Home > Aware Super member sends legal letter on fund’s vote against climate action

Aware Super member sends legal letter on fund’s vote against climate action

16 November 2022

21 November 2022

An Aware Super member sent a legal letter to the fund last week, raising concerns that Aware failed to understand and properly consider its vote on a crucial request for climate action at the recent Commonwealth Bank annual general meeting and demanding answers from the fund.

Aware Super voted against a critical climate-related shareholder resolution put to Commonwealth Bank at its annual general meeting (AGM) last month. The resolution – which requested CommBank disclose information on how it will not provide finance to any new or expanded fossil fuel projects – was voted against by Aware Super on the understanding that the bank must cease financing of all fossil fuel companies.

This error could have big implications for Aware Super’s members and the fund’s approach to climate action, as Aware Super will be voting on similar requests at the other three big Australian banks in December.

Members of Aware Super have written to Market Forces voicing their concerns that their fund did not properly consider this voting decision, and may not do so for critical climate-related voting decisions in the future.

Equity Generation Lawyers has written to Aware Super on behalf of the member, Meredith, requesting information on how the fund came to its voting decision and what policies, processes and disciplinary steps the fund has in place to try to prevent mistakes like this.

We can’t let super funds get away with poor decision-making about crucial climate votes. Take action – throw your support behind Meredith’s legal request and demand answers from Aware Super.

Aware Super members: Take Action

Join this action by submitting your own request for information from Aware Super.

Name

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Subject

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Message

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To Aware Super,

Aware Super holds shares in the Commonwealth Bank of Australia (CBA) on behalf of myself and other Aware members. The fund’s position was to vote against Resolution 5(b) “Climate Risk Safeguarding” published in CBA’s Notice of Annual General Meeting dated 8 September 2022. Resolution 5(b) stated:

‘Shareholders recognise the substantial transitional and physical risks of climate change and their potential financial impacts on our company. We also note our company’s support for the Paris climate change agreement and the goal of net-zero emissions by 2050. Shareholders therefore request the company disclose, in subsequent annual reporting, information demonstrating how the company’s financing will not be used for the purposes of new or expanded fossil fuel projects.’

It has come to my attention that several Aware Super members have written to the fund requesting information about the fund’s position on Resolution 5(b), and the fund has responded with the following:

‘Aware Super engaged extensively and considered the opinions of the Commonwealth Bank, our proxy advisor, Market Forces and our external fund managers in the lead up to the company’s AGM and in developing our position on the shareholder proposal put forward by Market Forces.
 
It is understood, through these engagements, that Market Forces does expect the Commonwealth Bank cease general financing of any fossil fuel company. We believe it is not in investors or Australian’s best interest to destabilize the economy (and threaten many jobs in the process) in this way. Transitioning to a low carbon economy must consider the social aspect including the workers and communities these companies operate in. For this reason, Aware Super voted against the shareholder proposal (resolution nos. 5a and 5b).’

Resolution 5(b) requested that CBA disclose “in subsequent annual reporting, information demonstrating how the company’s financing will not be used for the purposes of new or expanded fossil fuel projects”. There is no logical link between the text of Resolution 5(b) and an understanding that Market Forces expects CBA to cease general financing of any fossil fuel company. Accordingly, I am concerned that Aware fundamentally misunderstood Resolution 5(b).

Aware’s understanding of Resolution 5(b) is not supported by the ordinary meaning of the text of the resolution, nor by Market Forces’ supporting statement, nor by CBA Board’s recommendation to shareholders on how to vote on Resolution 5(b). It is unclear how Aware came to its view that informed how the fund voted on Resolution 5(b).

I am concerned that Aware does not have sufficient skill and expertise to understand the ordinary language of Resolution 5(b) and related material from Market Forces and CBA. There is concern that the fund failed, and may in the future fail, to satisfy the bare minimum standard of care and diligence apt for the provision of professional superannuation services to its members. This basic level of error results in concern about the management of the fund.

Pursuant to s 1017C(2) of the Corporations Act 2001 (Cth), I request copies of the following documents and information held by Aware Super:

(a) notes of all engagements with CBA, Market Forces, the fund’s proxy adviser and external fund managers about Resolution 5(b);

(b) documents from CBA, Market Forces, the fund’s proxy adviser and external fund managers about Resolution 5(b);

(c) policies, processes (including on potential disciplinary actions) to ensure Aware applies the requisite care and diligence when considering and making proxy voting decisions.

I look forward to receiving the information requested as soon as practicable within 14 days of the date of this email.

Sincerely,

Yes, of course I'd like to get updates about this and other Market Forces campaigns!

Yes, of course I’d like to get updates about this and other Market Forces campaigns!

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TOOK ACTION: Super – Aware Super legal request – November 2022

Further information

What is proxy voting?

As a shareholder in thousands of companies worldwide, your super fund has the right to vote on items of business at the annual general meetings (AGMs) of all of those companies. Issues that are voted upon include director elections, remuneration packages and takeover provisions. Advisory resolutions raised by groups of individual shareholders can also be subject to a vote.

What are shareholder resolutions?

Shareholder resolutions are formal proposals put forward by a group of shareholders to guide a company’s actions. They are included as an item of business to be discussed and voted upon at a company’s AGM. All shareholders, including large investors like superannuation funds, then have the opportunity to vote for or against the resolution (or they can abstain or elect not to vote).

Resolutions are used by shareholders in an attempt to improve the performance of companies, often in relation to sustainability issues, like climate change. Generally, shareholder resolutions require the support of more than 50% of shareholders to pass, and are generally non-binding on the company. In the United States, shareholder resolutions form part of the regular process of engagement with companies. In Australia, however, our Corporations Law combined with most company constitutions do not presently allow shareholders to propose advisory resolutions unless accompanied by a separate resolution to change the company’s constitution. Resolutions proposing changes to a company’s constitution require the support of 75% of shareholders to pass.

To learn more about shareholder resolutions, head over to our shareholder action page.

Aware Super members: Take Action