The AGL Energy Limited (ASX: AGL) share price is outperforming the market even as one of Australia's most influential super funds is putting pressure on the company.
The $68 billion healthcare superfund, HESTA, is warning AGL's board that its soon-to-be-released decarbonisation plan better be good, as reported by the Australian Financial Review.
The market seems to have cast an early verdict. The AGL share price is up 3.12% to $6.61 while the S&P/ASX 200 Index (ASX: XJO) is 0.88% lower during afternoon trade.
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AGL share price coping with the pressure
However, HESTA itself is under pressure from members to explain why it doesn't sell its entire holdings in AGL. HESTA's chief executive Debby Blakey is trying to convince them that engagement is better than divestment. She said:
We are seeking to learn more about how they will mitigate climate risk, how they will reduce emissions and how they will manage the situation, support the transition and align with that 1.5 degree transition pathway.
More board changes could be afoot
There have been significant management changes since AGL's failed plan to split itself into two companies. HESTA voted against the demerger and there could be more changes to the board. This is because HESTA has not decided who to back when directors seek re-election.
But given the turmoil that has already rocked the AGL share price since the Mike Cannon-Brookes-led campaign against AGL's spilt, investors do not seem too perturbed.
More ASX shares in the climate firing line
If it's any consolation to AGL's board, it won't be the only ASX company that HESTA is pressuring. The fund will write to all S&P/ASX 300 (ASX: XKO) companies in its portfolio asking them to outline plans to tackle climate change, social inequality, and biodiversity.
The letter will warn companies that those who don't have a fit-for-purpose plan will face a revolt from HESTA. This could include uncomfortable shareholder resolutions, votes against directors, and HESTA dumping their shares.
The fund, which has 950,000 members, has a 2050 net-zero target for its investment portfolio. It also has a 50% carbon reduction interim target set for 2030 (the baseline year is 2020).
HESTA's move comes at a time when several large cap ASX companies have been accused of greenwashing. That means they are only paying lip service to their climate commitments for PR and marketing purposes.
AGL share price snapshot
The AGL share price is under more scrutiny than most on the climate front due to its ownership of coal-fired power plants.
But the market sees value in the shares given they've rallied 16% over the past year. In contrast, the ASX 200 has fallen over 11% in the same period.
On the other hand, longer-term investors are probably underwater on their investment. The AGL share price was trading at more than $20 in early 2020.
