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Local Government Superannuation Scheme

PRI reporting framework 2017

You are in Direct - Listed Equity Active Ownership » Engagement

Engagement

Overview

LEA 01. Description of approach to engagement

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate whether your organisation has a formal engagement policy.

01.2. Indicate what your engagement policy covers:

01.3. Attach or provide a URL to your engagement policy. [Optional]

01.4. Provide a brief overview of your organization’s approach to engagement

Under our SRI Policy we are committed to:

1. Incorporte ESG issues into investment analysis and decision making processes

2. Be active owners and will vote on shareholder issues and participate in collective engagement

3. Seek disclosure on ESG issues by our investment managers

4. Promote the acceptance and implementation of the UN PRI Principles in the investment industry

5. Collaborate with other organisations to enhance effectiveness and 

6. Report on our sustainability activities.

01.5. Additional information [optional]


LEA 02. Reasoning for interaction on ESG issues

02.1. Indicate the method of engagement, giving reasons for the interaction.

Type of engagement

Reason for interaction

Individual/Internal staff engagements

Collaborative engagements

          Raise awareness of ESG and sustainability as investment risk and opportunities
        

Service provider engagements

02.2. Additional information. [Optional]


Process

Process for engagements run internally

LEA 03. Process for identifying and prioritising engagement activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.

03.1. Indicate whether your organisation has a formal process for identifying and prioritising engagement activities carried out by internal staff.

03.2. Describe the criteria used to identify and prioritise engagement activities carried out by internal staff.

03.3. Additional information. [Optional]


LEA 04. Objectives for engagement activities (Not Completed)


Process for engagements conducted via collaborations

LEA 05. Process for identifying and prioritising collaborative engagement

New selection options have been added to this indicator. Please review your prefilled responses carefully.

05.1. Indicate whether your organisation has a formal process for identifying and prioritising collaborative engagements

05.2. Describe the criteria used to identify and prioritise collaborative engagements

05.3. Additional information [Optional]


LEA 06. Objectives for engagement activities (Not Completed)


Process for engagements conducted with/on your behalf by service providers

LEA 07. Role in engagement process

New selection options have been added to this indicator. Please review your prefilled responses carefully.

07.1. Indicate if you play a role in the engagement process that your service provider conducts on your behalf.

07.2. Indicate the role(s) you play in engagements that your service provider conducts on your behalf.

07.3. Additional information. [Optional]

As an ACSI member, we identify issues for engagement on an annual basis together with ACSI management as part of the ACSI member council. Monitoring and review are done semi-annually via progress reports and presentations. While members do not “specify” the particular objectives for the engagement or companies to be engaged with, we do approve ACSI’s choices. We also attend a number of engagements each year alongside ACSI staff.


LEA 08. Monitor / discuss service provider information

08.1. Indicate whether you monitor and/or discuss the following information provided to you by your service provider

Please select all that apply

08.2. Additional information. [Optional]

ACSI annually creates a list of engagement priority companies with specifically defined concerns and objectives for each company. Objectives are meaningful changes in company behaviour. ACSI also sets objectives for the proportion of all priority companies where objectives are met (for example, ACSI may aim for over 50% of all priority companies’ objectives to be met).

Monitoring and evaluation is done through semi-annual progress reports, itemized company by company and in aggregate, which are delivered to member funds.

Inbound engagements with companies that are not on the priority list also involve specific objectives, though typically less material. Monitoring of these is done through annual evaluation by ACSI’s Member Council, and a range of internal reports. The results of these engagement meetings are also included in ACSI’s proxy voting reports and surveys involving all companies in ACSI’s universe (called “longitudinal” research projects).


General processes for all three groups of engagers

LEA 09. Share insights from engagements with internal/external managers

09.1. Indicate if insights gained from your engagements are shared with your internal or external investment managers.

Type of engagement

Insights shared

Individual/Internal staff engagements

Collaborative engagements

Service provider engagements

09.2. Additional information. [Optional]

LGS employs external fund managers. We meet these managers on a regular basis and ESG issues are included on the meeting agenda. This will include discussion of LGS’ direct engagements with companies and there may be discussion on the work of ACSI or other industry collaborative engagements.


LEA 10. Tracking number of engagements

10.1. Indicate if you track the number of engagements your organisation participates in.

Type of engagement
Tracking engagements

Individual / Internal staff engagements

Collaborative engagements

Service provider engagements

10.2. Additional information. [OPTIONAL]


Outputs and outcomes

LEA 11. Number of companies engaged with, intensity of engagement and effort

11.1. Indicate the amount of your listed equities portfolio with which your organisation engaged during the reporting year.

Number of companies engaged

(avoid double counting, see explanatory notes)

Proportion (to the nearest 5%)
Specify the basis on which this percentage is calculated

Individual / Internal staff engagements

1 Number of companies engaged
0 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

Collaborative engagements

17
0 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

Service provider engagements

135
5 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

11.2. Indicate the proportion of engagements that involved multiple, substantive and detailed discussions or interactions with a company during the reporting year relating to ESG issue.

Type of engagement

% Comprehensive engagements

 

 

Individual / Internal staff engagements

 

 

Collaborative engagements

 

 

Service provider engagements

11.3. Indicate the percentage of your collaborative engagements for which you were a leading organisation during the reporting year.

Type of engagement

% Leading role

 

 

Collaborative engagements

11.4. Indicate the percentage of your service provider engagements that you were highly involved in during the reporting year.

Type of engagement

% High involvement

 

 

Service provider engagements

11.5. Additional information. [Optional]


LEA 12. Engagement methods

12.1. Indicate which of the following your engagement involved.

12.2. Additional information. [Optional]


LEA 13. Engagements on E, S and/or G issues (Not Applicable)


LEA 14. Companies changing practices / behaviour following engagement

14.1. Indicate whether you track the number of cases during the reporting year where a company changed its practices, or made a formal commitment to do so, following your organisation’s and/or your service provider's engagement activities.

14.2. Indicate the number of companies that changed or committed to change in the reporting year following your organisation’s and/or your service provider's engagement activities.

Number of company changes or commitments to change

Individual / Internal staff engagements

1

Collaborative engagements

5

Service provider engagements

52

14.3. Additional information [Optional].

Service Provider Engagements: 52 representing

Board Gender Diversity=19

Corporate Governance= 9

Labour Human Rights=5

Carbon Asset Risk=4

Sustainability Reporting=15

In Febuary 2016, ACSI created a list of priority engagement companies with specifically defined concerns and objectives for each company identified through priority themes (e.g. climate change), which is reviewed annually.  The above outcomes represent the number of companies that changed or made a formal commitment to change from our priority engagement list.


LEA 15. Examples of ESG engagements

15.1. Provide examples of the engagements that your organisation or your service provider carried out during the reporting year.

Topic or ESG issue
          Board Gender Diversity
        
Conducted by
Objectives

Increase the representation of women on ASX200 company boards to 30% by 2017.

Scope and Process

ACSI wrote to all ASX200 companies with either no women or only one woman on the board.  This written correspondence was followed up with a series of meetings with target company boards.

Outcomes

As at 1 February 2017:

- Engaged with 23 companies on the issue

- 14 target companies appointed the first woman to their board during 2016

- A further 5 companies have made direct commitments to address the issue in the next 12 months.

Topic or ESG issue
          Corporate Governance
        
Conducted by
Objectives

Improve specific company practices in governance of

a) Executive remuneration

b) Directors and board composition and

c) Capital raising practices

Scope and Process

ACSI engaged with 14 priority companies in the ASX200 on one or more governance issues.

Outcomes

ACSI saw 9 out of the 14 priority companies improve their company governance, or make commitments to improve, as a result of engagement on a range of corporate governance issues.

Engagement with 3 target companies was escalated with ACSI recommending its members vote against remuneration resolutions and/or the re-election of directors following engagement.

Topic or ESG issue
          Carbon Asset Risk
        
Conducted by
Objectives

Understanding and disclosure of how large companies incorporate carbon asset risk 

Scope and Process

ACSI engaged with four large energy companies on disclosure of climate change and carbon asset risks.

Outcomes

A topic of discussion with many company boards, the 4 specific target companies all improved or committed to improve following engagement with ACSI. One company improved its already leading reporting, another provided its very first climate scenario as part of its 2016 annual report.

Topic or ESG issue
          Labour and Human Rights Policies
        
Conducted by
Objectives

Enhanced company disclosure of Labour and Human Rights policies.

Scope and Process

ACSI engaged with 8 priority companies identified via two commissioned research reports for high exposure to labour and human rights risks.

Outcomes

A total of 5 companies either made or committed to making significant improvements to their management and disclosure of labour and human rights risks, and ethical sourcing disclosures.

Topic or ESG issue
          Sustainability Reporting
        
Conducted by
Objectives

Improved annual reporting of ESG risks.

Scope and Process

The performance of the full ASX 200 in this area was identified through 
ACSI's research. Letters were written to each company detailing areas that require improvement and providing guidance on disclosure frameworks.

Outcomes

ACSI engaged with 15 companies, following receipt of ACSI's letters, regarding their sustainability disclosures. Eight have indicated they are looking to improve their disclosure going forward.

Topic or ESG issue
          Credit Card usage for gambling
        
Conducted by
Objectives

To increase awareness and ban credit card usage by banking institutions for gambling.

Scope and Process

Letter sent to major Australian banking institutions in relation to banning use of credit cards as a line of credit for gambling.

Outcomes

Response from Australian Bankers Association regarding support for a legislative ban on credit for gambling.

Internal discussions progressing at the banks

Further follow up meetings planned with the banks with some positive signs for appetite to respond.

Topic or ESG issue
          Labour and human rights in emerging markets.
        
Conducted by
Objectives

Increase action by company to address human rights abuses in emerging markets.

Scope and Process

Engaged directly with company regarding new measures in place and going forward to rectify past issues.

Outcomes

Company responded that agreements with unions had been signed, rehiring of workers had occurred in one of the emerging markets countries.

15.2. Additional information. [Optional]


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