1 00:00:03,810 --> 00:00:06,410 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean 2 00:00:06,430 --> 00:00:09,080 Sean Aylmer: Aylmer. We seem to be talking more and more about 3 00:00:09,080 --> 00:00:11,740 Sean Aylmer: the role of super funds in the investment landscape in 4 00:00:11,740 --> 00:00:14,980 Sean Aylmer: Australia. It makes sense, considering the amount of money going 5 00:00:14,980 --> 00:00:18,220 Sean Aylmer: into super continues to increase and fund managers have a 6 00:00:18,239 --> 00:00:21,549 Sean Aylmer: duty to their members to invest well, but they're also 7 00:00:21,550 --> 00:00:24,850 Sean Aylmer: using the size of their investments to help bring about 8 00:00:24,850 --> 00:00:28,350 Sean Aylmer: change in line with what their members and society more 9 00:00:28,350 --> 00:00:32,400 Sean Aylmer: broadly expect to see, and often that change helps to 10 00:00:32,400 --> 00:00:37,229 Sean Aylmer: minimize financial risk. The Australian Council of Superannuation Investors is 11 00:00:37,229 --> 00:00:40,409 Sean Aylmer: a group of 32 super funds who manage over $ 1 12 00:00:40,409 --> 00:00:44,040 Sean Aylmer: trillion in assets, influential investors when you consider that, on 13 00:00:44,040 --> 00:00:48,449 Sean Aylmer: average, they own 10% of every company on the ASX 200. 14 00:00:48,830 --> 00:00:52,740 Sean Aylmer: Louise Davidson is the CEO of ACSI, Australian Council of 15 00:00:52,740 --> 00:00:56,170 Sean Aylmer: Superannuation Investors, and my guest this morning. Louise, welcome back 16 00:00:56,170 --> 00:00:56,720 Sean Aylmer: to Fear and Greed. 17 00:00:57,440 --> 00:00:59,320 Louise Davidson: Thanks very much. It's great to be back. 18 00:00:59,840 --> 00:01:03,170 Sean Aylmer: It's quite a responsibility that the council has. 19 00:01:03,520 --> 00:01:06,360 Louise Davidson: True. True. It is a big responsibility and it's one 20 00:01:06,400 --> 00:01:11,209 Louise Davidson: that we take very seriously. So, our focus really is 21 00:01:11,209 --> 00:01:17,069 Louise Davidson: on financial risk and managing financial risk in companies, particularly 22 00:01:17,069 --> 00:01:21,240 Louise Davidson: as it displays itself through environmental, social and governance issues, 23 00:01:21,770 --> 00:01:25,050 Louise Davidson: I guess also financial opportunity. But the real focus when 24 00:01:25,050 --> 00:01:28,640 Louise Davidson: it comes to a lot of these ESG issues is, 25 00:01:28,640 --> 00:01:32,670 Louise Davidson: are companies managing them in a way that's going to, 26 00:01:33,280 --> 00:01:37,459 Louise Davidson: over the long- term, lead to better outcomes from a 27 00:01:37,459 --> 00:01:41,190 Louise Davidson: financial perspective for the super funds who invest in the companies? 28 00:01:41,270 --> 00:01:44,220 Sean Aylmer: Yeah. Okay. We spoke 12 months ago and at the 29 00:01:44,220 --> 00:01:47,690 Sean Aylmer: time you were putting Australian companies on notice over climate 30 00:01:47,690 --> 00:01:50,950 Sean Aylmer: change and you were circulating a set of expectations for 31 00:01:50,950 --> 00:01:55,200 Sean Aylmer: companies, particularly those exposed to climate- related risks. A year 32 00:01:55,200 --> 00:01:56,410 Sean Aylmer: on, what's been the result? 33 00:01:56,950 --> 00:02:00,130 Louise Davidson: Yes, that's right. So we published a policy last year, 34 00:02:00,240 --> 00:02:02,560 Louise Davidson: as you know, and we discussed it, you and I, 35 00:02:02,650 --> 00:02:06,670 Louise Davidson: about 12 months ago. I suppose, just to recap for 36 00:02:07,010 --> 00:02:10,600 Louise Davidson: listeners, the real focus of that policy is on making 37 00:02:10,600 --> 00:02:16,080 Louise Davidson: sure that companies are managing climate risk within their organization, but 38 00:02:16,080 --> 00:02:19,040 Louise Davidson: also on making sure that they're providing enough information to 39 00:02:19,040 --> 00:02:22,530 Louise Davidson: investors for investors to make a decision about whether or 40 00:02:22,530 --> 00:02:26,660 Louise Davidson: not they think that management is adequate. So there's quite 41 00:02:26,660 --> 00:02:29,440 Louise Davidson: a lot of focus on making sure that companies are 42 00:02:29,639 --> 00:02:32,690 Louise Davidson: giving us that information, but also on making sure that 43 00:02:32,690 --> 00:02:38,930 Louise Davidson: companies are aligned in their corporate strategy to appropriate climate outcomes. 44 00:02:38,930 --> 00:02:42,520 Louise Davidson: So, aligned to the Paris Agreement, net zero emissions by 45 00:02:42,610 --> 00:02:46,760 Louise Davidson: 2050, and also the steps that they need to take 46 00:02:46,760 --> 00:02:49,400 Louise Davidson: along the way to meet that. So we don't want 47 00:02:49,400 --> 00:02:51,340 Louise Davidson: a company to say, " Well, we'll be net zero by 48 00:02:51,350 --> 00:02:55,380 Louise Davidson: 2050, and just trust us that we'll be there by 49 00:02:55,380 --> 00:02:57,370 Louise Davidson: then." We want to say, " Okay. Well, where will you be 50 00:02:57,370 --> 00:03:03,300 Louise Davidson: 2025, 2030, 2035?", et cetera. So a lot has happened in 51 00:03:03,300 --> 00:03:06,190 Louise Davidson: the climate space over the last 12 months. We have 52 00:03:06,190 --> 00:03:10,269 Louise Davidson: had a pretty positive response from companies to the policy 53 00:03:10,270 --> 00:03:13,710 Louise Davidson: that we published, and it's interesting also to note that in 54 00:03:13,710 --> 00:03:17,079 Louise Davidson: that period of time we've also seen the federal government 55 00:03:17,100 --> 00:03:20,650 Louise Davidson: commit to net zero by 2050 for Australia. That's been 56 00:03:20,650 --> 00:03:23,850 Louise Davidson: a really big step forward. We've had, I guess, over 57 00:03:23,850 --> 00:03:27,310 Louise Davidson: just the last couple of weeks, some pretty alarming updates 58 00:03:27,310 --> 00:03:31,260 Louise Davidson: from the IPCC on the physical impact on climate change, 59 00:03:31,400 --> 00:03:33,700 Louise Davidson: and I guess we're all really being exposed to that 60 00:03:33,700 --> 00:03:37,780 Louise Davidson: in a pretty big way in Australia recently, particularly over the 61 00:03:37,780 --> 00:03:40,369 Louise Davidson: last few months with the terrible flooding that we've seen 62 00:03:40,370 --> 00:03:43,090 Louise Davidson: in Queensland and New South Wales. So it's sort of 63 00:03:43,090 --> 00:03:44,360 Louise Davidson: becoming very real, isn't it? 64 00:03:45,220 --> 00:03:49,570 Sean Aylmer: Yeah. You mentioned that intergovernmental panel on climate change report 65 00:03:49,570 --> 00:03:52,850 Sean Aylmer: which came out only in the last week. Was it 66 00:03:52,850 --> 00:03:57,060 Sean Aylmer: shocking to you that companies perhaps haven't done as much 67 00:03:57,060 --> 00:04:00,120 Sean Aylmer: as they should, and do you think that sort of report can be 68 00:04:00,120 --> 00:04:03,050 Sean Aylmer: a catalyst for people or for companies to put it 69 00:04:03,050 --> 00:04:03,850 Sean Aylmer: back on their radar? 70 00:04:04,670 --> 00:04:07,720 Louise Davidson: Look, I hope that that report does serve as a 71 00:04:07,720 --> 00:04:12,200 Louise Davidson: catalyst in that way. There's just so much urgency about 72 00:04:12,200 --> 00:04:15,440 Louise Davidson: the steps we need to take now. So I am 73 00:04:15,440 --> 00:04:19,210 Louise Davidson: hopeful that the release of the IPCC report does act 74 00:04:19,210 --> 00:04:22,309 Louise Davidson: as a prompt, a reminder that this is something that 75 00:04:22,740 --> 00:04:25,570 Louise Davidson: we really need to be thinking about. It shows that 76 00:04:25,880 --> 00:04:28,900 Louise Davidson: we only have quite a narrow window now in order 77 00:04:28,900 --> 00:04:33,150 Louise Davidson: to keep the warming of the atmosphere to 1. 5 78 00:04:33,150 --> 00:04:37,700 Louise Davidson: degrees, and that's a really important thing. We are not 79 00:04:37,700 --> 00:04:40,580 Louise Davidson: at 1. 5 degrees yet and you can already see 80 00:04:40,900 --> 00:04:44,289 Louise Davidson: the changes to our weather, and that's having a massive 81 00:04:44,290 --> 00:04:48,529 Louise Davidson: impact on our population in Australia, but also to populations 82 00:04:48,529 --> 00:04:50,830 Louise Davidson: all around the world. So, just to go back to 83 00:04:50,830 --> 00:04:54,310 Louise Davidson: the companies, I think, yes, we have seen a lot of 84 00:04:54,310 --> 00:04:58,630 Louise Davidson: momentum in terms of company response to this, not just 85 00:04:58,630 --> 00:05:01,299 Louise Davidson: to the IPCC report, but also to ACSI's work and 86 00:05:01,300 --> 00:05:05,880 Louise Davidson: to, I guess, the whole global momentum around climate. So 87 00:05:06,120 --> 00:05:10,310 Louise Davidson: just, for example, in the ASX 200, we've now got 93 88 00:05:10,310 --> 00:05:13,470 Louise Davidson: companies that either have a net zero or carbon neutrality 89 00:05:13,470 --> 00:05:15,909 Louise Davidson: target. So that's a big step forward. 90 00:05:16,110 --> 00:05:17,479 Sean Aylmer: That's quite a jump in the last couple of years, isn't it? 91 00:05:18,839 --> 00:05:22,900 Louise Davidson: Absolutely. So, as I said, there's been really significant momentum 92 00:05:22,900 --> 00:05:27,310 Louise Davidson: that we're seeing here. I guess one of the things 93 00:05:27,310 --> 00:05:29,690 Louise Davidson: is, quite a few of the companies that have a 94 00:05:29,690 --> 00:05:34,750 Louise Davidson: big climate exposure on the Australian stock exchange are global 95 00:05:35,150 --> 00:05:38,340 Louise Davidson: companies. So they're companies that have got operations all around the world 96 00:05:38,800 --> 00:05:42,539 Louise Davidson: and so they haven't been waiting for Australia to who adopt 97 00:05:42,540 --> 00:05:45,250 Louise Davidson: a net zero target. They've been needing to make sure 98 00:05:45,250 --> 00:05:48,130 Louise Davidson: that they are working in ways that are consistent with 99 00:05:48,420 --> 00:05:53,480 Louise Davidson: what governments and investors all around the world expect. I 100 00:05:53,480 --> 00:05:56,840 Louise Davidson: think companies in some cases have been leading in this 101 00:05:57,390 --> 00:05:59,920 Louise Davidson: area, which is not to say there's not a long 102 00:05:59,920 --> 00:06:03,850 Louise Davidson: way to go. The other thing I would say is that 103 00:06:03,970 --> 00:06:06,770 Louise Davidson: one of the parts of our climate change policy last 104 00:06:06,770 --> 00:06:10,180 Louise Davidson: year was that we were really keen for companies to adopt 105 00:06:10,670 --> 00:06:14,230 Louise Davidson: what's called a say on climate vote at their AGMs. 106 00:06:14,670 --> 00:06:20,350 Louise Davidson: So, company AGMs can be quite important accountability mechanisms because it's 107 00:06:20,350 --> 00:06:22,990 Louise Davidson: the one time of the year when a company needs 108 00:06:22,990 --> 00:06:28,600 Louise Davidson: to front up to its investors and explain itself, make 109 00:06:28,600 --> 00:06:31,610 Louise Davidson: sure that investors are comfortable with the direction it's taking. 110 00:06:31,980 --> 00:06:33,539 Louise Davidson: It's the one time of the year actually when the 111 00:06:33,540 --> 00:06:36,330 Louise Davidson: board, all of the directors of the company, have to 112 00:06:36,400 --> 00:06:40,880 Louise Davidson: face up to their shareholders. So, at those meetings now 113 00:06:40,880 --> 00:06:45,240 Louise Davidson: we're asking them to provide an opportunity for investors to 114 00:06:45,460 --> 00:06:49,070 Louise Davidson: really give them feedback on how they are traveling from 115 00:06:49,070 --> 00:06:52,409 Louise Davidson: a climate perspective, and that's through a say on climate 116 00:06:52,760 --> 00:06:56,140 Louise Davidson: vote. A number of big companies in Australia have adopted 117 00:06:56,140 --> 00:07:01,710 Louise Davidson: that. So, AGL, BHP, Origin, Rio Tinto, Santos, and Woodside 118 00:07:01,710 --> 00:07:02,260 Louise Davidson: as well. 119 00:07:02,510 --> 00:07:04,410 Sean Aylmer: These are all big emitters, these guys. 120 00:07:04,620 --> 00:07:08,650 Louise Davidson: Absolutely. They've got big exposures. We are finding that the 121 00:07:08,650 --> 00:07:10,900 Louise Davidson: companies that have a big exposure tend to be the 122 00:07:10,900 --> 00:07:15,510 Louise Davidson: ones who are spending most focus on this issue and 123 00:07:15,510 --> 00:07:18,370 Louise Davidson: that's partly in response to investor demand, I think. 124 00:07:18,980 --> 00:07:21,290 Sean Aylmer: Yeah. Yeah. So we're making progress. 125 00:07:21,640 --> 00:07:25,160 Louise Davidson: We are making progress, but I suppose there's still a long 126 00:07:25,160 --> 00:07:27,150 Louise Davidson: way to go. So, yes, I think we are making 127 00:07:27,150 --> 00:07:29,970 Louise Davidson: progress, and a lot of companies are doing a huge 128 00:07:29,970 --> 00:07:32,010 Louise Davidson: amount of work on this. A lot of companies are 129 00:07:32,010 --> 00:07:36,310 Louise Davidson: really thinking very strategically about what the risks and opportunities 130 00:07:36,310 --> 00:07:40,940 Louise Davidson: are for them flowing from climate change. Now, those risks, 131 00:07:40,940 --> 00:07:45,080 Louise Davidson: for example, span a huge gamut. So it includes things like, " 132 00:07:45,080 --> 00:07:47,910 Louise Davidson: Will people want to invest in them?" That's one question. 133 00:07:48,230 --> 00:07:50,270 Louise Davidson: But then it also includes, so if you think about 134 00:07:50,270 --> 00:07:54,170 Louise Davidson: a mining company with a footprint, global footprint, they've got 135 00:07:54,320 --> 00:07:57,370 Louise Davidson: so many different exposures. They've got the risk of severe 136 00:07:57,370 --> 00:08:01,300 Louise Davidson: weather impacting on their operations. They've got the risk of 137 00:08:01,330 --> 00:08:04,870 Louise Davidson: social unrest if we end up in a situation where 138 00:08:05,480 --> 00:08:09,920 Louise Davidson: we've got refugees displaced by climate, et cetera. So those 139 00:08:09,920 --> 00:08:11,510 Louise Davidson: companies have got a lot of thinking and a lot 140 00:08:11,510 --> 00:08:14,080 Louise Davidson: of planning to do, and making sure that they are 141 00:08:14,080 --> 00:08:16,930 Louise Davidson: not part of increasing the problem is a really key 142 00:08:16,930 --> 00:08:17,540 Louise Davidson: part of that. 143 00:08:18,200 --> 00:08:19,990 Sean Aylmer: Stay with me, Louise. We'll be back in a minute. 144 00:08:26,030 --> 00:08:28,960 Sean Aylmer: My guest this morning is Louise Davidson, Chief Executive of the 145 00:08:29,210 --> 00:08:33,439 Sean Aylmer: Australian Council of Superannuation Investors. Okay. So let's move on 146 00:08:33,440 --> 00:08:37,300 Sean Aylmer: from environmental challenges. You spoke recently about cultural issues in 147 00:08:37,300 --> 00:08:41,130 Sean Aylmer: the workplace and that sexual harassment is becoming a focus 148 00:08:41,130 --> 00:08:44,460 Sean Aylmer: for investors. How seriously are companies taking that? 149 00:08:45,160 --> 00:08:48,110 Louise Davidson: Yeah. It is a really interesting area. So, from our 150 00:08:48,110 --> 00:08:52,059 Louise Davidson: perspective, high incidence of sexual harassment in a workplace is 151 00:08:52,059 --> 00:08:55,309 Louise Davidson: a flag that the culture is really not where it 152 00:08:55,309 --> 00:08:58,660 Louise Davidson: should be, and we have seen some clear examples of 153 00:08:58,660 --> 00:09:01,690 Louise Davidson: that over recent years where sexual harassment has led to 154 00:09:01,690 --> 00:09:05,179 Louise Davidson: some pretty big scalps, if you like, so big CEOs 155 00:09:05,179 --> 00:09:08,670 Louise Davidson: departing and so on. The question for us then is, " 156 00:09:08,830 --> 00:09:14,870 Louise Davidson: Well, how do boards satisfy themselves that their organization is okay?" 157 00:09:14,870 --> 00:09:17,700 Louise Davidson: Because, let's face it, we don't really expect that there's 158 00:09:17,870 --> 00:09:20,010 Louise Davidson: only one or two companies where this is a problem. 159 00:09:21,480 --> 00:09:24,250 Louise Davidson: We did some research actually last year with Kate Jenkins, 160 00:09:24,250 --> 00:09:27,819 Louise Davidson: the Sex Discrimination Commissioner, which was aimed at trying to 161 00:09:27,820 --> 00:09:31,480 Louise Davidson: understand what should boards be asking, what questions do boards 162 00:09:31,480 --> 00:09:34,590 Louise Davidson: need to ask, what statistics do they need to have 163 00:09:34,830 --> 00:09:39,210 Louise Davidson: reported to them to satisfy themselves that their company is not 164 00:09:39,210 --> 00:09:42,030 Louise Davidson: part of the problem here. It was interesting to us 165 00:09:42,030 --> 00:09:44,819 Louise Davidson: because the number of directors who were of the view 166 00:09:44,820 --> 00:09:48,120 Louise Davidson: that sexual harassment was a matter that was a board 167 00:09:48,120 --> 00:09:50,160 Louise Davidson: issue was actually quite low. I think it was only 168 00:09:50,160 --> 00:09:54,170 Louise Davidson: something like 19% of boards thought that this was their 169 00:09:54,300 --> 00:09:57,729 Louise Davidson: business. We've, therefore, made it really clear to boards that we see 170 00:09:58,450 --> 00:10:00,580 Louise Davidson: this clearly as being board business. 171 00:10:00,929 --> 00:10:04,300 Sean Aylmer: When you were talking then, there are obvious examples where... 172 00:10:04,830 --> 00:10:07,780 Sean Aylmer: AMP's an example last year where certainly it was very 173 00:10:07,780 --> 00:10:11,250 Sean Aylmer: high up the chain. Then Rio Tinto more recently has 174 00:10:11,250 --> 00:10:13,970 Sean Aylmer: released a view of its workplace culture. It exposed claims 175 00:10:13,970 --> 00:10:18,570 Sean Aylmer: of bullying, sexual harassment, et cetera. None of it is 176 00:10:18,570 --> 00:10:22,140 Sean Aylmer: good, it's all wrong. At the AMP level, you understand that the board 177 00:10:23,090 --> 00:10:26,190 Sean Aylmer: and senior management knew about it. At the Rio level, 178 00:10:26,190 --> 00:10:28,780 Sean Aylmer: is it maybe they weren't quite aware of it, but 179 00:10:28,780 --> 00:10:32,510 Sean Aylmer: then it's still a sin by omission by not being 180 00:10:32,510 --> 00:10:34,030 Sean Aylmer: aware of it. Is that how we think about it? 181 00:10:34,620 --> 00:10:37,390 Louise Davidson: Yeah. I think that's that's absolutely right. Well, I think 182 00:10:37,390 --> 00:10:40,160 Louise Davidson: if you are a board, if you are presiding over 183 00:10:40,160 --> 00:10:43,740 Louise Davidson: an organization, a large organization, surely you want to know if there's 184 00:10:43,740 --> 00:10:48,220 Louise Davidson: something really rotten going on within your organization because, otherwise, 185 00:10:49,420 --> 00:10:55,630 Louise Davidson: the impacts on productivity and morale, ability to attract good 186 00:10:55,630 --> 00:11:01,589 Louise Davidson: staff, all of those things are really impacted by an 187 00:11:01,590 --> 00:11:06,209 Louise Davidson: issue like this. The Rio Tinto report that you mentioned, 188 00:11:06,210 --> 00:11:11,699 Louise Davidson: which was undertaken by Elizabeth Broderick, the ex sex discrimination commissioner, it's 189 00:11:11,700 --> 00:11:14,840 Louise Davidson: a really interesting piece of work. Some of the material 190 00:11:14,840 --> 00:11:17,709 Louise Davidson: in it is very challenging. It does show high incidents of 191 00:11:18,780 --> 00:11:24,370 Louise Davidson: sexual harassment, sexism and racism. I think the fact that, 192 00:11:24,750 --> 00:11:27,610 Louise Davidson: as a company, they've decided to put that out into 193 00:11:27,740 --> 00:11:31,230 Louise Davidson: the public domain is a really important step. It kind 194 00:11:31,230 --> 00:11:36,709 Louise Davidson: of says to their shareholders, to their staff, and to 195 00:11:36,790 --> 00:11:40,229 Louise Davidson: the general public, " Look, we see that we have failed 196 00:11:40,230 --> 00:11:43,641 Louise Davidson: here and hold us accountable because now you know that we have failed." 197 00:11:43,641 --> 00:11:48,040 Sean Aylmer: That's a very interesting point. Just before we go, I just want to 198 00:11:48,040 --> 00:11:50,820 Sean Aylmer: mention the gaming companies too. So there's lots going on 199 00:11:50,820 --> 00:11:53,110 Sean Aylmer: at the Star at the moment. Crown went through it 200 00:11:53,110 --> 00:11:55,929 Sean Aylmer: last year. To be honest, the banks did it in 201 00:11:55,929 --> 00:11:59,329 Sean Aylmer: the Royal Commission. The whole anti- money laundering issue. How 202 00:11:59,330 --> 00:12:01,530 Sean Aylmer: does ACSI think about those sorts of things? 203 00:12:01,860 --> 00:12:04,880 Louise Davidson: Yes. The gambling industry has not covered itself in glory 204 00:12:04,880 --> 00:12:07,970 Louise Davidson: of recent times, has it? Money laundering obviously is a 205 00:12:07,970 --> 00:12:10,800 Louise Davidson: really big problem and we saw the impacts of that 206 00:12:10,800 --> 00:12:13,000 Louise Davidson: not just come out through the Royal Commission, but also 207 00:12:13,000 --> 00:12:16,600 Louise Davidson: the issues with Westpac some years ago and so on. 208 00:12:17,200 --> 00:12:20,300 Louise Davidson: The anti- money laundering provisions are there for a reason, 209 00:12:20,820 --> 00:12:25,130 Louise Davidson: and for there to be deliberate subversion of those, I 210 00:12:25,130 --> 00:12:28,320 Louise Davidson: suppose, it's a very serious matter. So it's certainly something 211 00:12:28,320 --> 00:12:30,809 Louise Davidson: that we and our members would have high levels of 212 00:12:30,809 --> 00:12:31,271 Louise Davidson: concern about. 213 00:12:31,271 --> 00:12:31,271 Sean Aylmer: Louise, thank you for talking to Fear and Greed. 214 00:12:31,271 --> 00:12:31,272 Louise Davidson: My pleasure. 215 00:12:31,272 --> 00:12:39,150 Sean Aylmer: That was Louise Davidson, Chief Executive of the Australian Council of 216 00:12:39,150 --> 00:12:42,959 Sean Aylmer: Superannuation Investors. This is the Fear and Greed Daily Interview. Join 217 00:12:42,960 --> 00:12:45,309 Sean Aylmer: us every morning for the full episode of Fear and 218 00:12:45,309 --> 00:12:49,590 Sean Aylmer: Greed, Australia's most popular business podcast. I'm Sean Aylmer. Enjoy 219 00:12:49,590 --> 00:12:49,740 Sean Aylmer: your day.