Speaking to InvestorDaily, Australian Ethical chief executive Phil Vernon said “real action” on ESG and responsible investment can only come from superannuation trustees and directors.
There may well be a lot of “passionate people” within an institution, but unless they have the support of the leaders of the organisation their efforts will be for naught, he said.
That said, Mr Vernon said as many as 80 per cent of superannuation trustees are committed to taking action on ESG.
“But they have no clear idea what the scope of their ability to take bolder action may be,” Mr Vernon said.
The biggest stumbling block is the perception among trustees that they would be in breach of their fiduciary duty if they said ‘no’ to a particular investment on ESG grounds, he said.
It is difficult for a director or a trustee to say they are “uncomfortable” with an investment decision, Mr Vernon said.
“What you’re really suggesting is that the company needs to change its business model – and that’s a fundamentally difficult decision to make,” he said.
It comes down to the ability of the trustee in question to say ‘no’ without fear of legal repercussions, Mr Vernon said.
“In many cases there may be no legal risk for them if they took the bolder action,” he said.
Knowing “where the lines are” when it comes to ESG is the subject of ongoing director/trustee education, Mr Vernon said.
“I’ve had this conversation with a number of trustees and directors and there’s a lot of interest in it.
“There’s a lot of admission that ‘yes, there is a lot of lack of clarity’ and there’s a lot of willingness to understand [ESG issues],” Mr Vernon said.
