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Cybersecurity tops ESG priorities for ASX companies: Perennial

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FS Sustainability – Rachel Alembakis

Cybersecurity is the key 2023 ESG theme for ASX listed companies, topping greenhouse gas emissions and diversity as priority, according to the latest Perennial Better Future survey.

The survey, which was sent to approximately 200 ASX-listed companies across sectors and market capitalisation, found that 78% of respondents’ business strategy specifically references ESG and sustainability.

The top three most commonly cited ESG issues that are material to respondents’ businesses and a focus the next 1q2-18 months are cybersecurity, GHG emissions and diversity.

The rapid rise of cybersecurity comes in the backdrop of major cyber breaches at Optus and Medibank, and was consistent across larger and smaller companies.

“Cybersecurity is obviously a big issue, but it went to first place after having had three years of greenhouse gas emissions, diversity and modern slavery as the top 3, to have cybersecurity go from fourth to first, that’s pretty interesting,” said co-head of ESG at the Perennial Better Future Trust Emilie O’Neill. “It’s not just the increasing prevalence of attacks we’ve seen. What is different is the media attention and the reality of what a cyber breach can actually do in a business.”

Perennial has developed a cybersecurity assessment framework and has identified what they believe are companies that are most vulnerable to cybersecurity breaches.

“We are using that as a basis to go to market and engage with business,” O’Neill said. “We want to make sure there’s a governance framework to manage cyber risk. We want to see it embedded to the culture of the business, and to see employees trained on it, because that’s where the biggest penetration is.

Many of the companies reported concerns related to cybersecurity, including reputational risks, fines and regulatory attention, customer loss and litigation.

“We want to see a board member accountable for cybersecurity risk, in their risk register, and we want to make sure that management is upskilled, and a dedicated employee who is looking at security and cyber risk,” O’Neill said. “Where there’s not accountability, you’re going to see lapses.”

On greenhouse gas emissions and climate-related targets, 73% of companies measure either Scope 1 and 2 or Scope 1, 2 and 3 GHG Emissions. However, 20% of those surveyed do not report their GHG emissions.

Respondents didn’t report future mandatory climate disclosure obligations via legislation or the future integration of the International Sustainability Standards Board’s sustainability reporting standards as a motivating force in disclosing their GHG and climate risks, O’Neill said.

“We’re not really seeing that as a driver yet,” she said. “Obviously, companies that are reporting are going to be better positioned to respond when these become mandatory.”

Perennial has set a target of having all portfolio companies report at least Scope 1 and 2 emissions and setting targets to align with the Paris agreement by 2025.

When it comes to gender diversity, the report found that industry difficulties in attracting gender diverse talent pools was the biggest inhibitor to achieving a gender diverse workplace in 2022, consistent with prior years. Competition for top female talent remained in 2nd position and intensified in 2022, while lack of university graduates remained stable.

Perennial has widened its focus on gender diversity beyond the board level, while noting that last year, 11 new female directors were appointed to their portfolio companies.

“We can meet with board members, we can show our happiness or dissatisfaction with appointments, but we met with Chief Executive Women and had a lot of discussion on a report they did on line management roles and this is now where we’re progressing,” O’Neill said. “The conversations now are, okay, you have a female on the executive team, but they’re in HR or head of legal counsel, or head of sustainability. They’re all really important positions, but are they going to have P&L accountability and are they going to go to the role of CEO?”

O’Neill also flagged that biodiversity is an issue that is rapidly rising up the agenda for ASX-listed companies, a topic that has not previously been flagged by survey respondents.

Read the original article on FS Sustainability