media release
28 September 2022
HESTA calls for ambitious response from ASX300
HESTA has written to the Board Chair and CEOs of ASX 300 companies ahead of the forthcoming AGM season to ask how they are planning for and responding to long-term systemic risks such as climate change, social inequality, and biodiversity.
The letter, which outlines the Fund’s engagement themes for the 2022-23 financial year, underpins HESTA’s belief that companies should be taking action to promote broader economic resilience for the benefit of its members and all Australians.
HESTA CEO Debby Blakey said HESTA’s engagement approach aims to support strong, long-term value creation for members.
“Delivering good returns to our members requires a strong and stable economy and strong performance of our portfolio companies against their strategies,” Ms Blakey said.
“This decade is critical for managing a range of systemic risks that are relevant both to the companies we invest in and the overall management of our portfolio. That’s why we’re encouraging management and boards of ASX 300 companies to be ambitious in their responses to systemic risks such as climate change, social inequality and the loss of biodiversity.”
This is the third annual letter HESTA has written to Australian companies, this year expanding engagement from the ASX 200 to the ASX 300, reflecting the depth of the HESTA portfolio.
HESTA manages the retirement savings of more than 950,000 members working predominantly in the health and community services sector, with over $68 billion of assets under management.
In the letter, Ms Blakey says climate change remains a crucial focus for the Fund.
“In addition to posing a financial risk to the value of our members’ investments, climate change is also relevant to the work our members do in health and community services,” Ms Blakey said.
In 2020, HESTA was the first major super fund to set the ambition to reach net zero carbon emissions across its entire investment portfolio by 2050. It recently strengthened its interim emissions reduction target to a 50% normalised emissions reduction by 2030, against a 2020 baseline.
“We urge Australian companies to deliver a verified climate strategy, with targets aligned to a 1.5°C transition pathway,” Ms Blakey said.
“This should include careful consideration of the need to direct greater capital expenditure towards supporting a timely, equitable and orderly transition to a low carbon economy.”
Reflecting the need for urgent climate action, HESTA will examine how the items for consideration on the Notice of Meetings, including the skills around the Board table, reflect the importance of the transition challenge.
HESTA notes in the letter the rapid degradation of nature, resulting in biodiversity loss being identified by the World Economic Forum as the third-most severe global risk, after climate action and extreme weather.
Ms Blakey encouraged companies to assess if their operations and supply chains may be exposed to risks due to either a dependence on nature or were causing a loss of nature. For example, companies may be dependent on nature through food supply chains or causing loss of nature through issues like significant water use or contamination.
Companies are also encouraged to better enable integration of natural capital into decision making through consideration of the recommendations of the Taskforce of Nature-Related Financial Disclosures.
The letter outlines how gender inequality affects HESTA’s investment portfolio, the broader economy, and the retirement outcomes of members, 80% of whom are women.
“We are asking Australian companies to set gender balance targets for Board and Executive roles and develop plans to achieve these targets,” Ms Blakey said.
"Companies should also be conducting gender pay gap analysis to better understand and implement opportunities for improvements."
HESTA continues to lead 40:40 Vision, an initiative aiming to achieve gender balance (40:40:20) in ASX 300 executive teams by 2030. 40:40 stands for 40% women, 40% men, 20% any gender.
On the topic of skills shortages, Ms Blakey encourages Australian companies to consider opportunities to provide more secure jobs with appropriate working conditions and rights, including promoting employee physical and mental safety and wellbeing.
Ms Blakey said how companies treated their people supported long-term value creation through the link to employee productivity.
“The management of human rights and human capital must also extend to companies’ supply chains and so we encourage companies to deepen the processes used to assess and address modern slavery risk, focussing on risk to affected people,” Ms Blakey added.
Ms Blakey said that where HESTA considered there were growing investment risks, the Fund may use its existing engagement escalation framework.
Escalation can include either one or a combination of tools such as the use of a ‘watchlist’, votes against Directors, the support or filing of shareholder resolutions and/or consideration of divestment where the Fund considers there is inadequate evidence of progress to address the risks and it is in members’ best financial interests.
“We look forward to continuing to work proactively with the ASX 300 to enhance the long-term value of companies through the management of these systemic risks and transition to a more sustainable, equitable and prosperous economy for our members and all Australians,” Ms Blakey said.
Ends.