Australasian listed companies are increasingly open to engagement with fund managers over environmental, social and governance (ESG) issues, according to Harbour Asset Management chief, Andrew Bascand.
Bascand said Harbour is starting to see “pretty good progress” in its corporate engagement efforts with Australian and NZ firms that tackle complex ESG sticking points.
“Engagement is where the rubber hits the road for ESG,” he said. “And we’re putting huge amounts of energy into it.”
As detailed in the second annual Harbour Sustainability Report released last week, the manager fronted-up to more than 20 ASX- and NZX-listed companies last year over various “ad hoc” ESG issues. (Separately, Harbour has an ongoing engagement program that feeds into its annual Corporate Behaviour Survey.)
Of the 23 one-off company ESG discussions Harbour initiated in 2022 about half fell into the governance bucket, a third related to environmental queries and the remainder concerned social issues.
For example, Bascand said Harbour – sometimes along with other institutional investors – discussed ‘modern slavery’ prevention strategies with a local retail company while holding “multiple conversations” with board and management of a NZ utility firm over climate change progress.
NZ companies tend to present less-challenging ESG agendas for fund managers than Australian counterparts, the Harbour report notes.
“For the ad hoc engagements, these were fairly balanced between New Zealand and Australian companies (12 and 11) out of the total 23 conducted,” the report says. “This was despite Harbour portfolios proportionately having a larger weighting to New Zealand companies compared to Australia, driven by a higher number of contentious governance issues for Australian companies during the year.”
Harbour voted with management on 553 corporate proposals last year with 30 against; the firm also largely followed the voting advice of its main ESG data supplier, Institutional Shareholder Services (ISS), only deviating in 20 out of the 583 recommendations.
About a quarter of the proxy voting proposals centred on executive remuneration with climate change (19 per cent) a close second.
“Climate change resolutions were primarily proposed by shareholders but were often not put to the meeting given they were conditional on the resolutions to amend constitutions which did not carry,” the report says. “Regardless, our voting intentions tended to be against these proposals given requests for climate action or information where, in many cases, companies were already making solid progress.”
Bascand said while ESG investing has evolved considerably, fund managers need more consistent and up-to-date data to monitor both financial returns and real-world impact of sustainable strategies.
Most ESG data tends to lag real-life by several months or more, meaning investors typically have a rear-mirror view of sustainability factors.
“But we want a more forward-looking approach [to ESG],” he said.
Harbour mostly uses ISS and MSCI data for sustainable investing purposes as well as in-house analysis.
The second annual Harbour sustainability report was unveiled at the group’s responsible investment forum last week that saw presentations from T Rowe Price Global Impact Equity Strategy portfolio manager, Hari Balkrishna, Icehouse Ventures chief, Robbie Paul, and Teri Thomas, head of Volpara Health Technologies.