Good Governance Series

Superannuation Funds Upgrade Governance with ESG

Australia’s Superannuation funds are upgrading their corporate governance with increasing allocations of funds to investments based on Environmental and Social Corporate Governance (ESG).

Funds have already been spent on the company’s investments in good practice on paper, on climate change issues for mining companies, and this year, they are beginning to work in the area of ​​equitable human capital management, according to a report in Pensions & Investments magazine.

Matthew Clifford, Head of Energy and Sustainability Services, Asia-Pacific at JLL, says Australia has been at the forefront on ESG for seven or eight years. “Despite its small size, Australia has punched above its weight in terms of sustainability,” he says. “Super funds have been among the main drivers.”

Funds pressure companies for ethics and sustainable actions

National Banks, Westpac, and the Australia and New Zealand Banking Group are pleased to announce their support for good governance . Investors in NAB registered the highest ever vote against a report, with more than 88 per cent.

The negative statement was triggered by a report from the Royal Commission.

Australian Council of Superannuation Investors CEO Louise Davidson said : “The unprecedented size of the vote against the NAB compensation report reflects the fact that investors take issue with the payment of executive bonuses in a year when the Royal Commission has highlighted systemic breaches of the law and mistreatment of customers within the banks. “

Super Funds win Victory on Climate Change

Super funds won another corporate governance victory in February When, as part of engagement through the Climate Action 100+, Australian mining giant Glencore Agreed to reduce coal production and to accept the conditions imposed by the Paris Agreement on global climate change. The move wants to make mean capping coal production, and shifting to capital investment to grow production of commodities to the energy and mobility transition, “as the press release stated.

And pressure from Super Funds and environmental groups combined at the end of single-use plastic bags at the country’s two largest supermarket chains, Coles Group, and the Woolworths Group. The chains were relocated to make the change, as shoppers preferred to use the bags. But, good ESG governance won out, and now shoppers at both chains must pay a small fee  for reusable plastic bags.

Governance for Workers’ Health and Human Rights

ASCI members’ Concern for fair treatment for workers and consumers is behind the drawing on a strategy to protect them. The Super funds seeks to develop specific strategies for their large portfolios of real assets.

Nicole Bradford, head of responsible investment with the Cbus Super Fund, says the human rights, workers’, and diversity will be areas of focus focus in 2019. “It is part of the mix of being aware of and taking responsibility for – their operations and supply chains, “she says. “But the applicable legislation only addresses issues such as forced labor and child labor. Through our active ownership programs, we look at companies and invest in the lens of the sustainability of their labor practices, including occupational health and safety. “

Australian Superannuation Funds Must Put Into ESG Governance

ESG governance, the Sydney-based Responsible Investment Association of AustralAsia insists in a report.

“If the superannuation industry is at the forefront of its potential for productive, prosperous, and healthy future for Australians, it will need ESG considerations alongside traditional financial factors, avoids contributing to damaging activities, and industries and communities. R & D and investment only in companies and assets that genuinely deliver long-term, risk adjusted, performance outcomes. So they need to be courageous and skillful stewards, learning when and how to engage with companies and who they are invested in. “

Unfortunately, few Australian firms have signed up for the Principles for Responsible Investment, the United Nations-supported international network of investors. Here, Australia lags well behind the US and Europe.

The Association also notes that the portfolio decarbonization is on the radar, however few Australian Super funds have. Decarbonisation targets, “the report notes.

ESS Governance, says Ian Silk, president of the ACSI, and head of the AustralianSuper fund.

“ESG can no longer be considered a ‘nice to have’ … that’s why ACSI and our members plan to continue and grow our focus on ESG integration.”

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