Our environmental, social and governance practices
Investment governance
Our investment governance focuses on managing risk and is driven by our primary investment objective to maximise long-term real returns whilst keeping risk to an acceptable level. We believe that poor management of environmental, social and corporate governance issues can lead to financial risks as well as a decline in the long term value of shareholder investments.
We manage risks associated with poor environmental, social and governance (ESG) practices in two primary ways:
1.Voting at shareholder meetings
Our overall approach is to act as a responsible corporate citizen and embrace our proxy voting responsibilities. Where possible we vote on all matters bought to shareholders by the companies in which we invest.
2. Research and engagement through a Governance Advisory Service (GAS), now known as Regnan.
Our key relationships
Through a number of key relationships, we actively participate in the development and implementation of best practice ESG standards around the world:
- Our CEO participated in the development of The United Nations Principles for Responsible Investment (PRI) and ARIA became a signatory to the principles in December 2006. We are committed to ensuring that all investment activities we undertake are consistent with these principles.
You can read about how we (and other trustees around the world) are employing strategies consistent with the UN Principles in Responsible investment in focus: How leading public pension funds are meeting the challenge.
Please note that the interviews upon which this paper was based were conducted in the second half 2006. Since that time we have mandated our international equities managers to vote many of those holdings and the arrangement with Institutional Shareholder Services (ISS) noted on page 18 has ceased.
- We are a member of the Investor Group on Climate Change (IGCC) a group of Australian and NZ investors who recognise that climate change is impacting on investment returns. The IGCC has partnered with the CDP to bring the top 100 Australian and top 50 New Zealand companies into the Carbon Disclosure Project (see more details below).
- We are a signatory to the Carbon Disclosure Project, (CDP) – a project undertaken by 225 institutional investors world wide to collaborate on the business implications of climate change. Signatories to the CDP and IGCC believe that many issues associated with climate change have the potential to affect shareholder value
- We are a member of the International Corporate Governance Network, an investor-led network that actively promotes good corporate governance internationally.
- We are a foundation member of the Australian Council of Superannuation Investors. ACSI is a not for profit organisation formed in April 2001 to provide independent research and education services to superannuation funds, in relation to the corporate governance practices of companies in which they invest.
- Our predecessors – the PSS and CSS Boards – established a joint venture with BT Governance Advisory Service (GAS) (formerly Westpac Investment Management). GAS was established as an investment risk management overlay service encouraging Australian companies to improve governance practices for the benefit of all institutional investors and the market overall. GAS has identified portfolio exposure to corporate, social and environmental risk through specialist research and constructive dialogue with companies in the S&P/ASX200 index.
In 2003 the United Nations awarded ARIA and BT GAS with the first ever Royal Award for responsible and sustainable investment.
The Governance Advisory Service has now evolved and in 2007 BT GAS has re-emerged as a new company – Regnan – founded by ARIA, BT Financial Group, Vanguard Investments Australia Limited, VicSuper, Victorian Funds Management Corporation, HESTA Super Fund, Local Government Superannuation Scheme and Hermes UK.
You can read more about our approach to some specific ESG risks in the following historical position papers:
- Audit governance
- Executive remuneration
- Workplace health and safety
- Energy use
- Environmental disclosure
- Director and executive share trading
As new ESG issues are researched and position papers developed by Regnan, they will be made available here.
