ASX companies taking significant tangible actions on ESG

From

Damien Cottier

An accelerated shift from awareness to action on Environmental, Social and Governance (ESG) and sustainability among ASX listed companies is underway, and there is a heightened focus on these issues by all stakeholder groups, according to new survey findings from Perennial Better Future.

For the first time since the survey began, greenhouse gas emissions, including alignment with the Paris Agreement, was listed by ASX companies’ respondents as the biggest area of focus and improvement. Diversity moved to second place from third in 2020, and Governance moved to third place from first last year.

“Against the difficult backdrop of COVID-19 and all the challenges it has presented, ASX respondents said greenhouse gas emissions will be the number one priority in the next 12-18 months. This demonstrates Australian companies are starting to come to grips with the urgency and opportunity of acting on climate risk,” said Perennial Better Future’s Co-Head of ESG Emilie O’Neill.

In its third year, the Perennial Better Future Survey conducts an ‘ESG pulse’ check on Australia’s listed companies to understand where they have been, where they are now and where they are going regarding ESG.

Increasing action at senior management levels

While results from previous Perennial Better Future Surveys clearly showed attention to ESG matters among Australia’s listed companies, this year’s results strongly point to more tangible actions occurring.

“This year’s results revealed the pandemic has not stopped boards and senior management seeking to improve ESG practices and policies,” said O’Neill.

More than 88% of respondents confirmed their company had a board member or senior executive responsible for ESG. Further, 81% of companies have a business strategy that specifically references ESG and sustainability. This is consistent across both large and smaller companies.

Importantly, companies are seeing real-world results from focusing on ESG and sustainability – more than 80% confirmed positive business outcomes.

Further, 93% confirmed engaging with investors on ESG and sustainability issues as beneficial to the company.

Current and emerging issues on the radar

The role of proxy advisors has been in the spotlight recently and 40% of respondents agreed they feel increasing pressure on their remuneration policy and corporate governance practices from proxy advisors.  However, other stakeholders such as shareholders and remuneration consultants are still viewed as the most critical in regard to implementing remuneration policy.

When it comes to inhibitors to ASX companies achieving a gender diverse workplace, industry difficulties in attracting a gender diverse talent pool topped the chart. Increasing gender diversity at a senior level has consistently been a focus for ASX companies over the past three years.  However, there has been an increase in focus on achieving gender diversity amongst entry-level positions.

Cybersecurity was a new option in this year’s survey and ranked equal third with Modern Slavery, in areas that will become more material in the coming years.

“Cybersecurity has emerged as a critical issue for companies, a concern heightened by the shift to remote working during the pandemic,” said O’Neill.

“Given the likelihood of greater investor and other stakeholder interest in relation to ESG matters, we look forward to continuing to track how ASX companies progress,” said Damian Cottier, Portfolio Manager of the Perennial Better Future Strategies.  “We will continue to engage with companies to encourage them to play a greater role in positively shaping a better future,” he concluded.

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