PROPONENT: Australasian Centre for Corporate Responsibility (ACCR)

SUPPORTIVE MATERIAL: Investor Briefing

ACTION ITEM: ACCR intends to vote AGAINST the approval of AGL’s climate transition action plan (CTAP) and against AGL’s executive remuneration plan due to concerns about weaknesses of AGL’s CTAP.

IMPACT ON DIVERSIFIED SHAREHOLDERS: As ACCR explains in its investor briefing, AGL is Australia’s largest corporate GHG emitter, contributing “around 20% of emissions from Australia’s electricity sector (approximately 7% of Australia’s total emissions),” but ACCR believes AGL’s CTAP requires necessary improvements in order to protect investors’ portfolio value.

In its analysis, ACCR finds that the CTAP AGL has proposed for shareholder approval shows only modest progress over the firm’s prior plan. ACCR also states that AGL remains “misaligned with scientifically valid interpretations of the Paris Agreement – it is following scenarios based on 1.8-2.6°C of warming.”

For diversified investors, ACCR’s analysis explains that:

As a systemically important company critical to the pace of the Australian energy transition, AGL’s CTAP is of particular interest for universal owners who stand to benefit from the long-term stability of the financial system, for which climate change remains a material threat. A more ambitious CTAP would help address those risks.

PROPONENT: Market Forces

SUPPORTIVE MATERIAL: Investor Briefing

ACTION ITEM: This shareholder resolution requests that Australia-based APA Group prepare and publish a report analyzing the consistency of APA’s planned capital expenditure with APA’s climate commitments. It specifies that the report should be published prior to APA making a Final Investment Decision (FID) on new large-scale pipelines.

IMPACT ON DIVERSIFIED SHAREHOLDERS: The resolution states that APA Group’s Climate Change Policy affirms the company’s commitment to developing and maintaining its climate transition plan in support of the Paris Agreement, and requests disclosure on how the company’s planned construction and operation of pipelines specifically for the Beetaloo Sub-basin align with those commitments, including how the company plans to abate or avoid additional emissions resulting from these plans. In its investor briefing, Market Forces points to this project as a potential issue for investors and probable misalignment with the company’s net zero by 2050 goal, given that these pipelines could be in operation into the 2070s.

For diversified investors, Market Forces explains that:

Many of APA’s largest securityholders are universal owners, for whom overall market performance, not idiosyncratic company performance, determines 75-94% of portfolio returns.

 

Universal owners face significant climate risks. The Institute and Faculty of Actuaries found that investors could face a 50% loss in global GDP as early as 2070 if the growing concentration of greenhouse gases in the atmosphere are not addressed.

PROPONENT: Sustainable Investments Exchange (SIX)

SUPPORTIVE MATERIAL: Investor Brief

ACTION ITEM: SIX has filed two deforestation-related shareholder resolutions at Australia-based Woolworths Group. The first, “Classify beef as a high risk deforestation-linked commodity,” presses the company to address beef-driven deforestation by adding beef to the company’s No Deforestation commitment as a high risk commodity. The second resolution, “Update Pulp, Paper and Timber Policy,” asks Woolworths to consider removing PEFC certification as part of its supplier requirements in its Pulp, Paper, and Timber Policy.

IMPACT ON DIVERSIFIED SHAREHOLDERS: In support of both of these resolutions, SIX’s investor brief explains that “[m]any of Woolworths equity investors are universal owners, for whom overall market performance (correlated to economic growth), not individual security performance, determines 75-94% of portfolio returns” and that approximately half of Australia’s GDP is directly reliant on ecosystem services derived from natural capital (and the rest “indirectly dependent on natural capital across complex value chains”). Due to this heavy reliance, the brief explains, “[b]iodiversity and ecosystem loss via deforestation risks reducing long-term economic growth and therefore portfolio returns.”

TOPIC: Report on Human Rights Due Diligence | Microsoft Corporation (MSFT)

PROPONENTS: Religious of the Sacred Heart of Mary Charitable Trust and the Sisters of the Sacred Heart of Mary, with the addition of 57 co-filers

SUPPORTIVE MATERIAL: Investors’ Exempt Solicitation

ACTION ITEM: In this proposal filed by 59 investors representing over $80 million in Microsoft stock ownership, and supported by nonprofit Investor Advocates for Social Justice (IASJ), the proponents ask Microsoft to publish a report, assessing the effectiveness of its human rights due diligence (“HRDD”) processes in preventing, identifying, and addressing customer misuse of Microsoft artificial intelligence (“AI”) and cloud products or services that violates human rights or international humanitarian law.

IMPACT ON DIVERSIFIED SHAREHOLDERS: This resolution addresses what the proponents see as repeated concerning incidents of the company’s “complicity in human rights violations in China, Saudi Arabia, and the USA” as well as Palestine. They believe Microsoft shows gaps in “oversight and review of its due diligence processes that pose material risks for investors,” including for diversified investors.

The solicitation explains that Microsoft’s status as the second largest stock weight in the S&P 500 and its USD 3.8 trillion market capitalization sets it up as an entity for whom most investors cannot avoid exposure. In fact, the investors’ exempt solicitation explains that “for diversified investors and ‘universal owners,’ these portfolio-level impacts of the Company’s actions make it essential to monitor potential risks associated with Microsoft’s operations and public perception.”

Additionally, the solicitation states that:

Addressing the costs of human rights violations may help protect shareholders from economy-wide risks … Market performance, and accordingly, the long-term performance of diversified portfolios, depends on the health of the economy, which can be undermined when companies’ activities create social and environmental costs that drag on GDP. Conflict and human rights violations can generate spillover effects that disrupt trade, investment, and financial markets beyond local economies. Reports indicate that Microsoft’s technologies have been linked to military targeting and surveillance activities in Gaza, contributing to the destruction of infrastructure, the displacement of communities, and the loss of life, factors that depress economic productivity and slow recovery. These dynamics not only weaken local economies but can ripple globally, heightening legal, reputational, and systemic risks, and threatening the long-term returns of diversified shareholders.

PROPONENT: Sustainable Investment Exchange (SIX)

SUPPORTIVE MATERIAL: Investor Brief

ACTION ITEM: In these two shareholder resolutions by SIX, Australia-based Woolworths Group is asked to: 1) identify and report on the real and potential impacts of farmed seafood it procures for its products, specifically related to biodiversity issues and risk assessments, and 2) align its seafood sourcing policy with global best practice standards.

IMPACT ON DIVERSIFIED SHAREHOLDERS: For diversified investors, on page 26 of its investor brief, SIX describes that farmed seafood practices include the “misuse and overuse of antibiotics (including for livestock in food supply chains) [which] are the main drivers of AMR [antimicrobial resistance].” SIX connects this potential of AMR from seafood farming practices to long-term risk of diversified portfolios:

• Public health threat from AMR likely to reduce global growth and investment returns
• Estimates range from loss of 3.8% of GDP to $100 trillion by 2050
• COVID-19 pandemic good proxy for cost as next pandemic may well involve a drug resistant pathogen
• Investors diversified across sectors will absorb economic impact of next pandemic – and unforeseen social and geopolitical upheaval

As explained by the World Health Organization, “antimicrobial resistance (AMR) occurs when bacteria, viruses, fungi and parasites no longer respond to antimicrobial medicines … drug-resistant infections impact the health of animals and plants, reduce productivity in farms, and threaten food security. AMR has significant costs for both health systems and national economies overall.”