This is a service specifically targeted at the needs of busy non-executive Directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
In this edition, we consider ASIC’s recent report on retail investor trends, APRA’s information paper setting out the findings of its climate related self-assessment survey and the ACCC’s successful action against Google for misleading conduct which has resulted in a $60 million fine.
In Over the Horizon, we consider the CBA’s recent comment on investment in decarbonization needed for Australia to meet its “net zero” commitment by 2050.
GOVERNANCE & REGULATION
ASIC’s report on retail investor research. In November 2021, ASIC conducted a survey of 1,053 Australian retail investors who were over 18 years old and had directly traded in securities, derivatives or cryptocurrencies at least once since March 2020. On 11 August 2022, ASIC released a report which captures the motivations, attitudes and behaviours of those investors in a pandemic-stricken environment. Despite the disruption that the COVID-19 pandemic has caused, retail market activity has remained generally elevated when compared to activity levels prior to the onset of COVID-19. ASIC highlighted two key areas of focus: (1) retail interest in crypto-assets, and (2) digitalisation and socialisation of trading. In relation to crypto-assets, 44% of surveyed investors held crypto-assets, making it the second most common product type held, and 25% of those investors stated that crypto-assets were the only products that they held. ASIC has expressed its concerns over this trend given the unregulated and volatile nature of crypto assets. In relation to digitalisation and socialisation of trading, ASIC noted that 51% of new investors are between the ages of 18 to 34, which indicates engagement among a broader spectrum of the market, and that ‘information’ on investing is now being sourced on social media platforms and digital channels. ASIC noted that it is ‘working to better understand the use of digital engagement practices and maintain regulatory pace with these developments.’ See report. Social media is becoming a larger part of many companies’ investor relations strategies, but Directors (particularly of listed companies) need to ensure there is proper governance and oversight of content released on these platforms.
APRA publishes information paper on climate risk self-assessment survey. The Australia Prudential Regulation Authority (APRA) recently published the results from its survey which was conducted from March to May 2022 across the banking, insurance and superannuation industries. The survey was voluntary, and sought to assist APRA to determine alignment of APRA-regulated entities with APRA’s practice guide on climate change financial risks (CPG 229). The survey concluded that although there is a good level of general alignment with CPG229, only 64 entities chose to participate in the survey (which may give a biased outcome, as it is likely entities were more likely to participate where they have adopted CPG229 into their practices). Interestingly, 80% of Boards who participated stated that they oversee climate risk on a regular basis, but only 63% have incorporated climate risk into their business planning strategies. Further, 73% of entities stated that they have one or more climate-related targets in place, but only 50% have metrics in place to measure and monitor climate risks. There seems to be some level of disparity between words, on the one hand, and action, on the other. The results indicate that climate-related risks and opportunities are becoming an increasingly important consideration for Boards. See information paper.
Google fined $60 million for misleading conduct. In April 2021, the ACCC commenced proceedings in the Federal Court against Google, alleging that it engaged in misleading conduct by misleading Android phone users about the collection of personal data relating to their location. The case centred around whether Google had made it sufficiently clear to users that their location data would be collected even when a person’s location history had been switched off. The ACCC estimated that 1.3 million Google accounts had seen the misleading message. On 12 August 2022, the Federal Court ruled in the ACCC’s favour, and ordered that Google pay a hefty fine of $60 million as a result of three breaches of the Australian Consumer Law. Justice Thawley also ordered that Google pay 50% of the ACCC’s legal costs until 16 April 2021, and that Google conduct a review of its existing compliance program, adapt it where necessary, and monitor it for a period of three years to ensure further breaches do not occur. Chair of the ACCC, Gina Cass-Gottlieb, has said that the court-imposed penalty is a warning to all digital platforms and businesses not to mislead consumers about the collection and use of their data. See Australian Competition and Consumer Commission v Google LLC (No 4)  FCA 942.
OVER THE HORIZON
CBA estimates between $2.5 and $3 trillion investment is required to meet national net zero goals. Recent projections estimating the amount of investment that will be needed in Australia to transition to a net zero economy by 2050 have been staggering. Last week, Commonwealth Bank of Australia’s Chief Executive, Matt Comyn, said the Bank had estimated that between $2.5 trillion and $3 trillion in investment expenditure will be necessary, basing the scale of the projection on that experienced during the mining boom between 2005 and 2015. Australia’s current reliance on fossil fuels for power is the primary driver of the required investment (in WA, 75% of power to the grid is fuelled by gas, and in the Eastern States, 75% is fuelled by coal), representing a significant market opportunity for those at the forefront of the clean energy movement.