Moving forward on ESG: ACSI governance standards updated

The Australian Council of Superannuation Investors (ACSI) has today released its updated Governance Guidelines to reflect evolving expectations on ESG issues.

ACSI’s Governance Guidelines are updated every two years and will take effect from January.  The guidelines provide companies and other market participants with clarity about investor expectations on key ESG issues, and guide ACSI’s voting recommendations. ACSI members include 34 institutional investors and asset managers.

The Governance Guidelines are publicly available and provide expectations and guidance to companies on how board decisions or actions will be viewed by long-term investors. They cover a range of critical ESG issues, including modern slavery and climate reporting, board and management diversity, sexual harassment and safety, executive remuneration and the use of virtual technology at annual general meetings.

ACSI CEO Louise Davidson said that the guidelines promote robust governance practices, including how companies manage ESG risks and opportunities.

“One principle underpins everything we do. We are focused on financially material ESG risks and opportunities over the long term to protect and enhance the retirement savings that are entrusted to our members,” Ms Davidson said.

“Over the past two years, we have seen the financial impact that can occur when companies mismanage ESG issues. Our guidelines seek to promote better ESG performance of listed companies and ensure companies have a clear understanding of the issues important to investors.”

In the 10th edition of the Governance Guidelines, we have made a number of updates. As always, our focus on good governance will remain, alongside the new areas identified. Key changes include:

  • First Nations peoples: ACSI’s new policy on engagement with First Nations peoples highlights the material financial risks companies and investors face as a consequence of poor engagement and cultural heritage practices and provides guidance on good practice.
  • Climate: Our climate change policy position has been integrated into the guidelines, along with guidance on ACSI’s approach to ‘Say on Climate’ resolutions, and developments and disclosures to help investors better track and assess company progress.
  • Sexual harassment: New information on sexual harassment draws on ACSI’s research and outlines expectations that companies proactively prevent and respond effectively to sexual harassment.
  • Modern slavery: More detailed guidance on meaningful action and disclosure in relation to modern slavery.
  • Diversity: The guidelines reinforce the importance of diversity (of all forms) and promoting a workforce that reflects the diverse demographic and society in which a company operates. This includes disclosure on the diversity of the board and how this is being encouraged. We have also included a section on racism and other forms of discrimination, which states the importance of establishing a safe and inclusive working environment for all. Additionally, we have included specific expectations on gender diversity at executive management level.
  • Virtual technology use at AGMs: We outline support for a hybrid model for AGMs and an expectation that the use of technology should not compromise shareholders’ ability to actively participate in AGMs.

“Ms Davidson said. “As the risks and opportunities associated with ESG issues evolve, so do the investor expectations. This is reflected in our Governance Guidelines.”

In consultation with members, ACSI updates the guidelines every two years to ensure they reflect contemporary expectations.

You can download the Governance Guidelines here.

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