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Will shareholders accept lower returns to pay for action on climate change?

Corporate and M&A, Shareholder Activism
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In yesterday's episode of The Briefing, Southern Cross Austereo's daily news podcast, partner Scott Phillips explains that while shareholder activists are increasingly calling for additional reporting by companies around environmental issues, whether they're prepared to accept lower returns to achieve their goals is not yet clear.

Following an interview with a young activist who sued his superannuation provider for inaction on climate change, Scott was asked what action we could expect to see from shareholder activists in the corporate world.

"Most commonly, shareholders in Australia and in the US are asking for more information about a company's broad commitments without getting too granular about how the company should be going about achieving these broad commitments," he said.

Scott explained that while it was absolutely appropriate for shareholders to exert their influence on matters important to them, including environmental issues, this comes with risks as they don’t have the detailed knowledge about the inner workings of a company that boards and executives do. With demands for climate action, in particular, there is also the risk that pressure on listed companies will just drive businesses into private hands.

"If you think what a company is and what a board's main responsibility to shareholders is, it's to maximise returns for shareholders. And so while a board can say it’s going to be supportive of climate action or emissions targets, the real question is what happens when the company’s profits conflict with that goal? That's where the rubber meets the road - when shareholders have to put their hands in their own pockets."

To listen to the program, click here

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