FS Sustainability – Rachel Alembakis
Greenhouse gas emissions and diversity top the list as areas of focus and improvement for ASX companies, according to Perennial Better Futures.
The third annual Perennial Better Futures Survey takes the ESG pulse ASX-listed companies to understand where companies have been, where they are now and where they are considering over the next 12-18 months.
For the first time since the survey began, GHG emissions, including alignment with the Paris Agreement, was listed by ASX companies’ respondents as the biggest area of focus, diversity moved to second place from third in 2020, and governance moved to third place from first last year.
The consistency of the top areas of focus demonstrates the importance of the issues, but other areas relating to ESG management have moved quickly in the three years since the survey began, said Perennial Better Future’s co-head of ESG Emilie O’Neill.
“What surprised me was the influence of senior management on ESG and sustainability,” O’Neill said. “That show companies have top-down drivers, with 81% saying that they have a business strategy that now specifically references ESG and sustainability. It’s being put into tangible views and seen as a priority, and also the dedicated executive management that have a dedicated sustainability role.”
More than 88% of respondents confirmed their company had a board member or senior executive responsible for ESG, the survey found. Respondents also said they are seeing real-world results from focusing on ESG and sustainability – more than 80% confirmed positive business outcomes.
“The level of focus in the last few years has really accelerated,” added Perennial Better Future Strategies portfolio manager Damian Cottier. “Some have started to see there’s a cost of capital difference to having a good approach to ESG. They’re often putting more resources into it to improve their performance.”
Almost all respondents – 93% – confirmed engaging with investors on ESG and sustainability issues as beneficial to the company.
Meanwhile, 40% of respondents agreed they feel increasing pressure on their remuneration policy and corporate governance practices from proxy advisors. However, other stakeholders such as shareholders and remuneration consultants are still viewed as the most critical in regard to implementing remuneration policy.
This year, a question relating to cybersecurity was a new option and ranked equal third with Modern Slavery, in areas that will become more material in the coming years.
“The importance of modern slavery and cybersecurity is not really surprising, given that they’re topics we identified as material, and seeing the companies identify them as material as well is pleasing,” Cottier said.
Perennial Better Futures is a boutique investment business owned by Perennial Partners. It includes the Perennial Better Future Trust and the associated active ETF, the eInvest Better Future Fund (IMPQ) and also manages ESG initiatives across the Perennial group.
Disclaimer: Please note that these are the views of the writer and not necessarily the views of Perennial. This article does not take into account your investment objectives, particular needs or financial situation.