ASCI updates governance guidelines

Proxy advice organisation, the Australian Council of Superannuation Investors (ACSI), has released its updated governance guidelines to reflect evolving expectations on environmental, social and governance (ESG) issues.

The guidelines provided companies and other market participants with clarity about investor expectations on key ESG issues, and guide ACSI’s voting recommendations.

The governance guidelines were publicly available and provided expectations and guidance to companies on how board decisions or actions would be viewed by long-term investors.

Key changes included:

• Better engagement with First Nations peoples;
• Climate change policy being integrated into the guidelines, along with guidance on ASCI’s approach to ‘Say on Climate’ resolutions;
• New information on research regarding sexual harassment and how to adaquetely respond to it;
• More guidance on disclosure and action on modern slavery;
• Re-enforcement of the importance of diversity, which included at the board level and how this was being enforced; and
• Support for a hybrid model at annual general meetings (AGMs) and an expectation that the use of technology should not compromise shareholders’ ability to actively participate in AGMs.

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Louise Davidson, ACSI chief executive, said the guidelines promoted robust governance practices, including how companies managed 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,” 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.”

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

ACSI’s governance guidelines were updated every two years in consultation with members and would take effect from January.

They covered 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.