Proxy Season 2025: Australian Boards Are Turning ESG from Slogan to Strategy

In recent years, sustainability and ESG (Environmental, Social, and Governance) have moved from the periphery to the core of boardroom agendas in Australia. The 2025 proxy season has marked a decisive shift: climate and ESG are no longer “side projects” but are now woven into the fabric of mainstream governance. Audit & Risk, Remuneration & People, and Nomination committees are all taking responsibility, driven by new regulatory requirements and rising investor expectations.

This transformation hasn’t been without its challenges. The introduction of mandatory AASB climate disclosure rules means boards must now treat sustainability as a financial reporting issue, not just an ESG checkbox. At the same time, companies face a complex landscape: while Australia hasn’t imported the U.S. “anti-ESG” backlash wholesale, there is growing scrutiny from both sceptics and advocates. Investors, especially superannuation funds, are demanding more than rhetoric—they want measurable, credible action. Meanwhile, mid-sized and smaller companies are struggling to keep pace with these new expectations.

We think there are four ways boards and executives can navigate this evolving environment, and balance ESG commitments with rising scrutiny, and turn compliance into a source of strategic advantage.

1. Integrate Sustainability into Core Governance

Boards need to embed sustainability into mainstream governance rather than isolating it within a dedicated function. This means updating committee charters so climate and ESG issues are overseen by core committees.

With AASB climate disclosure rules elevating sustainability to a financial reporting issue, ESG oversight must align with financial performance, risk, and capital allocation.

Linking executive pay to measurable KPIs—such as safety, decarbonization, and diversity—further reinforces accountability and ensures metrics withstand investor scrutiny.

2. Move from Compliance to Strategy

Leading companies are reframing ESG from a compliance obligation into a strategic driver of long-term value. Climate resilience, workforce inclusion, and governance culture should be positioned as competitive advantages. Investors increasingly demand clarity and measurable outcomes, so boards must move beyond slogans to KPIs supported by scenario analysis tied to capital allocation.

Disclosures should be robust enough to withstand scrutiny from both pro- and anti-ESG stakeholders, with clear financial framing of climate actions and transparent reporting.

3. Respond to Evolving Shareholder Proposals

Shareholder expectations are shifting rapidly. In 2025, banks became prime targets for climate resolutions demanding credible transition plans, not just pledges—a trend highlighted by the Market Forces resolution at Macquarie Group, which secured 35% support. Successful proposals now call for short- and medium-term targets, scope 3 disclosures, and alignment between capital allocation and climate goals. Resource and energy companies should also prepare for ‘Say on Climate’ votes by presenting operational plans rather than distant promises.

4. Communicate with Clarity and Purpose

Boards must adopt a neutral, evidence-based tone that maps ESG topics to core risk, strategy, and pay, avoiding politicised language. Proxy advisors are updating guidelines on independence, diversity, AI oversight, and executive pay, so disclosures should be calibrated accordingly. Use proxy statements to tell a compelling governance story—one that links ESG actions directly to long-term value creation and demonstrates resilience in a changing regulatory and investor landscape.