Data from Corporate Governance in Australia 2023, a new report by Insightia, a Diligent brand, shows that boards must direct resources toward enhancing their ESG oversight, with environmental concerns forming the heart of both activist and institutional investor engagements alike.
The Rise Of ESG Activism In Australia
NEW YORK, APRIL 19, 2023 | Insightia data released today as part of a new special report highlight the growing importance of ESG in shareholder engagements with issuers, driven by the Australian Government’s newfound focus on environmental accountability and reporting.
According to the report, produced in association with First Advisers, sustainability is helping drive shareholder opposition toward pay plans at companies deemed to be taking insufficient steps towards decarbonizing, moreso than at companies proposing outsized CEO payouts.
Corporate Governance in Australia 2023, produced by Insightia (a Diligent brand), shows that Australia continues to attract an abundance of activists, ranking the third-busiest market in terms of companies subject to public demands in 2022.
The rise of ESG activism in Australia underscores the need for leaders to have a 360-view of data across their organization, strengthening their ability to identify which red flags to escalate to the board, monitor and mitigate evolving risks, and document compliance and risk management efforts in defensible, auditable detail.
“With Australian issuers looking set to face a swathe of new ESG-related reporting requirements and investor engagement requests in the coming years, it’s increasingly important for leaders to be proactive in addressing ESG-related risks and opportunities,” said Josh Black, editor-in-chief at Diligent.
Key Findings
ESG dominates both investor and regulatory engagements:
- Mandatory corporate ESG reporting looks set to become a reality, with a new climate-savvy Prime Minister taking the reins and the Australian Government currently reviewing public comments on potential Task Force for Climate-related Financial Disclosure-aligned (TCFD) reporting.
- In a landmark case for ESG activism, Mike Cannon-Brookes secured four board seats at AGL Energy’s November annual meeting, in a campaign centred on the company’s reliance on coal. The success of this proxy fight may inspire further instances of environmental activism.
- In 2022, 24 climate change shareholder proposals won an average of 71.1% support, almost double the 36.4% average support and nearly triple the number of proposals filed two years prior.
- Issuers are making good progress towards advancing board gender diversity, with female directors holding approximately 35% of all ASX 300 board seats in 2022, compared to 23% in 2019.
Hefty CEO payouts don’t always equal pay revolts:
- Approximately 38% of ASX 100 and 32% of ASX 300 CEOs were classed as overpaid in 2022, with the basic materials, financial services, industrials, and energy sectors being the most likely to overpay executives.
- Of the 34 ASX 100 companies identified as having outsized CEO total realized pay when compared to total shareholder returns in 2022, just eight faced greater than 10% opposition to their remuneration plans.
- Instead of voting against excessive CEO pay plans, investors are directing opposition toward pay plans at companies deemed to be making insufficient steps towards decarbonization, with support for director remuneration proposals among Australia-based companies at the lowest it has been since 2015.
Occasional activists target board seats:
- Australia ranked the third-busiest market for activism in 2022, only behind the U.S. and Japan. Last year, 61 companies were subject to activist engagement, compared to 72 and 69 in 2020 and 2021, respectively.
- More than half of all demands made by activists in 2022 in Australia sought to either remove or add personnel to corporate boards, as the rate of remove personnel demands soared to its highest level since 2020. Conversely, 2022 was one of just three years since 2014 where more campaigns were resolved by settlements than via proxy votes.
- The majority of engagements in Australia are being carried out by occasional activists or concerned shareholders, rather than dedicated activists. Only five campaigns in 2022 involved either partially focused and/or dedicated activists.
To download the full report, simply click here, or to view our archive of publications, please visit the resource center section on the Insightia website.
About Insightia
Insightia, a Diligent brand since January 2022, is a market-leading SaaS company formed in 2020 through the merger of Activist Insight and Proxy Insight. Launched in 2012 and 2013 respectively, these companies had quickly risen to become leaders in their fields.
Together, Insightia provides unrivalled coverage of shareholder activism, investor voting, and corporate governance. Through its web application, Insightia One, clients can access the most complete solution for listed company intelligence on the market, with broader and deeper insights than ever before.
About Diligent
Diligent is the global leader in modern governance, providing SaaS solutions across governance, risk, compliance, audit, and ESG. Serving more than 1 million users from over 25,000 customers around the world, we empower transformational leaders with technology, insights and confidence to drive greater impact and lead with purpose. Learn more at diligent.com.
