Responsible investing has gained considerable traction over the past decade, with no signs of slowing down. 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. We’re seeing a noticeable shift in consumers 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 ten 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.
Raising the bar
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 .”1 According to a recent SMH article, “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...”2.
UniSuper works with many of its investee companies to help them both 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.
The triple bottom line
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 returns3. UniSuper has considered ESG in its investments for 15 years and our members have enjoyed top quartile returns, supported in part by years of ESG integration.
Fast forward to 2019 and the sentiment is even stronger, with investors expecting ESG considerations to match the performance of their non-ESG counterparts. At UniSuper, those 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 UniSuper's 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, UniSuper 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.
UniSuper's members are deeply engaged with ESG and sustainability. All our members, regardless of the option they’re invested in, have an expectation that UniSuper is considering and acting 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 also 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 report provides high level details of the engagements and activities we have participated in, as well as comprehensive proxy voting reports.
If you’d like more information on our choice ESG investment options, visit our website or speak to a UniSuper financial adviser to discuss your investment approach.
2. Ethical Super yet to prove sustainable: smh.com.au