Responsible investing to the forefront
Our society has increasingly high expectations around transparency and the rapidly changing news cycle makes companies more accountable by exposing poor business practices.
Corporate responsibility is now a given. Consumers are choosing to engage with corporates aligned with their personal values, while companies reliant on poor business practices are more likely to be left behind.
This comes as no surprise to UniSuper. We’ve been considering ESG (environmental, social and governance) in our investment decisions for quite some time. We recruited our first ESG analyst over 10 years ago and continue to enhance and refine our investment offerings in this space. As a fiduciary, we have a legal obligation to make decisions that have the best financial outcomes for our members. This means that ESG-related matters need consideration.
Social and environmental impacts are as important as the financial benefits for many ethical investors
Terry Pinnell, Chair of Ethical Advisers Co-op said: “With over $2.6 trillion of Australia’s retirement capital invested in superannuation, super funds are Australia’s most significant shareholders. Its members have the potential to shape the society in which we live .” In July 2018, The Sydney Morning Herald reported that “for many ethical investors it’s now about what the investment is doing for the ‘triple bottom line’ – the social and environmental impacts – not just the financial bottom line...”.
We work with many of our investee companies to help them report on their activities and encourage them to be more ambitious in how they manage their environment and people. We expect companies to reduce their emissions and keep their people safe to help ensure the long-term viability of their business.
When we’ve recognised issues, we’ve stepped in and appointed directors to change the safety culture in our unlisted investments. This made a big difference in the working culture for that company, and these improvements became global standards.
Good ESG principles are linked to good returns
It’s taken time for some investors to recognise the positive correlation between active ESG principles and investment returns. Studies over the last decades have shown that considering ESG does not compromise investment returns. We’ve considered ESG in our investments for 15 years and our members have enjoyed top quartile returns, supported in part by years of ESG integration.
In 2019 the sentiment is even stronger, with investors expecting ESG considerations to match the performance of their non-ESG counterparts. Our members who wish to more formally include ESG considerations – by either screening out contentious sectors, or by investing in environmental themes – will have the same long-term return objectives as their mainstream counterparts.
At our product level, green bonds (which form part of our Sustainable Balanced option) can provide environmental benefits without compromising on returns. Lending money to a borrower who’ll use the bond’s proceeds to fund projects that deliver environmental benefits such as energy efficiency, power transmission, renewable energy and efficient public transport, delivers on all fronts for ESG aware investors. In 2014, we recognised the value of green bonds and invested in the first World Bank Green bond issued into the Australia market and have regularly participated in new issuance ever since.
Track our responsible investing
Our members are deeply engaged with ESG and sustainability. All our members, regardless of the option they’re invested in, expect us to consider and act on ESG information. To meet this, we’re increasing the level of reporting provided to our members in an effort to be more transparent in their investment practices. Ultimately, this information should help members make informed decisions about their investments and provide information on the activities that we’re undertaking on members’ behalf.
Our Climate Risk Report helps members understand our approach to carbon related issues, our role as a fiduciary (what this means) and details those responsible for managing climate risks and what we invest in.
Our 6-monthly Responsible Investment Reports give high-level details of the engagements and activities we have participated in, as well as comprehensive proxy voting reports.