Australian companies are facing more climate-focused ESG resolutions than ever before, and they are paying quiet dividends
- Written by: Ian Ramsay, Emeritus Professor, Melbourne Law School, The University of Melbourne
In 2020, for the first time in Australia, more than half the shareholders of a public company voted in support of a climate change resolution put forward by shareholders in the face of opposition from the company’s board of directors.
The resolution, advanced at Woodside Petroleum’s annual general meeting, called for the company to establish hard targets[1] to bring its own emissions and the emissions caused by the use of its products globally in line with the Paris Agreement to keep global warming below two degrees.
A similar resolution followed at this year’s AGL annual general meeting, gaining the support of 52%[2] of the shareholders.
Although the Woodside vote was described as a “breakthrough moment[3]”, it is part of an increase in shareholder activism around environmental, social and governance (ESG) issues that’s been building for several years.
Our analysis[4] of shareholder ESG resolutions put forward in listed Australian companies between 2002 and 2019 finds they have increased in number, prominence and impact.
Shareholder ESG Resolutions per year
Another is to get companies to respond positively even though the resolutions will be defeated, and sometimes in return for the resolutions being withdrawn before the annual general meeting.
As an example, the Australasian Centre for Corporate Responsibility submitted a resolution for this year’s Woodside annual general meeting calling on the company to prepare an annual climate report that would include Woodside’s strategy to reduce its greenhouse gas emissions and put the report to a shareholder advisory vote.
It withdrew[9] the resolution after Woodside announced it would put climate reporting to an advisory vote of shareholders at its 2022[10] annual general meeting.
Some of those we interviewed said shareholder ESG resolutions distracted the companies from what they should be doing.
Others said they ran the risk of blurring the distinct roles of directors and shareholders. Many said the process for getting shareholder ESG resolutions on the agenda for annual general meetings is cumbersome.
However, almost all of those interviewed – and not just the proponents of the resolutions – saw them as a valuable way of letting companies know what their shareholders really think about how they should respond to the challenges of climate change and other issues.
References^ hard targets (www.smh.com.au)^ 52% (reneweconomy.com.au)^ breakthrough moment (www.smh.com.au)^ analysis (papers.ssrn.com)^ Freeburn and Ramsay 2021 (papers.ssrn.com)^ Rio Tinto's climate resolution marks a significant shift in investor culture (theconversation.com)^ Australasian Centre for Corporate Responsibility (www.accr.org.au)^ Market Forces (www.marketforces.org.au)^ withdrew (files.woodside)^ 2022 (www.nasdaq.com)
