Following the release of the fourth edition of the ASX Corporate Governance Principles and Recommendations, the property industry is poised to sharpen its focus on corporate values and culture.
Revised guidelines issued by the ASX Corporate Governance Council address emerging global issues, from climate and cyber risk to anti-corruption.
The Council, chaired by Elizabeth Johnstone, brings together 19 business, shareholder and industry groups, including the Property Council of Australia.
“Good corporate governance promotes investor confidence, attracts capital, enhances brand equity and secures a company’s social license to operate,” explains Belinda Ngo (pictured), the Property Council’s executive director of capital markets.
Ngo says the revised principles and recommendations anticipated and respond to some of the governance issues identified in the recent Hayne Royal Commission, as well as new whistleblowing, anti-corruption and modern slavery laws.
“We have an open and transparent market in Australia, and our property industry is world-leading when it comes to environmental, social and governance, or ESG, issues. Our members believe in good corporate governance, but we have an opportunity to push the envelope further.”
The property industry has championed diversity through the Property Male Champions of Change, is addressing modern slavery through its supply chains and tops the GRESB chart for sustainability and the Dow Jones Sustainability Index, Ngo says.
In 2018, the Property Council’s Social Sustainability Roundtable published A Common Language for Social Sustainability, which continues to drive the ESG conversation.
ESG criteria increasingly guide investment decisions in global markets. The Responsible Investment Benchmark Report 2018, for instance, found 55.5 per cent of the $1.56 trillion assets managed in Australia now operate under ESG principles.
The revised guidelines, which replace those released in 2014, apply to all ASX listed companies, which must report on an “if not, why not basis” Ngo explains.
Among the significant changes is a greater focus on culture and values. For example, boards are encouraged to take greater responsibility for defining an entity’s purpose and satisfying themselves that remuneration policies are aligned with that entity’s purpose, values, strategic objectives and risk appetites.
The guidelines also raise the bar on gender diversity – with listed companies in the S&P/ASX 300 index required to set objectives of at least 30 per cent of each gender in their board composition – and climate change disclosures.
The final version of the fourth edition has considered many issues raised by the Property Council in relation to the draft released last year for consultation.
“The new guidelines strike the right balance between shining a spotlight on the importance of culture, values and good corporate practices without creating an overly prescriptive and legalistic document. This will elevate investor, customer and employee expectations as more people look at companies through an ESG lens,” Ngo concludes.
The Corporate Governance Principles and Recommendations will take effect for financial years commencing on or after 1 January 2020.