement, it may be appropriate to vote against management at an AGM.”