From Responsible Investor by Paul Verney. Image: Climate Council
Original Title: Historic vote at AGL likely to increase Aussie climate boardroom battles. Reactions from market participants as Australian activist gets four directors on to the board of Aussie energy giant.
The board rebellion at AGL this week, which saw four “climate competent” directors elected at the Aussie energy giant, is likely to embolden similar action in the country, according to market observers.
Alison George, head of research at shareholder advisory firm Regnan, told Responsible Investor that nominating directors is a power that has “been rarely used historically” by investors in Australia, despite the “relative ease” with which it can be done. But, she added: “I expect this will change going forward, emboldened by this dramatic example.”
On Tuesday, all four candidates put forward by Grok Ventures, the activist fund owned by tech billionaire Mike Cannon-Brookes, achieved majority support. Grok is reported to hold an 11 percent stake in AGL, Australia’s largest energy provider.
The significance of the vote was also highlighted by Susheela Peres da Costa, principal at The Stewardship Centre and chair of the Responsible Investment Association Australasia (RIAA).
She told R/ that board composition is the “most direct active ownership lever” but noted that investors in the country have been reluctant to use it.
“A decade ago, Commonwealth Superannuation Corporation was the only fund to resist BHP’s recommendation that shareholders oppose a well-qualified, climate-skilled, professional director who sought to fill that skills gap on the board,” she said. “Even five years ago, many struggled to support non-binding resolutions, for fear of upsetting board directors.”
Echoing Peres da Costa on the importance of the vote, Brynn O’Brien, executive director of shareholder advocacy nonprofit ACCR, described the vote as “history making” and said it was “a real sign that shareholder strategy in Australia is really coming into maturation”
O’Brien told RI that the boards of other high-emitting companies should take note. “The fundamental lesson is that climate risk management is an ever-increasing pressure and those who remain flat footed in the face of rapidly shifting market dynamics should, and will, be held to account by shareholders,” she said.
Another company that might be in investors’ crosshairs is Aussie oil and gas major Woodside Energy, whose transition plan was supported by just 49 percent of shareholders in May – the lowest tally to date for a “Say on Climate” vote.
Woodside has reportedly stated that it won’t present a revised climate plan for a vote in 2023, a move described as “bold” by O’Brien and one that will “raise the ire of shareholders and increase focus on whether the company has the right directors on its board”.
Three of Grok’s candidates at AGL were supported by Australian Council of Superannuation Investors (ACSI), the ESG-focused body representing super funds with more than A$1 trillion ($665.8 billion; €644.1 billion) in assets under management.
They were Mark Twidell, Kerry Schott and Christine Holman, who received support of 98, 86 and 82 percent, respectively. Louise Davidson, ACS’S CEO, said the trio were supported “on the basis they would add significant value and skills to the energy company – including experience relevant to the energy transition”
John Pollars, who was not supported by ACSI, attracted support of 61 percent.
Twidell, an energy specialist who served as director of energy programme at US electric car maker Tesla, was the only candidate backed by AGL’s management.
Schott is the former chair of Australia’s Energy Security Board. Christine Holman and John Pollars are business executives with decades of experience in professional non-executive director roles.
Australian super fund HESTA told R/ that it supported Twidell and Holman but opposed Schott and Pollaers.
The A$68 billion fund also supported AGL’s climate transition action plan, which was supported by 70 percent of shareholders.
But R/ understands that the company will remain on HESTA’s watchlist – along with the likes of Origin, Santos and Woodside – over climate concerns.
HESTA’s CEO Debby Blakey said the fund will wait to understand how the choice of new CEO “will support implementation of the climate plan” before considering removal of AL from HESTA’s watchlist position.
On the board shake-up, she added that HESTA welcomes the renewal of the AGL board. “It provides a stronger mix of skills with experience in developing large-scale renewable capacity, long-term business transformation, and digital and customer solutions,” she said.
AGL, which has seen poor financial performance in recent years, is reported to have had the highest carbon emissions of any company listed on the ASX in 2021, at 42.7m t CO2e, due to its coal-fired electricity generation.
In May, the company terminated plans to demerge its coal-based business, a move that would have seen the assets spun off into Accel Energy.
Last year, US activist fund Engine No.1 similarly secured three positions on the board of US oil major Exxon for its nominees. But Regnan’s George said that, while it is “tempting” to make comparisons with Exxon, there are differences between the engagement cultures in the US and Australia.
“It is relatively easy for shareholders in Australian companies – and other stakeholders – to get access to discuss issues of concern,” she said. “These board seats aren’t about enabling a conversation, it’s about decision-making.”
George also expressed her hope that the new board “doesn’t send the company back to the drawing board on their climate plan”, which has now been endorsed by shareholders.
While improvable, she said, “it’s real decarbonisation progress that will enable greater ambition and revision of the plan over time”.
“In a year, the director nomination win will look more like a fail if all we have is a better plan, and no progress,” she added.
A Grok spokesperson told R/ that the AGL board has its “full support to deliver on the monumental task ahead, of rebuilding the company to lead Australia’s green energy transition, for the benefit of all stakeholders”