There are lessons for companies and investors in the Australian National University's decision to divest from seven businesses, and the fall-out from it.
The ANU announced earlier this month that it would divest holdings in Iluka Resources, Independence Group, Newcrest Mining, Sandfire Resources, Oil Search, Santos and Sirius Resources (see related article).
It did so on the basis of research from CAER, which has links to a long-established UK research agency, and after studying the approach to divestment taken by Stanford University (see related article).
But the move prompted criticism from Sandfire and Iluka, and a claim from the Association of Mining and Exploration that the companies had been "vilified".
According to one source, a lesson for investors is that it pays to detail divestment criteria when announcing changes, rather than simply naming companies that will be dropped.
It's a "trap for young players that they've named the companies, rather than talking about the criteria first-up," the source suggested.
Disclosure is crucial
For companies, a core lesson is that transparency is crucial, according to Susheela Peres da Costa, deputy managing director of environmental, social and governance research company Regnan and James Day, director of CDP in Australia and New Zealand.
Companies shouldn't be surprised that there are investors regularly making decisions based at least in part on environmental and social factors, Peres da Costa said.
"They really ought to be thinking about that investment audience in their communications", she said. "Disclosure is my single biggest tip."
Day agrees: "The best strategy for companies to adopt in this sort of environment is to be even more transparent than they have in the past," he told CE Daily.
Only by providing high-quality information can they build confidence "that they are managing these risks and opportunities to the best of their abilities", Day said.
Peres da Costa acknowledged survey-fatigue as a legitimate concern among companies, as they grapple with ever-increasing demands for information.
"The answer to that is proactive disclosure," she said.
It should be acceptable for companies not to respond to surveys if they can point to a website or other public source that already contains the relevant information, she said.
Legitimate to focus on public information
Peres da Costa isn't impressed by complaints that the ANU's researcher relied largely on publicly information in preparing its advice.
There are investors of all types "who only rely on publicly available information", she pointed out.
And if the companies concerned don't respond to research surveys seeking information or clarification on their environmental, social and governance performance then they have to accept there might be consequences, she said.
"If they have chosen to deprioritise a particular audience that is not the fault of the researcher."
Many ways to disclose
Peres da Costa emphasised that companies shouldn't equate transparency with having to issue a stand-alone sustainability report, noting that Regnan is an advocate of integrated reporting (see related article).
"We see that as really the future," Peres da Costa said. "We want this information integrated into financial reporting because we see it as financially relevant information."
She also emphasised the importance of having publicly-available environmental and social policies, not just initiatives.
Having an impressive workplace diversity program doesn't, by itself, "tell us whether under a different CEO in two years time that diversity will erode", she said.
"A policy tells you something different," she said. "It tells you about a level of conviction at a board level."
Portfolio decarbonisation
The inroads being made by divestment campaigns has garnered plenty of attention in recent times, but Day said companies should also be aware of a new portfolio decarbonisation coalition, which is taking a slightly different tack.
Launched at last month's UN climate summit, it is advocating a "similar but slightly different approach" that encourages investors to measure and disclose their carbon exposure and take steps to reduce the carbon intensity of their portfolios, without precluding investments in any particular stock.
The CDP is urging investors around the world to join the decarbonisation coalition, and other backers include the UN Environment Program, a major Swedish pension fund and Amundi, Europe's largest asset manager.
Day also encouraged companies to set corporate carbon reduction targets that are consistent with the latest climate science, noting that CDP and project partners are seeking comment until October 23 on a 'science-based targets methodology' (see related article).
Meanwhile, Peres Da Costa said it should now be clear that investor concerns about environmental and social performance aren't just focused on the coal sector, and aren't going to dissipate.
"Any company that thinks this is only about coal, or that investor consideration of environmental and social issues is a new phenomenon, must have been living under a rock for the last 15 or 20 years," she said.
