The chief executive of the $70 billion retail industry super fund, Rest Vicki Doyle has urged the Federal Government to move faster on setting the standards for disclosure around ESG issues, particularly on climate change.
Speaking at ACSI’s annual conference in Sydney, she warned that there was a danger that the increased focus by securities regulator ASIC could be putting “the cart before the horse”.
Her comments came after a speech by the Minister for Financial Service, Stephen Jones that the Federal Government would be giving ASIC another $4.3 million to crack down on greenwashing by companies and funds. Future Super last week paid a fine for greenwashing over a Facebook post.
Doyle said ASIC’s tougher action on greenwashing was coming before there were reasonable standards and guidance for companies and funds on the rules and regulations around disclosure and commenting on green issues.
She said it was important that Australia did not end up in a situation as there had been in Europe in previous years where the word “sustainability” was associated with companies doing the wrong thing including greenwashing.
“If we invest significantly in ASIC [to take action against greenwashing] and the taxonomy [for disclosure around climate change and ESG issues] isn’t there, we put the cart before the horse,” she said.
“What we might end up with is more of a compliance mindset over the next couple of years, when what we need is to be spending time and resources on setting the standards for companies to put capital there [in greener investments] where they are confident and for investors to build confidence to support them in the capital, and not get those two things out of sequence.”
She said the shift to more disclosure and attention to green issues and reducing the carbon emissions of investments was moving into “unchartered territory” for investors such as super funds, which required “innovative thinking and deep risk management skills.”
“It requires a whole lot of skills and resources and there is only so many resources we have in our organisation to think about this,” she said.
Call for faster action
While she supported action against greenwashing, faster action was needed to move towards setting standards for disclosure and developing the taxonomy. “I would like us to speed up [the development of] that taxonomy,” she said.
At the moment, she said, it could take as long as 12 to 24 months.
“This is a big issue for us because Europe are much further along, and the Inflation Reduction Act has just come out in the US.”
“They will suck up the talent, suck up the capital,” she said. “Companies – and we [Rest] will need to be thinking where we put our money.” She said super funds were looking at emerging markets to invest in.
The Inflation Reduction Act of 2022 is the Biden Administration’s landmark legislation to curb inflation by reducing the deficit, lowering prescription drug prices and investing into domestic energy production through clean energy.
Minister Jones in his speech at the conference signalled the Federal Government was looking at more incentives to encourage investment in green energy, as a result of the competitive pressure from the US Inflation Reduction Act.
While he said the Albanese Government had already taken a suite of policies to reduce emissions, it was still having to consider the competitive pressure from the US Inflation Reduction Act which he warned could “suck capital out of Australia” if there were not enough incentives for investments locally.
Actively managing Santos risk
Doyle said Rest strongly believed in being an active investor to encourage companies to make the transition to a lower carbon world. “Having a seat at the table and being an active investor is important,” she said.
But she said this did not mean selling out completely of companies which were carbon emitters, for example Rest still had a shareholding in gas company Santos.
She said a million of Rest’s two million members were aged under 30 with a strong interest in climate change and social and ESG related issues.
“There has never been more of a time when there is a case for active ownership including understanding the implications of supply chains, human rights and climate change,” she said. “ESG issues are front and centre of investing.”
“We play a very important role in actively being at the table,” she said.
“The pressure from investors and asset owners can change the trajectory of them fast tracking their climate change plans and their transition around energy.”
“Without that pressure they will find the money elsewhere.”
But she said if companies were not moving fast enough on these issues it could be time to think about divesting or expressing views in terms of voting at annual meetings.
“Being an active investor is important, but there may be times when you need to divest completely if that company is agnostic or ignorant to moving quickly [on climate change issues].”