ESG Update as at 13 August 2019


Australian and New Zealand ESG Updates

ACSI wants workplace deaths counted towards ESG reporting

The Australian Council of Superannuation Investors (ACSI) is calling for companies to disclose workplace safety and fatalities in ESG reports so that systemic risks are identified. The council’s 12th annual ESG assessment of company reports has now extended to workplace safety.

In 2018, 22 people died in their place of work, 16 of whom were contractors. ACSI says this shows a disconnect between safety practices expected of employees versus the safety of contractors.

There are 67 of the ASX200 companies not reporting on workplace deaths, with eight of those paying executives bonuses for safety outcomes. ACSI is concerned that the lack of safety data transparency may be masking deaths and safety problems.

In Australia, there is no requirement to report workplace fatalities, however, companies must inform regulators in the relevant state. There are safety metrics, but there is no real information on how severe injuries are unless they cause death.

There are now only 16 companies not disclosing ESG information in this group, which is in stark contrast to companies’ long-term emissions-reductions targets beyond 2040 - only six companies are disclosing net zero emissions targets for 2050.

ASIC updates climate-related disclosure guidance

The Australian Securities and Investments Commission (ASIC) has published an update on its regulatory guidance to disclosing climate change-related risks and opportunities after a Senate Economics References Committee recommendation on Carbon Risk. ASIC found its existing guidance was satisfactory but added to it for clarification.


Global ESG Updates

The Philip Morris saga continues - scientific data on heated tobacco products

Philip Morris is attempting to shift its public focus from smoked tobacco products to electronically heated tobacco products, with the United States Food and Drug Administration approving a suite of new heated tobacco products recently. Philip Morris claims the heated tobacco sticks are a less-damaging alternative to smoking tobacco.

Cigarettes are burned at 600°C, while the new heated products are heated to 350°C. Philip Morris says that harmful chemicals are reduced by the change in temperature, however the European Respiratory Society found that heated tobacco vapour had high concentrations of carcinogens, irritants and tar. Some toxins are lower in heated tobacco products compared to burnt cigarettes, but that doesn’t mean they do not contain harmful substances. The World Health Organisation says that currently there is no evidence to suggest that these new heated products are less harmful than regular tobacco products.

Investors navigating big tobacco and Philip Morris’ new business ventures are being warned to be cautious about claims made about the safety profile of these new products, and for now, not to treat heated tobacco products any differently than regular tobacco products.


ESG Research

RIAA investment benchmark report released

The Responsible Investment Association Australasia (RIAA) released its Responsible Investment Benchmark Report for 2019, detailing industry growth, size, composition and performance.

Key findings of the report include:

  • The responsible investment industry is still growing - 44 per cent of total assets under management in Australia

  • The dominant approach is ESG integration, which means a broader set of considerations are used in investment decisions, compared to other strategies such as negative or positive screening, sustainability themes, and impact investing

  • Negative screening as a strategy continues to expand, despite consumer demands for other strategies - investment managers are screening out weapons and tobacco, whereas consumers want less fossil fuels and human rights violations

  • In 2018, Australian responsible investment funds outperformed mainstream funds over most timeframes and asset classes