The Power of Conversation: The Crucial Role of Client-Manager Discussions on ESG

During the week of June 12-16, 2023, the Australian Council of Trade Unions (ACTU) and the Global Unions’ Committee on Workers’ Capital (CWC) coordinated a series of in-person meetings with global asset managers and a group of trustees from four Australian superannuation funds to discuss best practices in investment stewardship.

“The value of these meetings is for trustees to engage with investment managers in how investments decisions can align with the best interest of workers in ensuring the long-term financial strategy of the organisation”, said Deneille Sutton, the Workers’ Capital Officer at the ACTU. “This was an opportunity to convey the importance of recognising the critical voice of workers in the supply chain and how unions are vital representative bodies in understanding these issues” she added.

In the meetings with some of the world’s largest asset managers, including BlackRock, Fidelity, Goldman Sachs, JP Morgan and Macquarie, trustees had the opportunity to appraise whether asset managers use their voice as shareholders in the companies they invest in to ensure that workers’ capital does not undermine worker rights.

Photo: Left to Right: Shalini Ramgoolam (CWC), Deneille Sutton (Australian Council of Trade Unions), Emeline Gaske (HESTA), Helen Cooney (Rest), Sharife Rahmani (Equip Super), Dean Brakell (First Super).

The trustees, nominated as part of the Garry Weaven Emerging Trustee Scholarship program, were keen to better understand how asset managers considered information from workers and other stakeholders on labour rights controversies as part of their analysis of company performance. These conversations were grounded by the CWC’s Baseline Expectations for Asset Managers on Fundamental Labour Rights which points to information from trade unions as a best practice for asset managers to guide their stewardship practices (e.g., shareholder engagements and proxy voting) with respect to human rights and workforce management.

“We need investment professionals to understand that we, as unions, have information about their investments. Once investors realise that to be true, they want to hear what we and union members have to say,” said Helen Cooney, the Principal Policy Officer at the SDA, Australia’s union for retail, fast food and warehousing workers, and a Trustee Director at Rest Super, one of Australia’s largest superannuation funds by membership. “If unions have knowledge that is not being caught in a manager’s assessment model, how can we be confident that our members’ retirement savings will benefit in the long term? As trustee directors, we set policy and fulfil our duties set out in law, rather than act as advocates, but we cannot fulfil our fiduciary duties to the best financial interests of our members without understanding the assessment models used by asset managers, and without knowing how effective they are.”

By sharing their perspectives and insights, the trustees provided valuable information to asset managers about emerging ESG issues, industries, or geographies that align with their funds’ priorities. For example, key labour rights issues related to supply chain due diligence, occupational health and safety in the retail sector, and violations of freedom of association and collective bargaining in the United States were raised. The asset managers can, in turn, incorporate these insights into their engagements with companies. These feedback loops between between workers, trustees, and asset managers help foster accountability, transparency and shared responsibility.

Furthermore, in an era characterized by an alarming increase in the polarization of the ESG movement in the United States, it was crucial that asset owner clients in Australia set an expectation that American-headquartered managers move beyond the political lens and ground their sustainability commitments to carter for their global client base. Dialogues such as the ones held in June help convey  those high level values to asset managers.

We will be continuing the dialogue with global asset managers to enable asset owners from around the world to stay informed about the progress of ESG initiatives, ensuring that their investments remain aligned with their evolving values.