Investing for a sustainable future

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This month our Chief Investment Officer, Andrew Howard, looks at responsible investment—what it is, how we think about it, and most importantly, how we use it to help protect the long-term value of our members’ retirement savings.

Listen to the podcast

This month our Chief Investment Officer, Andrew Howard, looks at responsible investment—what it is, how we think about it, and most importantly, how we use it to help protect the long-term value of our members’ retirement savings.

How do we think about responsible investment?

As a profit to member super fund, we do everything we can to help maximise our members’ retirement savings and income and make a positive contribution to the world they’ll retire in. An important part of that approach is to invest responsibly and for the long term. How we think about responsible investment is a very important part of how we invest our members’ money—the approach we take and the assets we invest in. You could say that responsible investing is in our DNA.

So just what is responsible investment? It’s a broad concept and one worth considering. A good interpretation is offered by the Principles of Responsible Investment*

“Responsible investment is an approach to investing that aims to incorporate environmental, social and governance factors into investment decisions, to better manage risk and generate sustainable, long-term returns*.”

PRI is the world’s leading advocate for responsible investment. It is an independent body—supported by (but not part of) the United Nations—which encourages investors to use responsible investment to enhance returns and better manage risks. In 2018 VicSuper achieved an A+ rating for its Responsible Investment Strategy and Governance from PRI. This year we also recorded significant improvements for implementation of responsible investment related to Listed Equities, Fixed Income - SSA and Active Ownership, resulting in A+ or A ratings across the board, above the median score**.

We stand by PRI’s interpretation, but we can go further. As well as our responsibility to improve investment returns for our members, we seek to make a positive contribution to the world they live in and will retire in. As responsible investors, that means anticipating and managing the risks that arise. This requires taking a long-term investment view and thinking strategically about environmental, social and governance (ESG) issues, how ESG risks are integrated into investment decisions, how to achieve sustainable outcomes, and providing members with a clear choice of investment options.

How do we invest responsibly?

Our responsible investment activities cover not only shares, but also bonds, real assets like property, infrastructure or timber, and alternative assets like private equity. Our RI approach has four main pillars: 1) environmental, social and governance integration; 2) active ownership; 3) investing in sustainable outcomes; and 4) member choice. 
“It’s important that our members have the choice to align the investment of their super savings to their social and environmental values”
  1. Integrating environmental, social and governance (ESG) factors into our investment processes means having external managers with the ability to identify ESG factors and how they impact on investment returns. By doing this, we’re in a better positon to help protect the long-term value of our members’ retirement savings. We’re careful to select external fund managers with a strong ethos and approach to ESG integration, then monitor their progress through regular reporting and review.
  2. Active ownership involves influencing the activity or behaviour of the companies we invest in. We engage with these companies and vote our eligible shares. We believe that engagement can positively influence company behaviour and performance and help achieve long-term shareholder value.
  3. It’s important that our members have the choice to align the investment of their super savings to their social and environmental values. Our Socially Conscious investment option includes clear social and environmental objectives. It aims to help members take action on climate change, minimise social harm, and protect human rights, labour rights and the environment. Go to socially conscious for more details.
  4. If our members’ retirement savings are to prosper and grow, the economy, society and the environment need to be healthy and productive. It’s why we invest in sustainable outcomes. At 30 June 2018 we had more than $1 billion invested in assets that have environmental and social benefits, some of which are outlined below.

International equity customised carbon strategyCarbon strategy

Ross River Solar Farm – Queensland, AustraliaRoss River solar farm

Amount invested: $1 billion
A listed equity investment developed specifically for VicSuper that aims to deliver a 70% reduction in greenhouse gas emissions and 50% reduction in fossil fuel reserves against its benchmark.

Amount invested: $25 million
A new 148 megawatt solar farm located 20km south west of Townsville. Using over 400,000 solar panels, it will power at least 54,000 houses and save 230,000 tonnes of greenhouse gas emissions!

 

Infrastructure – Portugal, Denmark and GermanyFinerge wind farm

Finerge is a market leader in the production of wind energy in Portugal. It has 499 wind turbines producing around 1.77 terrawatts per year and avoiding the emission of 808,982 tons of carbon dioxide.

Real Estate – US and EuropeDevonshire square

Devonshire Square, London: a unique collection of multi-let office buildings over five acres in the financial heart of London.

Amount invested: $24 million
Investments in Finerge and Scandlines through First State Investments European Diversified Infrastructure Fund II. Finerge is the second largest operator of onshore wind energy production in Portugal with 27 wind farms, generating 4% of Portugal’s electricity demand. Scandlines operates ferry routes connecting Denmark and Germany using a fleet of customised hybrid (electric-diesel) vessels.
Amount invested: $400 million
Investments in Invesco Core Real Estate (US), the market leader in real estate sustainability (ranked 1st of 141 funds through the Global Real Estate Sustainability Benchmark); and TH Real Estate European Cities Fund, which has a target of 30% energy reduction by 2030. Both are market leaders in ESG integration.

Collaboration and recognition

Climate Action 100+
As well as investing responsibly in low carbon listed equities and renewable energy, we actively collaborate with more than 280 investors to engage the world’s largest greenhouse gas-emitting companies to act on climate change. We do this through the Climate Action 100+ initiative***. This is a five-year initiative led by investors to engage greenhouse gas emitters and other companies across the global economy with a view to drive clean energy transition and help achieve the goals of the Paris Agreement.

Australian Asset Owner Stewardship Code
VicSuper was one of the first signatories to the Australian Asset Owner Stewardship Code, developed by the Australian Council of Superannuation Investors (ACSI). Stewardship activities include voting, engagement with investee companies and policy advocacy.
— Discover more about how we invest responsibly
— Discover more about the benefits you get as a VicSuper member

Important information

This advice has been prepared without taking into account your objectives, financial situation or needs. You should therefore consider the appropriateness of the advice in light of your individual circumstances before acting on the advice. You should also obtain and consider a copy of the relevant Product Disclosure Statement available at on our website before making any decisions.
VicSuper Pty Ltd ABN 69 087 619 412, AFSL 237333, Trustee of Victorian Superannuation Fund ABN 85 977 964 496.
*source: What-is-responsible-investment?
**VicSuper 2018 PRI Assessment Report – page 5
***for more information see Climate Action100+

— Discover more about how we invest responsibly
— Discover more about the benefits you get as a VicSuper member

Important information

This advice has been prepared without taking into account your objectives, financial situation or needs. You should therefore consider the appropriateness of the advice in light of your individual circumstances before acting on the advice. You should also obtain and consider a copy of the relevant Product Disclosure Statement available at on our website before making any decisions.
VicSuper Pty Ltd ABN 69 087 619 412, AFSL 237333, Trustee of Victorian Superannuation Fund ABN 85 977 964 496.
*source: What-is-responsible-investment?
**VicSuper 2018 PRI Assessment Report – page 5
***for more information see Climate Action100+