Home' Superfunds : Superfunds August 2014 Contents Superfunds August 2014
n the past decade, Australian super
funds have done a lot to implement
responsible investment policies that
cover environmental, social and corporate
governance (ESG) issues. But most of the
work has been at the ‘ivory tower’ policy and
That’s changing: activists are increasingly turning
social investments into a public issue. They’re
rallying members to pressure funds to divest
controversial holdings in the likes of fossil fuels.
“The mobilisation of super fund members
around responsible investment is only just
beginning,” says James Gifford, Senior Fellow at
the Harvard Kennedy School and Senior Advisor
to TAU Investment Management.
Trustees and management are aware
of the damage such public campaigns
can do to their fund’s brand. But, at the same
time, they need to focus on the fund’s primary
responsibility: financing members’ retirements.
Fortunately, there is growing recognition
that responsible investing can not only cut risk,
but enhance returns; and there are emerging
investment opportunities in assets, such as green
bonds, that combine socially desirable outcomes
with strong returns.
Responsible investing “is not about sacrificing
returns or putting up with OK returns,” says
Gordon Noble, Managing Director, Inflection
Point Capital Management and ASFA’s former
Director of Investments. “It’s about achieving
RECOGNITION OF SOCIAL INVESTMENTS
A decade ago, there was a general convention
that trustees shouldn’t consider non-financial
issues. “It is now universally acknowledged that
trustees have the right to engage around ESG
issues – in fact, the Australian Securities Exchange
(ASX) Corporate Governance Principles have just
introduced new changes that enhance company
ESG disclosure,” Noble says.
According to the Responsible Investment
Association Australasia (RIAA), in 2012, some
$A152 billion of funds were held in responsible
investment portfolios, a 30 per cent increase from
2011. That represents 16 per cent of total assets
under management, up from 8 per cent in 2010.
RIAA says responsible investment “is an approach to
investment that explicitly acknowledges the relevance
to the investor of ESG factors, and the long-term
health and stability of the market as a whole”.
Noble says, in recent years, funds have built ESG
capacity, including having the trustee board establish
a responsible investment policy; incorporation of
ESG into investment mandates; and building internal
responsible investment capacity.
A key driver was the United Nations (UN)
Principles for Responsible Investment (PRI),
to which many Australian super funds have
become signatories. The PRI is based on six
principles, including “incorporating ESG issues
into investment analysis and decision-making
Gifford, founding executive director of the UN
PRI, says Australian super funds have implemented
the principles “pretty well” compared with many
SOCIAL MEDIA SWARMING CAMPAIGNS
“The drive around responsible investing was led
by pension funds, super funds and asset owners,”
Noble says. “It wasn’t led by members of the
funds.” But this is changing, with social investments
becoming a public issue and member-focused.
Bill Hartnett, Head of Sustainability at New South
Wales’ Local Government Super (LGS), says that non-
governmental organisations (NGOs) and campaigners
“are putting together the dots that super funds are
huge providers of capital for both good, and what
they might consider ‘bad’, projects.”
Campaigns have already been successful,
including the Tobacco Free Super campaign led by
the oncologist, Dr Bronwyn King.
When King found her super fund invested in
tobacco, she convinced it to offload its tobacco
holdings. Some 20 major funds have since divested
from tobacco after discussions with Dr King.
But Noble says the intensity of campaigns,
fuelled by social media, will increase.
He says there will be ‘bee-like’ social media
swarming campaigns, where an issue gets rapid
growth in the number of people active on it. “The
group will come together, campaign on an issue,
and then go away. Every pension fund trustee
will really need to understand the impact of their
fund’s behaviour on its brand.”
Andrew Gray, AustralianSuper’s Manager of
Investments Governance, says his fund has seen
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