AGL faces investor heat on climate
A major proxy adviser has backed a shareholder resolution calling for AGL to disclose greater climate disclosures.
AGL Energy faces a fresh challenge over its climate credentials after a major proxy adviser backed a push for the company to set interim emission reduction targets while also questioning remuneration deals for chief executive Graeme Hunt and his predecessor Brett Redman.
The power giant was hit with an activist shareholder resolution ahead of its annual general meeting on September 22 calling for it to set short, medium and long-term targets aligned with the Paris climate accord ahead of a planned split of the company into a green retailer and coal-focused electricity generator.
Proxy adviser Institutional Shareholder Services has told shareholders that it supports the resolution given it will hand investors better clarity about the split of the company and how it plans to handle climate change demands.
“In order for shareholders to make an informed decision about the demerger agreement, additional disclosure is needed regarding the expected assumptions on future power prices and maintenance and fuel cost and demand for fossil fuel power generation,” ISS said in its voting recommendations ahead of the AGM.
“This kind of information could inform the debate by allowing policy makers and market participants to weigh the costs of compliance with Paris Agreement goals with the costs of continued non-compliance. As such, this shareholder proposal warrants support.”
The Australasian Centre for Corporate Responsibility had accused AGL of not being prepared to set Paris-aligned targets although the electricity operator has vowed to give shareholders a vote on climate reporting for the split companies - AGL Australia and Accel Energy - at their first AGMs should the demerger proceed.
ISS said support for the resolution should not be unreasonable given AGL’s plan for the vote once the companies are separated.
“Additional information regarding the company‘s efforts to reduce its carbon footprint and align its operations with Paris Agreement goals would allow investors to better understand how the company is managing its transition to a low carbon economy and climate change related risks, especially as the company seeks to split its operations into two companies via the proposed demerger,” ISS said.
AGL copped a giant first strike against its remuneration report at last year’s AGM with 46.5 per cent of shares voted against the pay structure, and 30.4 per cent of shares voted against a performance rights issue to Mr Redman.
Both ISS and CGI Glass Lewis said changes made by AGL meant they had recommended in favour of AGL’s remuneration report this year even as they flagged several areas of concern.
Mr Hunt’s high remuneration was flagged as one issue by ISS noting potential pay of $4.82m including his salary and short and long-term incentives.
The surprising exit of Mr Redman, the architect of the demerger, troubled both the advisers along with some of the perks that followed his ‘good leaver’ status and the move to install Mr Hunt as CEO from his position as chairman.
ISS noted “governance and independent issues following the appointing of the chairman as the permanent CEO and treatment of the former CEO, Brett Redman, as a ‘good leaver’ with access to prior long-term incentives despite poor performance, significant losses in shareholder value and his decision to depart the company.”
CGI Glass Lewis also raised criticisms of Mr Redman’s ‘good leaver’ status although did not deem them significant enough to change its vote on the overall remuneration report.
“Mr Redman arranged the plan for the structural separation but will not see it through. There are views that he left the job half done,” CGI Glass Lewis said.
However, it noted that any significant vesting of the retained long-term incentives were unlikely for Mr Redman given AGL’s recent share performance and return on equity measures.