Backdowns and broken promises: The super funds failing to bring gas companies into line on climate

Some super funds consistently failing to live up to climate and active ownership claims

As Australia’s two largest oil and gas producers, Woodside and Santos have faced mounting pressure from shareholders to align with global climate goals by delivering credible transition strategies. Yet both companies have repeatedly ignored genuine shareholder concerns about their approach to climate risk management, continuing with dangerous oil and gas expansion plans that are incompatible with the climate goals of the Paris Agreement.

After several years of increasing shareholder dissent, Woodside suffered a world record-breaking majority vote against its climate transition plan this year, which was just the latest in a long series of indicators that shareholders want to see a strategy shift. Yet the company has since responded by doubling down on plans to further expand gas production, acquiring an undeveloped liquefied natural gas (LNG) project that could double the company’s emissions. Santos has also faced repeated demands from shareholders to change course, yet has dug its heels in on gas expansion, continuing to develop the dirty and highly controversial Barossa gas project and pursuing other new gas fields including in Papua New Guinea and the Piliga Forest area on Gomeroi Country in New South Wales.

Both companies have repeatedly demonstrated they are either unwilling or unable to align with global climate goals and it’s clear investors are failing to use all the tools at their disposal to rein in these companies’ gas growth plans.

Nearly all of Australia’s top 30 super funds invest their members’ retirement savings in these two climate wreckers. These funds also acknowledge that climate change poses significant risks and claim that ‘active ownership’ is a key pillar of how they will manage such risks. But their recent voting history at the AGMs of Woodside and Santos would suggest otherwise. Given Woodside and Santos’ ongoing resistance to change, super funds had a key opportunity to demonstrate that their active ownership efforts are more than greenwash by voting against the re-election of these companies’ Chairs this year.

Yet most super funds failed to take it.

While some funds increased pressure and voted against the re-election of Woodside or Santos’ Chairs for failing to make progress towards aligning with global climate goals, others swallowed the greenwash and backed off pressure, undermining the effectiveness of their own stewardship efforts and letting their members down in the process.

Aware Super, ESSSuper, Spirit Super, State Super* and Vision Super all voted against the re-election of at least one of Woodside’s directors in 2023, before increasing pressure by voting against the re-election of the company’s Chair in 2024. Qantas Super also voted against the re-election of Woodside’s Chair this year. Aware Super and Vision Super took the commendable step of pre-declaring their intentions to vote against the Chair’s re-election, signalling to the company and other shareholders their willingness to take a stronger stance (and possibly stronger escalation measures in future). State Super has also since taken the positive step of disclosing its rationale for voting against Woodside’s Chair, noting the company’s “…slow progress in [identifying] and moving towards an effective climate change strategy.”

At the other end of the spectrum, several super funds squandered their opportunity to hold Woodside’s board accountable for its deplorable climate risk management approach. Eight super funds backed off pressure at Woodside through their voting activity this year: Active Super, Australian Retirement Trust, CareSuper, Cbus, Equipsuper, HESTA, Rest and TelstraSuper. While all of these funds voted against the re-election of at least one Woodside director in 2023, every single fund failed to back it up by voting against the Chair’s re-election in 2024, demonstrating to their members, other shareholders and Woodside itself that they are unwilling to follow through on their climate claims with increasingly forceful action.

HESTA’s active ownership efforts in 2024 have fizzled out, despite showing some promise earlier this year by putting forward its own director nominees for consideration at Woodside’s AGM. The feebleness of HESTA’s efforts became clear when Woodside brushed aside its picks for new directors, after securing public support from the fund for the re-election of the company’s Chair. Woodside has since appointed a new director, which HESTA Chief Executive Officer Debby Blakey confirmed was not one of HESTA’s picks. Members of the fund were furious with HESTA, with some submitting a legal request for information demanding answers. HESTA’s lacklustre approach to board accountability this year appears to have run its course, with the fund’s engagement efforts failing to deliver any meaningful change at Woodside so far despite the company having been on HESTA’s ‘engagement watchlist’ for more than two years.

Beyond HESTA’s unwillingness to take a stronger stance on Woodside, other funds that lost their nerve this year have since disclosed poor reasons for doing so. Several funds cited the willingness of Woodside’s Chair to meet with them ahead of the AGM as ‘progress,’ failing to recognise that the company might have compelling reasons to put up a facade of investor engagement when its Chair’s future at the company is perceived to be at risk. Other funds seemingly didn’t make (or ignored) the connection between the vote on Woodside’s inadequate climate plan and the re-election of its Chair, who is ultimately responsible for signing off that plan and the company’s climate-wrecking strategy.

AustralianSuper was one such fund that fell for Woodside’s greenwash. When questioned at the Senate greenwashing inquiry just days before Woodside’s AGM, AustralianSuper’s Head of Australian Equities, Shaun Manuell, said that the fund was “…comfortable that the company has engaged with us extensively over the last 12 months and that it has made large improvements in its disclosure in its climate [transition] plan.” This is in spite of the fact that Woodside has not materially changed its inadequate climate plan since 2020.

Australian Retirement Trust was another fund that provided poor excuses for not increasing pressure on Woodside this year. In outlining its reasons for supporting the re-election of the Chair in its latest sustainable investment report, the fund noted that the Chair “had been available for multiple consultation sessions” and that it is “…unclear a hypothetical alternative Chair would pursue a materially different strategy that would outperform on financial and carbon metrics.” This entirely misses the point of the utility in casting a binding vote against a company demonstrably unresponsive to non-binding investor votes. Woodside’s ongoing refusal to deliver a credible climate strategy means that investors must at some point act to hold the board accountable, and without escalating to binding votes against the re-election of key board members like the Chair, investors are going to keep giving Woodside free passage to continue with its dangerous gas expansion plans, at the expense of us all.

Voting activity of Australia’s 30 biggest super funds at Woodside’s 2023 and 2024 AGMs

Voting activity of Australia’s 30 biggest super funds at Santos’ 2023 and 2024 AGMs

Due to pressure from their members and in response to calls to divest climate-wrecking companies, super funds are increasingly attempting to justify their investments in these companies by claiming they are employing ‘active ownership’ strategies to manage climate risk. But they are failing to demonstrate effective action commensurate with the scale of the increasing risks being posed by companies like Woodside and Santos.

With climate change-fuelled disasters increasingly threatening communities around the world and the global mean surface air temperature having been above 1.5°C since January this year, it is incumbent upon the owners of highly polluting companies – particularly those companies actively undermining global climate change mitigation efforts by pursuing new fossil fuel projects – to be pulling out all the stops to end their expansion plans.

This means taking a position against new and expanded fossil fuels, in line with climate science.

While some super funds have expressed concerns about Woodside and Santos being misaligned with global climate goals, not one fund has taken a clear public position that reflects the reality of what climate science tells us must happen – companies cannot continue building new fossil fuel projects if we are to have a shot at meeting global climate goals.

Super funds must accept this reality and take genuine steps to end the fossil fuel expansion plans of portfolio companies.

Super funds must therefore be demanding and delivering an end to the oil and gas expansion plans of companies like Woodside and Santos, rapidly escalating through all of their active ownership tools.