Fiduciary duty in the 21st century: Australia roadmap

Regulatory action

• The Australian Prudential Regulation Authority (APRA) should update paragraphs 34 and 36 of Prudential Practice Guide SPG 530 Investment Governance (and equivalent prudential standards/guidance applicable to its regulated banks and insurers) to clarify to superannuation funds that ESG issues are material to risk and return analysis. They therefore should be incorporated alongside other risk and return factors in investment decision making.

Stewardship and intermediation:

• The Financial Services Council (FSC) should continue to work with Australian asset managers to strengthen stewardship expectations, including engaging companies on ESG issues.
• Stewardship expectations could be formalised through the development of a stewardship code. This should be industry-led.
• Australian asset owners should incorporate stewardship expectations in the selection, appointment and monitoring of asset managers.

Corporate reporting

• The Australian Securities Exchange (ASX) should continue to enhance corporate reporting and disclosure requirements and guidance. The Australian Securities and Investments Commission (ASIC) should monitor the quality of corporate reporting and disclosure.

Investor education

• Trustee boards should ensure capacity and competence on ESG issues. This should be industry-led.

This work also sets the Australian capital market in a broader international context, as regulators and investors respond to a rapidly-changing investing environment. Following assessment of seven further markets (Brazil, Canada, Germany, Japan, South Africa, UK and US), the PRI, UNEP FI and The Generation Foundation will prioritise the areas to which we will contribute. ESG integration is defined as the systematic and explicit inclusion of material ESG factors into investment analysis and investment decisions.

Produced in collaboration with UNEP FI and Generation Foundation