Sustainability & ESG integration

Sustainability is an integral part of our investment policy. We aim to invest in a way that contributes to a sustainable future, maximises returns and creates greater financial value for our members.

At VicSuper, integrating sustainability involves considering environmental, social and governance (ESG) factors in the investment decision-making process.

The objective is to provide long-term profitability and increase shareholder value.

The term ‘ESG’ is used to describe a set of considerations or factors to be taken into account as part of the investment decision or process.

  • E – Environmental factors include greenhouse gas emissions, natural resource consumption, waste management and associated opportunities to reduce environmental impact or even restore existing degradation.
  • S Social factors encompass a wide range of internal and external policies and processes focused on individuals and societies. For example, internal occupational health and safety or employee welfare, as well as product safety controls for end consumers.
  • Corporate governance factors include executive and director remuneration, conflicts of interest, transparency, regulatory compliance and other controls.

Sustainable investing is not the same as ethical investing.

Ethical investing involves negative screening where stocks or sectors are excluded based on a core set of beliefs.

VicSuper does not apply ethical screening to investment considerations. However, the Trustee has resolved to divest companies that produce tobacco products from the Fund's investment portfolio. Where VicSuper invests in trust vehicles managed by third parties, the divestment is applied on a best endeavours basis.

Integrating ESG into investments

ESG considerations allow us to highlight both opportunities and threats to the sustainability of an investment.

As VicSuper’s investments are managed by external investment managers, ESG integration involves the careful selection of investment managers, including considerations into their sustainability policies and ESG credentials.

VicSuper integrates sustainability into the investment approach at both the local and global level.

Principles for Responsible Investment (PRI)

VicSuper has been a long time signatory to the PRI.

The PRI initiative is an international network of investors working together to put six principles of responsible investment into practice.

In implementing the principles, signatories contribute to the development of a more sustainable global financial system.

Through our participation in the PRI we also have the opportunity to collaborate and share knowledge with other institutional investors on major investment-related risks and opportunities such as climate change, corporate governance and business ethics.

The most significant way that we incorporate the principles is by exercising our shareholder rights through company engagement and proxy voting.

The six principles are:

PRI 1: Incorporate ESG issues into investment analysis and decision making processes.

PRI 2: Be active owners and incorporate ESG issues into ownership policies and practices.

PRI 3: Seek appropriate disclosure on ESG issues by the entities in which we invest.

PRI 4: Promote acceptance and implementation of the Principles within the investment industry.

PRI 5: Work together to enhance the effectiveness of implementing the Principles.

PRI 6: Report on activities and progress towards implementing the Principles.

Influencing others

We have an interest in seeing the companies in which we invest develop sustainable strategies that allow them to maximise their potential to generate long-term cash flow and shareholder value.

Because of our significant holdings, we can help influence the governance of assets in which we invest and bring about change through company engagement and proxy voting.

Global Investor Survey

VicSuper participated in the Global Investor Survey, which formed part of the Global Investor Survey on Climate Change 2011 Annual Report. This is the second global survey of the investment practices of asset owners and asset managers relating to climate risk, coordinated by the three investor networks on climate change:

  1. Institutional Investors Group Climate Change (IIGCC) based in Europe
  2. Institutional Network on Climate Risk (INCR) based in North America
  3. Australia/ New Zealand Investor Group on Climate Change (IGCC).

The report provides an overview of the leading investment practices around the world on climate change and analyses the drivers for those practices.

Download the 2011 report  Download VicSuper's 2011 response