The Sustainable Balanced Investment Option includes investments in shares, property, fixed interest and cash. However, at present, only the Australian and international share components of this option are invested according to socially responsible principles.
What is sustainable investing?
Sustainable investing, also known as socially responsible investing, is an investment strategy which aims to maximise both the investment return and environmental and social benefits and corporate best practice. In general, sustainable investing favours corporate practices that promote environmental and consumer protection, human rights, and diversity.
How does a sustainable investment option work?
A sustainable investment option invests in companies that are leaders in terms of their economic, environmental and social sustainability. A sustainable share investment is one which values companies which can demonstrate that they:
- Have a strategic focus on the sustainability of their business which includes measuring impacts and setting targets for improvement
- Accept responsibility for their environmental, social and economic impacts of their products and services
- Are engaged and work constructively with communities, governments and non-government organisations to achieve sustainable outcomes
- Are prepared to lead their industry in the development of sustainable practices
- Are transparent when reporting on their performance.
A best of sector approach
AustralianSuper’s sustainable investment options use a ‘best-of-sector’ approach in selecting investments, which is implemented by our relevant investment managers.
Sustainable investment strategies increasingly adopt this approach, which seeks out sector-leading performance against environmental, social, governance and sustainability criteria. It aims to achieve diversity through investing across all industry sectors and to select best performing companies in each sector.
This means that companies are ranked within each industry sector, and the top 35% of each sector are selected (as ‘best-of-sector’). The portfolio is then constructed to maximise the expected return using stocks only within this best-of-sector group.
The process benchmarks economic, social, governance and sustainability performance that is appropriate to each sector and ranks the companies’ performances against these benchmarks.
So, instead of excluding an entire industry, companies that can demonstrate superior performance against the various benchmarks within each sector are included. This acts as a positive incentive for companies to improve their performance against the benchmark.