The Australian Council of Superannuation Investors (ACSI) Governance Guidelines are updated every two years. Their last release ACSI Governance Guidelines applies to meetings held after 1 January 2022, with a summary of changes provided below.

Virtual shareholder meeting proposals

ACSI generally supports hybrid models for AGMs whereby participants have the option to attend in-person or virtually. As such, ACSI expects that the use of technology does not compromise shareholders’ ability to actively participate in the meeting given that this is a fundamental right for investors.

Georgeson insights

Holding a hybrid type of meeting can provide various advantages for both companies and shareholders:

  • Companies have an opportunity to demonstrate their flexibility and transparency during the voting and overall participation process;
  • shareholders can attend regardless of their context and location increasing the level of involvement;
  • cost-effectiveness and carbon footprint reduction are also some of the shared benefits.

Gender diversity

ACSI’s new guidelines reinforce the importance of diversity across all forms (not just gender) and expect issuers to have a workforce as diverse as the society in which the company operates. When selecting directors ACSI considers the diversity of gender, age, education and professional experience, ethnicity, and overall board tenure.

Regarding gender diversity, ACSI specifically targets ASX300 companies with poor diversity on their boards as well as at the management level. From this perspective, ACSI encourages companies to improve their gender diversity policies and to disclose their plans to achieve this by:

  • pledging to achieve gender balance (40% male, 40% female and 20% any gender) in executive leadership by 2030;
  • declaring measurable medium and long-term gender targets;
  • making the plan publicly available and reporting progress against targets annually.

Georgeson insights

Although last year the ASX200 achieved the milestone of no longer having any all-male boards, proxy advisors investors and other stakeholders still consider there is much more to do to improve gender diversity across boards and key management personnel.

Committing to a plan to improve diversity and achieve gender balance is a key strategy to keep your investors engaged and improve the company's overall performance.

Diversity at the board level is expected but is also increasingly scrutinised for management roles.

Climate change

ACSI holds individual board members accountable for oversight of climate-related risks, thus it will consider voting against directors who consistently fail to achieve expectations.

ACSI supports the Paris Agreement’s objective to limit global warming to 1.5 °C which requires a shift to net zero greenhouse gas emissions (GHG) by 2050. Aligned to this, ACSI released its Climate Change Policy in 2021 which provides the baseline for its voting recommendations following seven principles which are applied on a case-by-case basis depending on the context:

  • for industries or companies who face material climate-related risks, reporting according to the Taskforce on Climate-Related Financial Disclosures (TCFD) framework is expected;
  • how companies communicate to investors a credible, science-based and Paris-aligned company strategy;
  • disclosure of a quality scenario analysis breakdown to include the different climate futures; • the inclusion of Paris-aligned climate targets;
  • analysis of physical risks management to assess to demonstrate asset-level and/or industry-level exposures and resilience;
  • the policy and advocacy activity of both the company and the industry associations should be consistent with the Paris Agreement goals and if any material differences exist, the company should disclose these discrepancies;
  • planning for the transition to a net-zero economy, including impacts on employees, communities and other stakeholders to minimise negative impacts.

Say on Climate (SoC) management proposals will be supported for companies that are materially exposed to climate risks and provide investors with the ongoing progress against strategy, including risks and opportunities. The analysis will be supported by the principles listed above.

SoC shareholder resolutions will be assessed on a case-by-case basis considering whether the company is already adequately addressing its climate strategy or not.

Georgeson insights

  • TCFD reporting alignment has become an essential tool to demonstrate climate efforts not only because it helps companies to set up their internal processes to address climate risks, but also because represents an opportunity to get the message across to shareholders, proxy advisors and customers.
  • There is an increasing expectation for board members to have demonstrated oversight regarding the climate strategy of the business.

Other updates

ACSI has also incorporated further guidelines around the “S” side of Environmental Social and Governance (ESG). For instance, after the completion of the first reporting cycle under the Modern Slavery Act, ACSI will be assessing the improvement of companies year on year and seeking proactive management around this topic.

Similarly, human and labour rights due diligence are expected given that these represent regulatory, operational, reputational and market risks. Thus, ACSI considers board members to have ultimate accountability for the company’s human rights practices. Also, sexual harassment and racial discrimination are other relevant topics that ACSI considers and requires all companies to proactively prevent these issues.

For these matters, ACSI expects companies to:

  • avoid causing or contributing to adverse human rights impacts and modern slavery in their own operations;
  • understand and mitigate the risks of adverse human rights impacts and modern slavery in their supply chains;
  • transparently disclose their material risks related to human rights and modern slavery and how the company effectively manages the risks;
  • board members to ensure they are receiving all the information needed to address all these topics.

Georgeson insights

  • Modern Slavery includes various concepts such as forced labour, human trafficking, chattel slavery, child labour and other illegal practices which can exist throughout the supply chain of any company. Not having due diligence processes in place can represent high risks of reputational damage, legal costs and operational disruptions amongst others.
  • Australian companies with a revenue of $100 million will likely be preparing their third for submission. So, it is expected that the depth of policies, practices, remediation processes and reporting is maturing.