Sometimes known as ethical, green or sustainable investing, socially responsible investing provides the opportunity to build an environmentally and socially sustainable future – while aiming to provide steady investment returns in the process.
AustralianSuper offers one PreMixed and two DIY Mix Investment Options that are based wholly, or partly, on SRI principles:
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 screened for their ethical, green or sustainable policies and practices.
The Australian Sustainable Shares Investment Option and International Sustainable Shares Investment Option are fully screened.
Labour Standards and Environmental, Social or Ethical considerations
The Trustee does not take into account labour standards or environmental, social or ethical considerations (SRI considerations) when selecting, retaining or disposing of investments except to the extent that it appoints investment managers in respect of its Sustainable Balanced, Australian Sustainable Shares and International Sustainable Shares options with a mandate to consider such factors as part of meeting the investment objectives of these options.
The Trustee does not itself apply SRI considerations to the underlying investments of the Fund.
What is SRI?
SRI stands for Socially Responsible Investing. Many people feel better knowing that their super is invested according to the values that may be important to them. At AustralianSuper, you have the option of accessing investments in companies selected by our investment managers that demonstrate a high level of responsibility on issues that include labour standards and environmental, social and ethical considerations.
The AustralianSuper approach
AustralianSuper offers three sustainable investment options. AustralianSuper’s role in relation to these options is to appoint investment managers that will meet the investment objectives of the investment options (financial objectives). This includes a mandate to consider issues such as labour standards, and environmental, social or ethical objectives in accordance with approaches determined by the investment managers. It can change its appointed investment managers at any time without prior notification to you.
Within each of AustralianSuper’s sustainable investment options, its appointed investment managers undertake socially responsible investing in accordance with criteria and methodologies formulated by the investment managers.
Specifically, the investment managers employed by AustralianSuper utilise internal screening processes to identify companies that rate poorly on labour standards, and environmental, social or ethical factors which result in those companies being excluded from the portfolio of share investments utilised in the investment options.
These criteria and methodologies are those of the investment managers (not the Trustee) but they are described in this section to provide members with a summary of the approaches taken by the investment managers.
AustralianSuper will vote its often large shareholding in companies on items that concern these issues at company general meetings where financial objectives may be impacted. For this purpose, it has not formulated a predetermined policy about which labour standards and environmental social or ethical considerations it will apply when making investment related decisions or how it will monitor or respond to these considerations. It will deal with these considerations, as it considers appropriate from time to time having regard to its duties as a trustee.
More about each SRI investment option
The SRI options are as follows:
- Sustainable Balanced
- Australian Sustainable Shares
- International Sustainable Shares
Sustainable Balanced
The Sustainable Balanced option is structured similarly to the AustralianSuper Balanced option (the default) in terms of asset allocation. The difference is that the Australian Equities and International Equities sectors are invested by managers with a specific Socially Responsible investment mandate. These managers consider labour standards, and environmental, social or ethical considerations when investing that are in line with the option’s allocation to Australian and International Shares (currently approximately 60% however this may vary from time to time due to movements in underlying asset values or re-allocations considered appropriate to achieve the option/s objectives). The remaining investments, including Property, Infrastructure, Bonds and Cash, are invested via the same managers and allocations as the AustralianSuper Balanced Investment Option.
Australian Sustainable Shares
The Australian Sustainable Shares option is invested by a Manager that considers labour standards, and environmental, social and ethical considerations in constructing the portfolio of investments in Australian shares.
Generally the first step of the screening process utilised by the Manager is to select companies that have met the investment manager’s economic tests.
From this ‘investible’ universe, companies are generally reviewed on ‘ethical’ criteria and are excluded if they have a material involvement (i.e. at least 5% of revenue) in uranium, weapons, alcohol, tobacco or gaming. Companies that pass the ‘ethical’ screen are then screened on other SRI criteria. This step generally involves both positive and negative screens.
This step generally excludes companies that rate poorly on criteria such as environment, human rights (including labour standards), genetically modified organisms (GMO) and animal rights (negative screens) while favouring companies that are rated highly on environmental and social criteria such as animal rights, environment, human rights, community awareness, corporate governance, corporate ethics, donations and compliance with recognised standards (positive screens). Companies that do not pass a positive screen are assessed in more detail to determine whether there are any areas of potential concern. When the investment manager becomes aware that a company no longer passes its economic, ethical or social screens, the investment will be sold as soon as practical in an orderly price sensitive manner.
International Sustainable Shares
The International Sustainable Shares option is invested with a Manager that considers labour standards, and environmental, social and ethical considerations in constructing the portfolio of investments in international shares.
Generally the methodology used by the Manager analyses a company’s relationship with its various ‘stakeholders’ (shareholders, society, the environment, suppliers, customers and employees) in order to identify risks and opportunities that influence long term corporate profitability.
In order to successfully analyse these relationships, the Manager may obtain data from a variety of independent sources including specialised service providers. Generally, the aim is to optimise the risk-return ratio by analysing risks and opportunities linked to social, environmental, governance and ethical issues that are often out of the scope of traditional financial analysis but which can have a significant impact on long-term performance.
Usually the analysis follows a strict process that is divided into three distinct steps. The first is to complete studies within each ‘sector’ to identify the risks and opportunities attached to each stakeholder domain that are of varying business relevance. Sectors include things such as ‘energy’ or ‘textiles’. Secondly, after the sector risks and opportunities are identified, how the companies within each sector manage these identified risks and opportunities are assessed. Thirdly the Sustainable universe is defined by only selecting from companies that fall within the top 35% of each sector. The portfolio is then constructed to maximise the expected return using stocks only within the Sustainable universe. This process is constantly reviewed to ensure that the criteria for the stocks contained within the portfolio continue to be met.