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Responsible investment is where we take steps to ensure our members’ retirement savings are invested in a way that protects them against environmental, social and governance (ESG) risks.
Recent research has demonstrated that listed companies classed as ESG leaders by MSCI (a leading company ratings firm) financially outperform other companies.1 This was supported by a previous study in 2017 that concluded that companies with the highest MSCI ratings outperformed the lowest rated firms by as much as 40%.2
Other reviews of multiple studies demonstrate the overall positive impact of ESG-focused investing. A minority of studies did not support this conclusion.3
Examples include carbon emissions, water usage, fair labour practices, global human rights, board structure and diversity, and standards for running a company.
By incorporating ESG risks as part of First Super’s investment strategy, we consider the overall impact of an investment.
This means looking beyond just the possible investment return and asking questions like:
At First Super, we are focused on delivering for our members first, and we also believe that as a steward of your super, the way we invest your money should put people first. By this we mean supporting the good treatment of workers, strong health and safety standards and supply chain management.
Our approach is grounded in our roots as an industry super fund for the paper, pulp and timber industries, with ties to trade unions and employer associations representing the best interests of workers.
As a long-term investor, we acknowledge that climate change related risks may affect the long-term performance of our investments and we are taking steps towards improving our understanding of climate-related financial risks.
We engage consistently with our external investment managers and investee companies to improve ESG outcomes. We take care to work with investment managers who have the same outlook as us on responsible investing.
Through our private equity program, we apply an ESG evaluation framework developed through our private equity mandate manager, Stafford Partners. For each investment opportunity, the private equity manager assesses the following areas:
An independent legal advisor assesses the responses. If ESG issues are identified and the independent advisor recommends an action plan to resolve them, then this and the timeframe must be agreed by all parties before we invest. Depending on the ESG issue, we may either require a company to resolve the issue prior to investing, or after the transaction occurs with a monitoring program and timeframe put in place.
In some limited circumstances we may decide excluding certain investments is the most appropriate approach. We will generally not consider investment opportunities in sectors within the economy identified as having a high level of ESG risk. Examples of these sectors are primary production and labour hire companies, because of the modern slavery, employment law compliance and occupational health and safety risks.
Individual investment opportunities we have declined include integrated agricultural producers and manufacturers, food manufacturers and distributors, gig employment platforms and hairdressing industry suppliers. The ESG risks in these opportunities were modern slavery and supply chain, occupational health and safety, employment law compliance, social licence and reputational risk.
First Super invests in listed shares through trusts and individually managed accounts (“IMAs”). Where First Super invests via IMAs it provides direction to the Investment Manager on how it wishes the voting rights to be exercised. Our voting on shareholder resolutions is informed by our investment philosophy and we take advice from the Australian Council of Superannuation Investors (ACSI) into account.
For more information, read our ESG and Proxy Voting Policy.
With your First Super membership, you can get advice about your investment options at no extra cost. It’s all part of our service to you. Call us today on 1300 360 988 or email us.
1 Kroll ESG and Global Investor Returns Study, September 2023.
2 ACSI Financial Materiality and ESG, November 2020.
3 ACSI Financial Materiality and ESG, November 2020.
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