Super fund stewardship thrust in the spotlight

The corporate regulator has outlined when a super fund’s active stewardship strategy could result in greenwashing intervention even as new research finds funds’ support for climate-related shareholder proposals is on the decline.

Presently, a number of funds maintain holdings in fossil-fuel companies such as Santos, Woodside and Chevron on the basis of stewardship or active ownership strategies to drive climate action. 

Speaking at the Australian Financial Review Super & Wealth Summit, ASIC deputy chair Sarah Court warned funds against overstating the degree of their engagement to avoid falling into the regulator’s greenwashing radar. 

“Trustees can choose to invest in any fund they wish to, there’s no law against who to invest in. The issue [ASIC] is interested in, of course, is what are you telling your investors about why you’re holding those funds, if you choose to say anything,” Court said.

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“When you’re making representations about an engagement or active stewardship strategy, firstly don’t overstate the degree of influence you could reasonably have in relation to the companies you’re investing in. Secondly, make sure you disclose to members the strategy and the approach. Really, it’s about being transparent about what can be achieved.”

In the last year, ASIC has reported some 35 greenwashing interventions, including infringement notices against Diversa Trustees, Vanguard and Future Super and civil penalty proceedings against Active Super, Vanguard Investments and Mercer Super over alleged greenwashing. 

According to Court, the issue at hand is about holding super funds accountable for their claims and ensuring they deliver on what they say they are going to do.

“If you’re telling members, ‘Look, we’re holding these investments for the purposes of engaging with these companies trying to influence change’ and then in fact you’re sitting back and not engaging at all, that is something I can imagine we get complaints about and choose to have a look at,” she said.

“It’s a misrepresentation or a distortion of what’s going on and investors are entitled to know what’s going on behind the scenes.”

New research from Market Forces has also pulled up funds for the degree of their active stewardship despite having made public climate commitments. 

The Great Superannuation Greenwash report, which analysed the voting behaviour of Australia’s largest 30 super funds on climate-related shareholder proposals between 2017 and 2022, found funds’ support for such proposals declined in the last year.

Just over half (52 per cent) of votes cast by Australia’s super funds backed climate-related proposals at company annual general meetings (AGMs) compared to 56 per cent in 2021 and 2020.

This even as the number of shareholder climate proposals had actually increased significantly in 2022, signalling increasing shareholder pressure on companies to take greater climate action. 

The analysis also found that, compared to all other companies in 2022, super funds were more likely to vote against action at fossil fuel companies with the largest expansion plans.

“While voting results on most shareholder proposals are non-binding in Australia and many other jurisdictions, this form of engagement helps ensure that companies are aware of and can respond to shareholder expectations and preferences on responsible business practices, transparency and long-term financial sustainability,” the report stated.

“As the stewards of $3.5 trillion of Australians’ retirement savings, super funds have a responsibility to act on behalf of their members and use their considerable power to ensure companies take meaningful climate action.”