ESG Update as at 10 December 2019
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Australian and New Zealand ESG Updates
Good Super closes four ESG-themed options
After a review, ethical superannuation fund Good Super has closed four themed investment options to new and existing members. Good Super has closed the women, animals, environment and pride options, with all four options set up in 2018.
Returns were poor for the four options, with the women’s option returning 1.50 per cent p.a., the pride option returning 7.96 per cent p.a., animals returning 2.83 per cent p.a. and the environment option closed within its first year.
This leaves two options remaining - ethical and income. The conservative, growth and balanced options have also all been closed since the fund was created in 2013. OpenInvest manages Good Super’s investments, with Good Super being a sub-plan of Max Super, promoted by Mammatus Pty Ltd with Tidswell Financial Services, which is a wholly-owned subsidiary of Sargon, as trustee.
Boutique launch Impact Fund into impact investing space
Channel Capital has signed up a new boutique, the Impact Fund, which has three former Goldman Sachs investors in charge. The boutique is to invest in infrastructure and real estate with a focus on making an impact.
The fund is targeting 7-11 per cent per annum in returns with a distribution yield of six per cent. Fees have not been disclosed. Investments already include aged care, affordable housing, behind-the-metre solar and a social impact bond. Wholesale and institutional investors can invest as of early 2020.
The boutique is backed by Light Warror, set up by Radek Sali of Swisse Vitamins. The investment chief of the boutique is Matthew Tominc, with Alex Debney, Adam Gregory and Andrew King.
First Super watching Orbis amidst ESG concerns
First Super’s board put Orbis Investment Advisory under scrutiny after ESG concerns were raised regarding XPO Logistics. XPO Logistics is a United States-based freight and logistics company, with Orbis being the largest institutional shareholder of XPO, holding about 23 per cent of shares.
First Super’s board is concerned that it is exposed to significant legal, regulatory and reputational risks in North America and Europe after allegations of labour law and occupational health and safety violations at XPO. First Super is now reconsidering its long-standing investment in Orbis.
XPO is underperforming, which First Super says could be arguably attributed to poor governance and labour practices. First Super has AU$143 million invested in Orbis Global Equity Fund.
BetaShares launches first green bond ETF
The first Diversified Bond ETF in Australia has been launched by BetaShares with a significant allocation to green bonds in the Sustainability Leaders Diversified Bond ETF - Currency Hedged (GBND).
The bond will track an index of green bonds issued by both companies and governments, avoiding fossil fuel exposure or any activities understood to be inconsistent with responsible investments. This exclusion list also includes gambling, tobacco, animal cruelty, alcohol, pornography and human rights violations. Any companies that show a lack of board gender diversity are excluded.
The new bond offers the benefits of fixed income, with a responsible bent.
A year of Women in Super
Women in Super (WIS), an advocacy group for women in retirement, has had a big year. Research shows that women retire with about half as much as men, and receive just a third of government tax concessions on super, with men receiving the other two-thirds. WIS lobbies the government on new superannuation policy proposals to close the gender gap in super, with tax concessions and superannuation contribution guarantees while on parental leave.
This year, WIS completed over 26 policy submissions to government, held 56 national events, awarded over 13 scholarships to members, and raised over $1.75 million for the National Breast Cancer Foundation, taking fundraising totals to over $37 million to date.
Rest climate risk trial scheduled
Rest super member Mark McVeigh brought a landmark case against Rest, with a three-day trial date set for 2020. The case relates to climate change risks, with McVeigh claiming that Rest failed to provide him with adequate information about how it addresses climate change-related risks. Expert evidence will be filed by March, with a case management hearing scheduled for April 17.
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ESG Research Updates
RIAA: responsible investments are outperforming peers
The Responsible Investment Association Australasia (RIAA) conducted research into Australian superannuation funds, revealing that funds who engage in responsible investing outperform their peers.
Across one, three and five-year timeframes, responsible investment strategies won out on all fronts. The study, The Responsible Investment Super Study 2019, examined 57 of our largest superannuation funds, comparing the MySuper performance of funds engaging responsible investment strategies to those that were not.
Responsibly invested funds saw returns of:
Over five years, 8.14 per cent compared with 7.7 per cent for non-responsibly invested funds
Three-year returns were 9.06 per cent compared with 8.65 per cent
One-year returns were 7.33 per cent versus 7.31 per cent
Additionally, the number of superannuation funds hiring at least one dedicated responsible investment professional has quadrupled across three years.
In 2018, 48 per cent of funds had a dedicated investment specialist for responsible investing, while just two years ago that was sitting at 12 per cent. Currently, 93 per cent of funds have a dedicated specialist, an indication of just how fast the industry is adapting to the important change. Some funds - Australian Ethical, AustralianSuper, First State Super, Macquarie and Mercer Super Trust - reported they had over five dedicated responsible investment professionals. Most of the big funds have at least two specialists, but fewer than five.
In 2016 34 per cent of super funds had at least one negative screen across the fund, while now that number is up to 61 per cent, with the most common screenings being for tobacco and armaments, followed by fossil fuels.
Other key findings include:
Retail funds offer consumers the widest variety of responsible investment options per fund
There are 88 responsible investment options offered by super funds, with over half offering a specific responsible investment option
