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Ethical influencing

We invest for a better future, and that means we use all the tools we have as an investor to influence change.

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FY18 Summary

This table gives an overview of some of our engagements during the 2017/18 financial year, including positive outcomes achieved.

We can't claim credit for all this positive change. Many others are working hard on the same issues, including inside the organisations that we try to influence. What is clear is that investors have a powerful role to play in shaping a better future.

Companies / Industry Sectors

Influence target Issues Background and actions Outcome Companies engaged and that changed*
Banking, insurance and financial advice The Banking Royal Commission is raising deep questions about the integrity of many of Australia’s largest financial institutions We are engaging with banks, insurers and advisors about the misconduct being reported to the Banking Royal Commission, including over-charging and harmful advice and sales practices.
The Royal Commission evidence is incorporated into our periodic reviews of relevant companies and our advocacy priorities. In May we divested from AMP. From the information revealed, we concluded that AMP committed serious breaches of duty to clients and misled the regulator, ASIC. These breaches (including failure to discipline bad planners and remediate clients) revealed systemic and cultural issues at the company. A key factor was the evidence that senior AMP executives in the advice business (a cornerstone of the AMP Group) decided to continue to incorrectly charge clients in the face of recommendations from staff to stop. We spoke about our concerns and decision in the media.
Under Royal Commission and public pressure, banks and insurers are making some changes to the way they remunerate and incentivise staff, brokers, car dealers and others to encourage better outcomes for customers. Some also announced an end to grandfathered commissions paid to financial advisors.
IAG, QBE, Suncorp and Allianz are withdrawing some of their ‘add-on’ insurance products which have been described by ASIC as ‘junk insurance’ (because they offer little or no value to customers).

We’re expecting powerful findings and recommendations from the Royal Commission, with initial recommendations likely before the end of the year.
8 companies engaged independently

7 companies changed
Live export sector, policy and facilitators Live export causes great and unnecessary suffering to over 2 million animals shipped live from Australia each year, including 1.8 million sheep shipped to the Middle East in 2017 alone. In April, 60 Minutes broadcast video filmed by a courageous whistle-blower showing animal cruelty on live sheep export ships, resulting in renewed calls to ban the live export trade.
We sent one of our ethics analysts to work with Animals Australia and help with their court case challenging a live export permit granted by the Department of Agriculture.

We engaged with banks (who finance exporters), insurance companies (who insure live export stock), and a port logistics provider, asking them to reassess their exposure to the live export trade.

We spoke in the media and wrote to the Federal Minister for Agriculture calling for an end to the trade. We also promoted Animals Australia’s online petition on our social media.
Two companies we engaged with are stopping services to live exporters.
An end to live export is now supported by the Greens, Labor and a number of independently minded Liberal MPs. The Coalition government is resisting, including withholding support for a key animal welfare recommendation from its own expert. If implemented, this recommendation may on its own make the trade unviable. The Government has suspended the licence of two live export companies.
8 companies engaged independently
2 companies changed
Film companies Encouraging smoking

There is an established causal relationship between young people’s exposure to smoking in movies and rates of new young smokers.

We supported an investor letter urging movie studios to prohibit tobacco use in youth-rated films (with some narrow exceptions such as where the health harms of smoking are portrayed). The engagement was arranged by As You Sow.

Sadly the percentage of youth movies rated ‘PG-13’ with tobacco depictions increased from 35% in 2016 to 50% in 2017, the highest level since 2009. 6 companies engaged collaboratively

0 changed
Climate action by banks and insurance companies Climate Insurance companies can help limit global warming through (1) responsible investment e.g. excluding fossil fuels and supporting renewables; (2) responsible insurance e.g. excluding insurance of new fossil fuel projects and offering customer incentives for lower emissions vehicles and houses; (3) their public voice for strong government climate action. Health insurers also have a role to play raising awareness of the health impacts of fossil fuels and global warming, and we engaged this year with Medibank and NIB.
We engaged with Australian banks on climate both independently and as part of an international collaboration seeking climate action from over 60 banks globally.

Market Forces maintained strong public pressure on insurers and banks. We supported Market Forces shareholder resolutions calling for the Commonwealth Bank (CBA) to align its business with limiting global warming to under 2 degrees, and for better climate risk disclosure from QBE.
NIB said they intended to introduce fossil fuel exclusions for their Australian share investments, having done this for their international investments in 2016. Medibank announced it will transition to low carbon investment in overseas shares, and that it will also look at low carbon options for their Australian share investments.
The CBA resolution received only 3% support in November 2017, but the CBA Chair acknowledged concerns about the bank’s fossil fuel lending and said she expected the downward trend in their coal funding to continue. With its greater focus on disclosure, the 2018 QBE resolution received stronger support of 18.8%.

National Australia Bank announced that it will not lend to any new thermal coal projects. They also launched a renewable energy fund.
50 companies engaged (7 independently)
19 companies changed
Minerals Council

Origin Energy


Adani Carmichael mine
Climate change
Corporate lobbying

Stopping an Adani Carmichael mine
Climate action by energy companies is urgently needed because they contribute over a third of global emissions and because renewable energy technologies give them many opportunities to reduce both their own emissions and the emissions of other sectors like transportation.
With a nominal advocacy holding of shares in Origin Energy and Santos we supported shareholder resolutions organised by Market Forces. The Origin resolutions called on the company to better explain how they are responding to climate change including transitioning to renewables, pursuing emissions reduction targets and reducing methane leaks. The Santos resolution focussed on better methane emissions management and disclosure.

We supported a shareholder resolution organised by the Australian Centre for Corporate Responsibility calling on BHP Billiton to show integrity in its lobbying on government climate policy. For many years the Minerals Council of Australia has obstructed sensible energy policy. As a key member of the Minerals Council, BHP gives both financial support and credibility to the Council. BHP should either use its influence to stop the obstructive approach of the Minerals Council, or resign its membership.
Although opposed by company boards, the resolutions received strong support:
Origin – 14%
BHP – 10%
Santos – 10%.
In December 2017 BHP publicly reported on differences between industry group positions on climate policy and BHP’s own position. BHP has since left the World Coal Association (WCA). It committed to review its membership of the Minerals Council over 2018. In March the Minerals Council issued a position statement which acknowledges the need for energy policy to allow Australia to meet its emissions reduction commitments.

Origin Energy announced a science-based 2032 emissions reduction target. Origin committed to a 50% reduction in its scope 1 and scope 2 emissions from its generation business, and to a 25% reduction in scope 3 emissions from the transport of energy (not scope 3 emissions from the burning of its gas by end users).
3 companies engaged collaboratively
1 changed
Climate exposed companies across the economy Australia’s and the world’s biggest emitters across the energy, transport, agriculture and building sectors If we are to limit global warming to well below 2 degrees, companies need to disclose what their targets and action to support the massive economic transition needed. The momentum for this is growing. During the year:

We supported the CDP 2018 ‘Non-Discloser campaign’ targeting about 400 companies to start reporting to the CDP. The international CDP climate reporting database is a crucial resource for investors, activists and others to assess who is taking climate action and who is not; and

We joined the Climate Action 100+ initiative led by investors to engage with the world’s largest corporate greenhouse gas emitters to reduce emissions and strengthen climate-related financial disclosures.

During the year we also supported the Oslo Climate Leadership Declaration encouraging companies to commit to set science based emissions reduction targets.
Both these collaborative engagements are still underway, so we will review their outcomes in the coming year. Of the 203 companies targeted for climate reporting to CDP, twenty four had started to complete a CDP response by July 2018, and a further 16 have said they are considering responding. 207 companies engaged collaboratively

24 changed
Investors Impact investing to meet the Sustainable Development Goals We presented to investor forums on impact investing. Investors need to support businesses and partnerships which are innovating to fill global social and environmental needs like those identified by the Sustainable Development Goals. Goals like achieving zero hunger, reduced inequality, sustainable fisheries, clean water and effective sanitation. Social impact investments for mental health services and reduced recidivism. More action is needed by mainstream investors and business; business as usual is not enough. N/A

Companies globally
Human rights

Worker safety
Using a nominal advocacy shareholding, we supported a shareholder resolution for better human rights reporting by Woolworths, including how it is protecting workers in its supply chain in accordance with UN Guiding Principles on Business and Human Rights. The resolution was organised by the Australian Centre for Corporate Responsibility.

We signed the Investor Statement on the 5th anniversary of the Rana Plaza disaster. Safety and working conditions have improved since the collapse of the Rana Plaza factory in Bangladesh in 2013, killing over 1,100 workers. The Investor Statement calls for continuing action to make clothing factories safe for workers, to encourage ownership by local stakeholders and to improve government oversight.

We signed the Investor statement of concern on the increasing harassment and attacks on human rights defenders calling on companies to act to protect those protesting disregard for human rights including indigenous rights defenders in the Philippines.
In the lead up to its AGM, Woolworths gave commitments to do more to ensure that labour hire companies comply with labour and human rights standards; to help educate workers about their workplace rights; and to promote effective grievance mechanisms for workers to ensure that human rights violations are reported, investigated and remedied. Because of these positive moves the shareholder resolution was withdrawn. 1 company engaged collaboratively

1 changed
Food companies Sustainable food:
The need for protein diversification
Protein production from livestock production has a much bigger footprint than plant protein, including greenhouse gas emissions, air and water pollution, poor animal welfare and human health concerns.

We co-signed engagement letters to 17 global food manufacturers and retailers about opportunities to replace animal protein ingredients and products with plant protein, arranged by Farm Animal Investment Risk and Return (FAIRR) as part of their sustainable protein supply chain engagement.
FAIRR initially engaged 16 global food companies in the sustainable protein initiative. They found that all companies accept that protein diversification is important as a response to consumer demand, but that only Tesco, M&S, Nestlé and Unilever clearly see the need for alternative proteins and reduced meat/dairy to lower their environmental footprint. 17 companies engaged collaboratively

Outcomes review planned for current year
Food companies Sustainable food:
Over-use of antibiotics
Over-use of antibiotics in agriculture hurts animals and humans by facilitating overcrowding of farm animals, promoting harmful growth rates and encouraging antibiotic-resistant bacteria.
We supported FAIRR’s public investor statement on antibiotic stewardship and their engagement with 20 global companies in the fast-food and casual dining restaurant sectors to limit antibiotics use in their supply chains.

We supported advocacy with US chicken producer Sanderson Farms to reduce its antibiotic use and stop its public denial of the risk to human health of excessive antibiotic use. (We don’t invest in Sanderson.)
In February, 43% of shareholders voted for Sanderson to stop giving medically important antibiotics to healthy chickens for disease prevention – up from 30% in 2017. But Sanderson currently remains the only large US poultry processor that has not committed to transitioning to antibiotic-free chicken production.
The annual Business Benchmark on Farm Animal Welfare (BBFAW) reports that companies publishing formal positions on the avoidance of the routine use of antibiotics rose from 47% in 2016 to 61% in 2017.
21 companies engaged collaboratively
4 companies changed
Food companies Sustainable food:
Animal welfare
Commercial animal agriculture causes much unnecessary animal suffering. We support the Business Benchmark on Farm Animal Welfare (BBFAW), a global measure of farm animal welfare. It enables investors and companies to understand and improve performance on farm animal welfare.
We co-signed engagement letters to 110 global food companies about their management of farm animal welfare, arranged by Business Benchmark on Farm Animal Welfare (BBFAW).
The annual Business Benchmark on Farm Animal Welfare (BBFAW) reports improvement in a number of areas including confinement, transport, routine mutilation, stunning and growth promotion. However, this improvement is often from a low base, and absolute harm levels continue to increase with growing numbers of farm animals. 110 companies engaged collaboratively

5 companies changed
Healthcare companies Medical research using animals One of our biggest ethical challenges is balancing the harm caused to animals used in medical research, and the benefits from developing new therapies to increase human well-being. Some animal testing offers limited guidance for human medical treatment, and research alternatives to animal testing are being developed. However in some areas experiments using animals do play a key role in medical advances. Where we invest in health companies that are involved in animal testing, we ask them to demonstrate that they are supporting the 3Rs (Replacement with alternatives to testing on animals; Reduction of number of animals used in testing; and Refinement of testing to improve welfare of animals). Through our engagement we have identified ‘best practices’ and we will engage with companies to encourage more wide-spread adoption of these practices. In this way we hope to play a part in improving standards across the board. 13 companies engaged independently

1 company changed


The number of companies engaged and changed is an estimate of the number of companies contacted during the year as part of the engagement, and of the number of those companies which made a positive change or commitment to change on the issue during the year.

Government / Public Policy

Influence target Broad themes Issues and actions Outcome
Australian federal government Climate Australian climate policy is a mess: It’s uncoordinated, short term and completely inadequate to meet our government’s commitment to limit warming to well below 2 degrees as well as providing reliable, affordable energy into the future. We need stronger emissions reduction targets, a carbon price, removal of fossil fuel subsidies, support for clean technology and an end to deforestation. In the midst of our policy chaos, there continues to be extraordinary talk of public money being used to support an Adani Carmichael coal mine. One potential conduit for government funding is the Northern Australia Infrastructure Facility (NAIF). We put in a submission to the Senate Enquiry on NAIF and participated in discussions with NAIF executives. We called for clear guidelines and process to ensure that government support is given for infrastructure which creates public benefit and not to subsidise private interests, particularly interests that threaten such tremendous harm as an Adani Carmichael mine. At the end of 2017 the Queensland Premier vetoed any government funding of an Adani Carmichael mine using NAIF.
Unfortunately, it’s still possible that federal or state governments could give funding support for the mine through other mechanisms, such as the Export Finance and Insurance Corporation (Efic).
Australian federal government Modern slavery / Forced labour

Human rights
We made a second submission to government supporting strong Australian Modern Slavery legislation to protect against forced labour. We called for the new disclosure requirements to have teeth i.e. penalties for non-compliance. We asked for companies to be obliged to not only disclose, but also to proactively act to safeguard against human rights breaches in their supply chains.
We also called for targeted action to deal with forced labour and exploitation issues created by rogue operators in the labour hire sector. In particular we supported a national licensing scheme to regulate labour hire operators.
At the end of June, the Modern Slavery Bill 2018 was introduced into the House of Representatives. The law contains a reporting requirement for large companies, without penalties for non-compliance.
There was also some support for a national scheme for licensing of labour hire contractors. Although we haven’t seen federal legislation yet, Queensland introduced a state labour hire licensing scheme.
Australian federal government: Clean Energy Finance Corporation (CEFC) Clean energy investment

Investment in the 2 degree transition
Climate action requires huge investment in clean energy and other emissions reduction technology and infrastructure. Australia’s CEFC (Clean Energy Finance Corporation) has a crucial role to play in catalysing this investment. As part of a review of CEFC we called on government for:

  • a continuing focus on emissions reduction;
  • support for green investment which genuinely drives new clean energy and does not facilitate greenwash;
  • attention to international as well as Australian climate investment.
A date has not been announced for completion of the CEFC review report.
Australian federal government Animal welfare: Poultry standards
  • We don’t invest in the poultry sector, but we participated in the consultation on animal welfare standards in the sector. We called for better protection for chickens, turkeys and ducks including:
  • a ban on battery cages;
  • elimination of use of key antibiotics which enable excessive crowding of animals and pose great risk to animal and human health;
  • phasing out fast-growth, excessive weight chicken breeds which compromise animal well-being; and
  • free range conditions which allow natural animal behaviours.
The Animal Health Australia report and will be available later in 2018
Australian federal government Agriculture standards and transparency The federal government began a parliamentary inquiry into superannuation fund investment in agriculture, including barriers to investment of super in the sector. Our submission:

  • emphasised the broad social, animal and environmental impacts of the agriculture sector, including through exploitation of farm labour, inadequate animal welfare standards, unnecessary land clearing, and inadequate steps to reduce greenhouse gas emissions;
  • called for better management and reporting of impacts by agricultural companies, including their emissions, water use, waste, antibiotic use, worker injuries and animals’ well-being;
  • called for government policy which supports a sustainable and diversified agricultural sector, including better regulation of land clearing, carbon pricing and banning of battery hen cages, sow stalls and live export; and
  • called for an office of animal welfare to achieve genuine action to reduce animal suffering, which would operate independently of the heavily conflicted department of agriculture.
We expect the Standing Committee on Agriculture and Water Resources to report later this year.
Governments globally Climate policy and action In June we supported the G7 Investor Statement on climate change which urged governments to:

  • implement action to achieve the goals of the Paris Agreement with the utmost urgency, including to close the ‘ambition gap’ where current targets fall short of what’s needed to limit warming to well below 2°C, and we see little real effort to limit the increase further to 1.5°C;
  • formulate and communicate long-term emission reduction strategies in 2018;
  • put a meaningful price on carbon;
  • phase out fossil fuel subsidies by set deadlines;
  • phase out thermal coal power worldwide by set deadlines; and
  • commit to improve climate-related financial reporting.
At the June G7 Summit, six countries reaffirmed their commitment to the Paris Agreement, with Trump standing alone. The ‘G6’ now needs to take the practical action urged by investors.

The next climate meeting of all governments, COP24, will take place in Katowice, Poland in December 2018. We hope to see it fulfil its vision “to work out and adopt a package of decisions ensuring the full implementation of the Paris Agreement”.