HESTA slams Woodside's climate plan but backs chairman despite his opposing views

HESTA slams Woodside’s climate transition action plan (CTAP), pointing to “significant” gaps.

HESTA will continue to exert pressure on Woodside at its upcoming AGM, but it intends to back the re-election of the oil and gas company’s chairman, Richard Goyder, despite demands from environmental activists for his departure from the board.

The fund owns under 1 per cent of Woodside but is known as one of its most vocal investors.

In a statement ahead of the AGM, HESTA CEO Debby Blakey said: “Woodside remains a watchlist company, subject to HESTA’s escalation framework. As part of this escalation approach, HESTA is involved in ongoing engagement with Woodside regarding their climate transition approach and board capability”.

“Through our ongoing engagement with Woodside, HESTA remains of the view that Woodside has an opportunity to meet the strategic challenge of climate change but that it will require the company to work together with a broad range of stakeholders”.

Highlighting the need for the company to add further “new energy and business transformation skills to its board”, Blakey said the fund is “for” the election of chair Richard Goyder and Ashok Belani, and “against” Woodside’s climate transition action plan and its remuneration plan. 

“In relation to Woodside's Climate Transition Action Plan, we welcome the additional detail provided and the opportunity for investors to give feedback via a ‘Say on Climate’ vote. However, there remains a significant gap between the current plan and a 1.5C transition pathway,” Blakey said.

Woodside's Goyder responded to shareholder criticism with a letter published to the ASX on Tuesday, praising the firm's climate plan and improvements made since the plan was previously opposed at AGMs in 2022 and 2023. 

“Since then, we have stepped up our engagements to better understand investor expectations on our governance and climate transition strategy. In the last 12 months, we have had hundreds of meetings with shareholders and proxy advisors, and I have personally led over 80 of those engagements," said Goyder 

“You may have seen in the media that some proxy advisers have sought to reject the CTAP based on a perceived lack of shareholder engagement. We disagree with this assessment."

Moreover, the chairman said Woodside did not need to put its climate disclosures to a vote of shareholders at this year’s AGM, instead it wanted to meet a commitment it made to its investors. 

“We are being honest about the energy transition," the chairman, who has HESTA's confidence, said.

"It is the Board’s view that the CTAP effectively articulates the challenges and demonstrates Woodside’s plans and progress towards mitigating the risks of climate change". 

Goyder pressed on, adding that Woodside is "concerned" that some stakeholders’ and investors’ requests to "drastically change" Woodside’s strategy and investment priorities "risk eroding value for all shareholders and contributing to a disorderly energy transition". 

HESTA votes against Santos chair 

Separately at Santos’ AGM, held last week, HESTA voted against the chair, Keith Spence, based on his lack of engagement with and response to investor concerns. He was, however, reelected with activist shareholders unable to block the move. 

Despite its opposition to Spence, HESTA did, however, back the election of new directors, noting that the oil and gas company has “taken positive steps to improve the mix of skills on its board”. The new directors, Vickki McFadden and John Lydon, “improve the diversity of the board”, according to the fund. 

The remuneration program was not in line with HESTA’s expectations, it said, due to management receiving short-term incentives above target for their management of community, landholder and First Nations relationships, and implementation of its strategy. 

“HESTA has written to the company stating its management of First Nations relationships has not met investor expectations. We also voted against the remuneration package due to management receiving bonuses despite progress being rated below target on the expansion of low-carbon businesses”.

Super funds take a step back from oil and gas producers

Last month, Australia’s top 30 super funds revealed they have been scaling back holdings in the two ASX 300 companies, relative to the Australian stock market.

Research by Market Forces, based on funds’ mandatory disclosures, found that funds have, on average, reduced their holdings in Woodside by 0.30 percentage points against the company’s weight in the ASX 300, a reduction equivalent to some 10 per cent of Woodside’s market share.

A similar trend was seen regarding Santos, with funds reducing these holdings by 0.13 percentage points, a reduction equivalent to some 11 per cent of Santos’ market share.

Australia’s largest super funds are turning their backs on Woodside and Santos as more members demand greater climate action,” observed Brett Morgan, superannuation funds campaigner at Market Forces.

“Super funds must demand and deliver an end to Woodside and Santos’ oil and gas expansion plans and publicly divest if they fail to comply.”