The Australian Council of Superannuation Investors (ACSI) has seen a significant lift in the number of ASX listed companies proactively approaching it for advice on improving remuneration structures and health and safety standards in their supply chains.
ACSI represents $400 billion in investments and owns about 10 percent of the ASX’s top 100 companies.
Gordon Hagart, head of ACSI, said: “Ten years ago if we phoned up BHP, the question would’ve been ‘who are you?’ Now we see 160 companies coming to us for advice on environmental, social and governance matters (ESG).”
It’s a sign, says Hagart, that longer term management is beginning to trump the short term culture that dominates the funds management industry and the greater role superannuation funds are taking in the management of assets.
“Short termism is often invoked as the reason why companies don’t manage ESG well,” he said. “Often it’s the asset managers and investment banks that are focussed on short term drivers of risk and return, but if the company comes to talk to the top end of the chain (the long term owners) they get a different message about the importance of managing risk and ESG.”
High profile news coverage is also driving greater member engagement. “Members will say ‘hang on, am I invested in a company that has factories in Bangladesh?’ It’s those human stories that can really surprise you, and make fund members suddenly very engaged with their super,” says Hagart.
While the issues that resonate vary between funds and members, labour and human rights has been the big one recently according to Hagart. When it came to light last year that Kmart and Woolworths were sourcing cotton from Uzbekistan and had labour factories in Bangladesh, Hagart says some superfunds approached the companies over their health and safety practices throughout their supply chains.
In the past ACSI have also claimed success in encouraging shifts to longer term remuneration practices within Transurban and Billabong, but Hagart says it’s an industry where “big wins” are not common.
“It’s like taxes and fees, it’s a slow, leaky tap – you’re leaking costs if you do nothing about it.”