Managing our sustainable and environmental options

Managing-our-sustainable-and-enviro-options-landing

We pride ourselves on carefully managing our sustainable and environmental options to ensure they deliver strong environmental outcomes and good returns.

Our in-house investment team has a long history of investing in highly-rated sustainable companies, and companies focussed on delivering innovative environmental products. Learn about how we manage these options, including the industries we include and exclude:

Global Environmental Opportunities (GEO) option

We actively manage this option ourselves to make sure we have oversight of any environmental, social and governance (ESG) issues.

The products and services that GEO invests in focus on:

  • Alternative energy—renewable energy and alternative fuels 
  • Clean technology—reducing energy consumption through effective power management, energy conservation and energy efficiency
  • Water infrastructure and technologies—addressing water scarcity, quality and infrastructure
  • Green building—building and operating environmentally sustainable buildings and/or offering environmentally sound products and services used in building design and construction
  • Waste management and pollution control—pollution prevention, recycling, waste minimisation and waste treatment.

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This option invests in a portfolio of global shares (which may include a small portion of Australian companies) that derive at least 40% of their revenues from environmentally beneficial products and services related to alternative energy, sustainable water, green building, pollution prevention and clean technology.

Aligning with the global sustainable development agenda

Our GEO options directly match five of the United Nations (UN) Sustainable Development Goals:

  • Climate action
  • Sustainable cities and communities
  • Clean water and sanitation
  • Responsible consumption and production
  • Life on land

Sustainable Balanced and Sustainable High Growth options

We manage our Sustainable Balanced and Sustainable High Growth options internally, and exclude investments in a range of industries.

Alcohol

We exclude companies considered “brewers” or “distillers and vintners” by the Global Industry Classification Standard (GICS). We also use specialist third-party ESG research to identify any companies that produce or sell alcohol as part of their core business (comprising more than 5% of total group revenue).

We evaluate the nature of the exposure on a case-by-case basis and decide whether to exclude particular companies. For example, we won’t exclude a proprietor or airport that leases property to an entity that sells alcohol. Likewise, we won’t exclude airlines that serve alcohol.

Gambling

We exclude companies considered “casinos and gaming” by the GICS. We also use specialist third-party ESG research to identify and exclude any company that has gaming as part of its core business (e.g. a hotel group that owns and operates casinos) which comprises more than 5% of its total group revenue.

Tobacco

We’ve always excluded tobacco from our sustainable investment options. In 2011, we decided to exclude tobacco companies from all our investment options. We made this decision on the basis that:

  • tobacco stocks were a small part of our total portfolio and had delivered minimal outperformance, and
  • the tobacco industry faces an uncertain regulatory future and has potential long-tail liabilities associated with it.

For these reasons, we believe the long-term risks of owning tobacco stocks outweigh the benefits.

Weapons

We exclude companies considered “aerospace and defence” by the GICS. We then use specialist third-party ESG research to identify any company that has any revenue exposure to weapons. 

If a company has less than 0.5% of total group revenues associated with weapons, we consider the nature of the exposure on a case-by-case basis and decide whether to exclude it. For example, we may invest in a company that produces glass instrument screens but not one that produces explosive materials.

Fossil fuel explorers and producers

We exclude companies that fall under the following GICS classifications: 

  • utilities
  • coal miners
  • energy
  • oil and gas explorers 
  • diversified metals and miners.

We then review the stocks on a case-by-case basis to determine exposure to fossil fuels (not all diversified metals and mining companies have fossil fuel exposure). We consider utilities for investment if they’re largely involved in renewable energy—provided they derive less than 30% of energy generation from natural gas only (excluding any coal generation). This allows for energy security/ back-up generation capabilities.

Human rights and united nations global compact

Using specialist third-party ESG research, we exclude any companies that breach the UN Global Compact or have otherwise been found to commit human rights violations.

Other companies

We may exclude other companies if they’re inconsistent with the nature and intent of our screening process. If a company is clearly associated with an excluded sector, we may decide not to invest in it and exclude it from the sustainable options (like a gas pipeline company that receives the bulk of its revenues from transporting fossil fuels).