ESG issues shine through in 2021 ASX reporting season

Environmental, social and governance factors have come to the fore in the latest ASX reporting season, says Regnan’s Alison George.

• Subtle messages are shing through profit and dividend results
• Covid, gender, environment come to the fore in ASX reporting season
• Find out more about responsible investing leader Regnan

AS THE 2021 full-year earnings season draws to a close, the story of significant profits and dividends — but cautious outlook statements — has been repeated again and again.

Iron ore miners, materials companies, many discretionary stocks and some of the financials have outlined strong performances.

Relatively few companies have failed to meet market expectations. Some four in five companies are reporting profits higher than a year earlier during peak Covid periods.

But behind the headlines another trend gained momentum this earnings season: a greater deference to environmental, social and governance factors among Australia’s biggest ASX-listed companies.

And this is likely to grab more attention in the lead-up to the annual general meeting season in coming months.

“A number of things are spurring companies,” says Alison George, head of research at responsible investing leader Regnan.

“On the social side, Covid and all its implications are being aired. For example there’s discussions about payments that some companies received from the government but didn’t really need.”

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Companies are also focusing on reports from major global bodies about climate change and the transformation needed to address it, George says.

Reporting season ends just two months before the next big global climate change conference — the United Nations Climate Change Conference in Glasgow, Scotland.

“The global gathering has focused companies on their response to climate change, the risks involved and also the opportunities,” George says.

“There’s also been a focus on diversity — and gender diversity in particular. There’s a tie with Covid, because female workers have been hardest hit,” she says.  

“There’s also been more discussion about discrimination against women working on mine sites.”

The latter mostly concerns a state parliamentary inquiry in Western Australia, where major iron ore miners BHP, Rio Tinto and Fortescue Metals have made submissions pointing to the poor treatment of women. BHP outlined alleged cases of sexual assault and harassment, and said it was taking steps to better protect women.

“Fairness and equity in pay arrangements have been a feature of reporting seasons for the past couple of years,” George says. “But it’s manifested this year in issues around broader societal fairness in light of Covid challenges.”

More than most other reporting seasons ESG considerations have come to the fore. And companies that address these issues could benefit in terms of valuations.

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George points to BlueScope Steel, which this earnings season did not simply commit to a long-term net zero emissions goal — it outlined a plan to get there.

“BlueScope makes steel which is a hugely emissions-intensive activity, but is also needed for sustainable development.

“Many companies have net zero emissions aspirations, but BlueScope has backed this with detailed plans and resourcing — both financial and human. That provides investor conviction that the plans are credible.”

As earnings season ends and the annual general meeting season kicks off later in the year, companies that have provided a blueprint for achieving ESG goals will benefit.

“What we want to hear from companies is how they are positioning themselves for ‘future-Australia’, of which carbon transition is a key feature,” George says. “But its also about new technologies, changing consumer preferences and shifting demographics.”