Finance minister Katy Gallagher has confirmed that she held informal talks with the sovereign wealth fund’s Board of Guardians amidst speculation its mandate could be changed to align it with the transition to net zero.
New Zealand’s sovereign wealth has set its future 20-year rolling returns forecast well above the risk-free rate but below the annualised 10 per cent it achieved in its first two decades of operation.
Rio Tinto (ASX:RIO) departures – a win for ESG?
Rio Tinto Ltd (ASX:RIO) today announced that CEO Jean-Sebastian Jacques; head of iron ore, Chris Salisbury; and head of corporate affairs, Simone Niven, will be stepping down from their roles following the Juukan Gorge incident. While someone losing their job should never been seen as a positive, is this the first high-profile ‘win’ for the growing group of ESG investors?
The G, standing for Governance, in ESG has come into focus in recent months, with corporate culture increasingly under the spotlight. On the one hand, AMP Ltd (ASX:AMP) has seen an incredible overhaul after a number of sexual harassment cases were made public, Westpac Banking Group (ASX:WBC) came under investigation over a number of Anti-Money Laundering breaches, which were blamed on its internal systems. Then came Rio Tinto and its decision to destroy the 46,000-year-old Juukan Gorge site, of incalculable cultural significance. To our understanding, the destruction didn’t breach any laws per se, with relevant permits obtained, but it clearly failed in the court of public opinion.
So is this a turning point for ESG investors? And a kick-start for the activist groups like Ownership Matters, who seek to influence business practices via shareholder votes and engagement? It certainly looks like it. Simon Thompson, Chairman of Rio Tinto had the following to say: “What happened at Juukan was wrong,” further indicating Rio Tinto was “determined to ensure that the destruction of a heritage site of such exceptional archaeological and cultural significance never occurs again at a Rio Tinto operation”.
In the months since the event, most major shareholders kept quiet publicly, indicating their preference to engage with the management team, rather than sell-out of the company completely. It is clear there has been a lot of pressure behind the scenes, particularly from the Australian Council of Superannuation Investors (ACSI), which stated in August ahead of the inquiry that “investors want to understand what changes the company will make to ensure an incident of this nature does not happen again.”
The increasing availability of information and transparency demanded by management and boards means these sorts of issues can no longer be swept under the rug. Activism is an important part of operating in public and private markets as the world seeks to move to a more sustainable economy beyond this pandemic. As engagement with superannuation and investment continues in the years ahead, investors will only become more aware of the activities of the companies their capital is used to support.
