What is responsible ownership?
At Aware Super, Responsible Ownership means we integrate environmental, social and governance (ESG) considerations into our investment processes. We do this before we invest and continue during our ownership.
This approach helps us better manage risk and generate strong long-term returns for our members.
Why is it important?
We believe it is important to take ESG considerations into account, because a company’s approach to managing ESG risks and opportunities can have a meaningful impact on its long-term viability and success.
Over the long term, we think companies and assets with sound ESG management are more likely to increase in value. By contrast, companies that poorly manage ESG risks have the potential to destroy shareholder value and may also harm the broader community and environment.
Managing climate risk
As a responsible owner we invest for strong retirement outcomes for our members. We see climate change as one of the most significant long-term risks to our portfolio and, therefore, our members’ retirement outcomes.
Responsible ownership outside of super
Our Responsible Ownership approach and Climate Transition Plan 2023 apply to the Aware Super Investment Funds.
What we do
Our Responsible Ownership approach has five pillars:
- ESG integration
- Advocacy
- Stewardship
- Exclusions
- Impact
Environmental, social and governance integration
We integrate a consideration of ESG factors into our investment processes.
Here are some examples of key ESG factors we consider:
Environmental factors
- Climate change mitigation and adaptation
- Waste, pollution and contamination
- Water (e.g. availability and supply)
- Biodiversity and sustainable land use
Social factors
- Workplace health and safety
- Diversity and inclusion
- Adherence to international conventions
- Modern slavery/forced labour (both in company operations and supply chains)
- The effectiveness of a company in maintaining its ‘licence to operate’ and managing labour relations
- Product responsibility
Governance factors
- Board composition (diversity, expertise & independence)
- Executive remuneration
- Transparency & reporting
- Conduct & culture
- Technology & innovation
- Data privacy & cyber security
Our approach to ESG integration is not limited to a set-and-forget analysis of an investment, but rather is a holistic approach to assessing ESG risks and opportunities over an investment’s life. We do this by considering ESG factors in our asset and manager due diligence and selection, when we first invest and through ongoing monitoring.
When selecting investment managers, it’s important to determine how well they integrate ESG issues into their portfolios because this supports better long-term returns for our members. We focus on managers’ policies, alignment, transparency, process, and active ownership approach.
We have been recognised by the UN-backed Principles of Responsible Investment as leaders for our approach to manager selection, appointment and monitoring.
Read more about how we assess investment managers in our Responsible Investment Report.
Advocacy and Collaboration
We believe we’re more effective and have a greater impact when we work together with industry associations and like-minded investors.
We have contributed to policy, advocacy, market development and education.
We have also encouraged change by making submissions to reforms (either directly or through our advocacy partners).
Stewardship: Engagement and Voting
Stewardship means actively monitoring and engaging with the companies we invest in and the fund managers we partner with.
We aim to positively influence a company’s policies, behaviours and practices in areas such as:
- climate change
- worker safety
- diversity
- company conduct and culture, and
- cultural heritage management.
As a large investor, we use our voting rights to support actions we believe will be beneficial and enhance value for our members.
Aware Super is a signatory to the Australian Asset Owner Stewardship Code. As a signatory, we have developed a Stewardship Statement which shows how we apply these principles.
For information on our Stewardship activity read our
Engagement through our partners:
- Aware Super / Federated Hermes 2023 Annual Review report
- Aware Super / Federated Hermes 2022 Annual Review report
- Aware Super / Federated Hermes 2021 Annual Review report
- Read about our engagement through ACSI in ACSI's Annual Reports
Exclusions
Our preference is to use engagement and proxy voting to positively influence the behaviour and ESG practices of the companies we invest in.
However, in some circumstances we do exclude a particular sector or company from our investment portfolios.
As a result, we have implemented fund-wide restrictions and exclusions, so we don’t invest in:
- Tobacco
- In 2012 we were one of the first super funds to divest from tobacco, setting a precedent in the industry.
- We have no direct investments in tobacco manufacturers and/or producers (including subsidiaries, joint ventures and affiliates) which derive 5% or more of their revenue from the manufacture and/or production of tobacco products.
- Thermal coal
- We have no direct investments in companies generating 10% or more of their revenues directly from mining thermal or energy coal.
- Controversial weapons
- We have no direct investments in companies that derive any revenue from the manufacture and/or production of controversial weapons including chemical weapons, cluster munitions, land mines and depleted uranium1. This exclusion applies to companies manufacturing whole systems only (i.e. these weapons in their entirety) and does not apply to companies assembling these types of weapons where one or more components are manufactured by another company. In addition, it does not apply to companies involved in the deployment of these types of weapons such as aviation companies.
1 The fund-wide controversial weapons exclusion does not apply to companies involved in the development, production or maintenance of nuclear weapons. Note that these companies are excluded from the Socially Conscious investment options. See Socially Conscious investment options for more information.
Note that the above exclusions don’t apply to indirect exposure to these types of companies. This includes derivatives, exchange traded products such as ETFs, and investment vehicles governed by an uncontrolled entity including, but not limited to, unit trusts and fund of funds via pooled vehicles. In addition, the implementation of these exclusions may be affected by the accessibility and accuracy of data, or an error by an external service provider. This may result in inadvertent holdings, typically over the short term, in investments we are seeking to exclude.
Measuring our positive impact
We believe one of the real opportunities for us as a responsible owner is developing a way to measure and monitor the impacts of our investments. One way we have responded to this opportunity is by creating our Positive Impact Measurement Framework and Sustainable Development Investing Assessment methodology.
Measuring this positive impact is critical to ensuring our investments are effective at instigating and maintaining change, compared to what would’ve happened without financing.
You can read more in our Responsible Investment Report.
Awards and recognition highlights**
- RIAA Responsible Investment Leader 2023
- 2023 Best Fund: Responsible Investment by Chant West*
- Rainmaker ESG Leader Rating 2023
- Ranked one of the top 10 funds in the 2023 GSR Leaderboard
- Ranked 7th (out of 59 global Pension Funds) in the Financial System Benchmark by the World Benchmarking Alliance
- One of only 30 global organisations invited to join the UN Global Investors for Sustainable Development Alliance
- Tobacco-free^ since 2012