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SAS Trustee Corporation

PRI reporting framework 2019

You are in Indirect – Manager Selection, Appointment and Monitoring » Appointment

Appointment

SAM 04. Appointment processes (listed equity/fixed income)

04.1. Indicate if in the majority of cases and where the structure of the product allows, your organisation does any of the following as part of the manager appointment and/or commitment process

specify

State Super commends the use of the ACSI Governance Guidelines.

04.2. Provide an example per asset class of your benchmarks, objectives, incentives/controls and reporting requirements that would typically be included in your managers’ appointment.

Asset class

Benchmark

          MSCI-World ex Australia ex Tobacco ex Controversial Weapons & MSCI World ex Aus Select ESG Low Carbon Integrated
        

ESG Objectives

          State Super will not invest in companies that are directly involved in the manufacture or production of controversial weapons and tobacco products.
        
          State Super has historically directed external fund managers to undertake voting on its behalf, however retains the right to override voting decisions should the issue be deemed of significant risk to the portfolio.
        

Incentives and controls

Reporting requirements

Benchmark

          Bloomberg Ausbond Govt 10+
        

ESG Objectives

          State Super will not invest in companies that are directly involved in the manufacture or production of controversial weapons and tobacco products.
        

Incentives and controls

Reporting requirements

Benchmark

          Bloomberg Global High Yield
        

ESG Objectives

          State Super will not invest in companies that are directly involved in the manufacture or production of controversial weapons and tobacco products.
        

Incentives and controls

Reporting requirements

Benchmark

          Credit Suisse Western European Leveraged Loan Index Hedged to AUD
        

ESG Objectives

          State Super will not invest in companies that are directly involved in the manufacture or production of controversial weapons and tobacco products.
        

Incentives and controls

Reporting requirements

Benchmark

          CPI + 9%
        

ESG Objectives

          State Super will not invest in companies that are directly involved in the manufacture or production of controversial weapons and tobacco products.
        

Incentives and controls

Reporting requirements

Benchmark

          FTSE EPRA/NAREIT Developed Rental Index Hedged to AUD
        

ESG Objectives

          State Super will not invest in companies that are directly involved in the manufacture or production of controversial weapons and tobacco products.
        

Incentives and controls

Reporting requirements

Benchmark

          FTSE Developed Core Infrastructure 50/50
        

ESG Objectives

          State Super will not invest in companies that are directly involved in the manufacture or production of controversial weapons and tobacco products.
        

Incentives and controls

Reporting requirements

04.3. Indicate which of these actions your organisation might take if any of the requirements are not met

04.4. Provide additional information relevant to your organisation's appointment processes of external managers. [OPTIONAL]

          The due diligence process prior to manager appointment includes an assessment of a manager's organisational commitment to considering ESG issues in its investment process and the effectiveness of this in both the security valuation and portfolio construction. In terms of organisational commitment, we and our consultant seek to confirm to what degree ESG issues are given serious consideration from senior management through to portfolio managers and research analysts and that it is clearly articulated in policy documents where possible. Our consultant seeks to understand how ESG factors or considerations are incorporated into the investment process, with a view to how well integrated the adopted approach is to the investment philosophy, whether this is adopted at an appropriate level of materiality, and whether this is incorporated in the investment culture of the entire investment team (i.e. not just those with responsible investment titles). This part of the due diligence process seeks to understand whether the integration of ESG issues is likely to be supportive of enhanced returns and/or mitigating risks for the portfolio of listed assets. Consideration is also given to the level and type of engagements with security issuers and approach to voting on securities by the manager and whether these are likely to be in confluence with our preferred approach. Assessments by the consultant prior to appointment include a specific rating on ESG issues and this may influence the overall rating of the prospective mandate. Historically there has been more emphasis placed on ESG integration for active fundamental management and for external managers that have more of a medium to longer term valuation focus embedded in their investment approach. Even for those managers with quantitative processes and shorter dated investment horizons, we note there is now considerable data available on ESG (and its components). We expect these managers will have researched the potential for ESG signals to be additive signals and included in the investment process, if they justify the same thresholds for inclusion as other tested signals.
        

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