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Vision Super

PRI reporting framework 2020

You are in Strategy and Governance » Promoting responsible investment

Promoting responsible investment

SG 09. Collaborative organisations / initiatives

09.1. Select the collaborative organisation and/or initiatives of which your organisation is a member or in which it participated during the reporting year, and the role you played.

Select all that apply

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Vision Super is affiliated with several industry groups who seek to improve responsible investment practices. In particular, the Trustee is involved with groups that are focussed on addressing the investment risks that relate to climate change;

  • Global Investor Statement Letter to G7 & G20 Governments on Climate Action in September 2019. This has been rolled forward to 2019 because the asks of governments remained the same.
  • Investor Letter to FASB
  • Just Transition Statement (COP24 United Nations Climate Chanel Summit in Katowice, Poland)
  • UNEP Joint Statement in Support of a Sustainable Financial System for Australia & New Zealand
  • ACSI and CGI Glass Lewis company focused engagements
  • Climate Action 100+ (Support Investor). Of the 13 Australian companies on the list, 10 are on ACSI's climate change priorities.
  • A member of RIAA
  • PRI Letter Investor Expectations on Climate Change for Airlines and Aerospace Companies
  • PRI Investor Expectations on Corporate Climate Lobbying
  • Open Letter to Global Index Providers - Petitioning them to exclude controversial weapons from global indices 
  • Signatory to the Workforce Disclosure Initiative (WDI)
  • PRI SEC Response Letter regarding proposed rules on shareholder proposals and proxy advisers
  • Co-filing of BHP Shareholder Resolution (Lobbying inconsistent with the goals of the Paris Agreement)

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

As an associate member of ACSI, management has provided feedback as to where we would prefer to see further work taken, namely around some customization of advice, proxy alert notifications, corporate tax evasion, social issues and co-filing shareholder resolutions.

Furthermore, we have attended:

  • Various Member Forums (i.e. Companies ESG Performance)
  • Climate Change Risk & AGM Season Updates/Roundup
  • Social Factor Working Group Sessions

Glass Lewis has collaborated with other investor organisations in order to share goals both within Australia and overseas.

Glass Lewis Australian memberships:

  • Responsible Investment Association Australasia (RIAA)

Glass Lewis International memberships:

  • Council of Institutional Investors
  • International Corporate Governance Network (ICGN)
  • Society for Corporate Governance
  • Canadian Coalition for Good Governance
  • Interfaith Center on Corporate Governance (ICCR)
  • Principles for Responsible Investment (PRI)
  • Financial Experts Association E.V
  • SASB Alliance

ACSI  also has memberships in Australia and internationally and from time to time collaborate with the National Association of Pension Funds (NAPF)/The Investment Association who are based in the UK.

The Fund has also been involved in the ACSI working group to develop an Australian Asset Owner Stewardship Code and was a founding client of ACSI's international voting service initiated during 2017.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Vision has contributed to recommendations and thoughts since the launch of Climate Action 100+ for nomination and voting of additional companies to the "plus list' of focus companies for inclusion from Australia and the Oceania region.

We have also provided some consideration of companies that that not been included in the original global 100 list along with suggestions for engagement preparation with companies to the organizing level through IGCC. The partner organisations of Climate Action 100+ have recently released the Company Dashboard, a tool that helps signatories track company progress against the initiative’s three commitment areas. The tool aggregates data and analysis from multiple providers to deliver an easy-to-interpret traffic light summary. 

We have initiated to be a support investor for the following Australian based focused companies:

South 32 Limited
Qantas Airways Ltd
Woodside Petroleum Ltd and;
AGL Energy Ltd.

One focus is to encourage companies to use the Taskforce for Climate-related Financial Disclosures Reporting Framework (TCFD). We are also talking to our managers about TCFD and encourage them to support these recommendations. To date, there has been little initiative shown by our managers and we will be aiming to push them behind this initiative. 

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

One of the ways our property managers track the ‘environmental credentials’ of their portfolio is to compare their portfolio GRESB score with the index. GRESB stands for the Global Real Estate Sustainability Benchmark and seems to be the benchmark for the property industry. This is a voluntary survey in which property companies need to submit an enormous amount of data to GRESB, which subsequently rates the property company. GRESB also monitors social factors such as staekholder engagement as part of its assessment.

Our core property exposure to the AMP Diversified Property Fund (ADPF) measures and tracks metrics including electricity, gas, water and waste, as well as and social and governance metrics such as green lease implementation, equity and diversity statistics. In addition to these metrics, the manager utilises third-party ratings/frameworks:

AMP Capital Real Estate have been participating in the GRESB survey since 2011.

ADPF participated in GRESB in 2019 and the fund score improved to 90%, up 5% from the 2018 score of 85.

Our GREIT's portfolio managed through Resolution Capital is a member of GRESB, as are several of thier investee companies. The portfolio has more GRESB members than the index by portfolio weights.

i.e. 80 vs 78  

          RIAA/ACSI Human Rights Working Group: Asset Owner-Asset Manager Modern Slavery Reporting Due Diligence Sub-Group
        

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Vision Super was involved in a working group on developing an operational due-diligence questionnaire for external fund managers, master custodians and transition managers. This questionnaire/template will also be made available to RIAA and ASCI members and as a member of ACSI and RIAA, we also collaborated with the production of a best-practice guide to reporting under Australia's Modern Slavery Act.

          2019 Global Investor Statement to Governments on Climate Change
        

Your organisation’s role in the initiative during the reporting year (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We signed the statement re-inforcing our supportfor the Paris Agreement and that all governments to ratify and implement the requirements to achieve the objectives of the Paris Agreement during 2019.

This comes at a vital time in the global process, as Governments are coming under pressure to ramp up their national climate ambition in order to bring it in line with a pathway which will limit global temperature rises to 1.5°C.

The Statement was signed by a record 515 investors managing over $35 trillion in assets, and reiterates the call for full and urgent implementation of the Paris Agreement. It was publsihed at COP25 in Santiago.

The Global Investor Statement from 2018 was essentially rolled forward to 2019 because the asks of governments remain the same. As Vision Super already signed the Statement, our signature will remained on the Statement. The Statement on the website was updated prior to the G20 with the updated list of signatories (including those who signed the Statement in 2018).

          Investor Letter to Amazon - Labour Rights
        

Your organisation’s role in the initiative during the reporting year (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Vision Super supported and signed a letter to Amazon which was managed by Ohman who are based in Stockholm, requesting a call to discuss the situation of labour rights in Amazon's operations and supply chains. Amazon has avoided constructive and substantive dialogue with its shareholders in the past, hence as a shareholder the need to collaborate with other investors on this issue. 70 investors with assets worth 4,53 trillion USD signed the letter which was sent to the company.

Investors did not reach the first goal with the letter to arrange a meeting with the company to discuss labor rights. However, Amazon have strengthened their supply chain standard to some extent, but no improvements within own operations can be identified  https://sustainability.aboutamazon.com/social-responsibility#section-nav-id-0

Further actions are needed to push Amazon to apply similar standards for operations.

ICCR and Investor Alliance for Human Rights subsequently had a 60 minutes meeting with Amazon (Kara Hurst, Head of sustainability and Michael Deal, Deputy General Counsel). The topic for that meeting was interaction between Amazon and investors. The meeting ended in a positive tone and it seemed like they are slowly opening the door for more regular discussions with investors, but no concrete actions was decided.

          BHP Shareholder Resolution (September & November 2019)
        

Your organisation’s role in the initiative during the reporting year (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Vision Super along with ACTIAM (Netherlands), The Church of England Pension Board (UK), Grok Ventures (Australia) and MP Investment Management (Denmark), asked BHP to act to suspend its membership of industry associations that are undertaking public policy interventions that are inconsistent with BHP’s support for the Paris Climate Agreement. This is outlined in Resolution 2 (below). Due to the nature of Australian corporate law, in order to submit our main ask (Resolution 2) it was necessary to also submit Resolution 1 (below) to amend the company constitution to allow an advisory resolution to be heard and voted upon.

Resolution 2: Ordinary resolution on lobbying inconsistent with the goals of the Paris Agreement

Shareholders recommend that our company suspend memberships of Industry Associations where:

A) a major function of the Industry Association is to undertake lobbying, advertising and/or advocacy relating to climate and/or energy policy (Advocacy); and

B) the Industry Association’s record of Advocacy since January 2018 demonstrates, on balance, inconsistency with the Paris Agreement’s goals. Nothing in this resolution should be read as limiting the Board’s discretion to take decisions in the best interests of our company.

Resolution 1: Special resolution to amend our company’s constitution

          Sponsored "Super Ideas: Securing Australia's Retirement Income System" in a collaboration with the John Curtin Research Centre
        

Your organisation’s role in the initiative during the reporting year (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We sponsored this research which was produced by the John Curtin Research Centre.  It provides an analysis of Australia's superannuation system taking into account the effect regulation, the changing economy (including the gig economy) and its effect on womens' super balances in particular.  It makes seven recomendations on how to address the issues in the Australian Super system to help Australians achieve dignity in retirement.

https://www.curtinrc.org/s/Super-Ideas-Securing-Australias-Retirement-Income-System


SG 09.2. Assets managed by PRI signatories

Indicate approximately what percentage (+/- 5%) of your externally managed assets under management are managed by PRI signatories.

87 %

SG 10. Promoting RI independently

10.1. Indicate if your organisation promotes responsible investment, independently of collaborative initiatives.

10.2. Indicate the actions your organisation has taken to promote responsible investment independently of collaborative initiatives. Provide a description of your role in contributing to the objectives of the selected action and the typical frequency of your participation/contribution.

Description

          Where our fund managers are not signatories to the PRI we ask them why they have not become a signatory and if they are members of any other ESG associations or have affiliations with. We also step through this process with any short listed managers that we may be considering appointing which is in line with our ESG and Investment Governance policy frameworks along with our investment beliefs. However. we are wary that some managers may sign due to investor pressure as opposed to any deep seated conviction in the PRI principles.
        

Frequency of contribution

Description

          ESG initiatives are disclosed on our website, annual reports, ESG Video and interviews, member updates, twitter and respective press arcticle and other media platforms. Also, as part of our active ownership and transparency, we dislose to our members our PRI Reporting Framework and Assessements and any other benchmark surveys or reviews that would participate in.
        

Frequency of contribution

Description

          PRI Co-ordinated Engagement on Corporate Tax Responsibility. Here our focus to engage with high risk companies from our region in order to enhance corporate income tax disclosures and further encourage the development of corporate tax strategies. During the 2018-19 period, our target focused companies related to Sonic and Ramsay Healthcare based in Sydney, Australia. Our assessements of these companies were reported to the PRI tax collaborative working group/committees during 2019. Our conclusions to date have determined for both companies, the tax they pay is broadly in line with revenues earned and little evidence of BEPS conduct. Furthermore, the nature of the pathology business means that there is likely to be less opportunity to utliise intangible assets and profit shifting when compared to other much larger pharmacutical companies.  Both companies could be more transparent about their tax arrangements and both have lobbied government on tax to protect their interests.
        

Frequency of contribution

specify description

          As a signatory of the PRI and members of ACSI and RIAA ESG houses and through open dialogue with our investment fund managers.
        

Description

          The PRI is at the forefront on all main-stream ESG issues and collaborates with investors, institutions, regulators, governments and other research related houses and advisory groups.
ACSI engage with ASX listed companies, government, regulators and other financial and non-financial intermediaries to promote specific ESG issues or concerns and that these are long term in nature and long term risk. Furthermore, ACSI contributes to government and parliamentary committees and discussions, other relevant public policy forums and promotion of the regulatory system that is fair and equitable to investors. They also promote various ESG causes via public policy forums and involvement with round-table industry discussions.
RIAA aim to influence public policy and regulation and are a strong proponent of responsible investment approaches and sustainable investable markets. Furthermore, they are a strong advocate of benchmarking and industry best practice. Other initiatives at RIAA focus around human rights working groups, impact investing forums, research and company enagagement working groups.
        

Frequency of contribution

10.3. Describe any additional actions and initiatives that your organisation has taken part in during the reporting year to promote responsible investment [Optional]

Vision Super's CEO attended the PRI In Person Conference in Paris last year during September and was also part of the ACSI delegation prior to that event. He found the experience worthwhile and very informative which is attended by asset owners, fund managers, governments and research houses. A report was provided to our September Board meeting. This follows on from the CIO's attending the same event in San Francisco the previous year.

Divestments

The Trustee implemented a formal decision to divest its portfolios through its fund managers from companies that derive material revenue to mining of thermal coal and mining of tar sands. It was also agreed to sign the  tobacco free pledge and this will be implemented along with an expanded list of controversial weapons divestments shortly.

In determining companies not eligible for investment in the Fund, the following applies:

  • The materiality threshold is set to 25% of revenues
  • A buffer zone of +/- 5%
  • The Fund will allow for a transition period of up to six months from the time of Board decision for the ineligible investments to be sold
  • A cap of 2% or emerging market equities, 2% of Australian equities and 5% of developed market equities ex-Australia is set for the excluded categories of investment as a percentage of the relevant investment universe.

ESG Rating Research Provider

Vision Super  decided to appoint MSCI for services specifically to providing divestment and carbon data. We had conducted trials of ESG providers over several months and found that MSCI had the most comprehensive data set. Our focused area around climate risk was an important matter with our deliberations and MSCI appeared to have superior climate change metrics based on comparative analysis, analytical quality, research and methodology.

MSCI will also be providing the official audited tobacco list for divestment under the tobacco free pledge which we will be implementing during the couse of 2020. We are confident that MSCI will continue to improve its offering.

Proxy Voting

Vision Super votes on all its equity exposures and monitors and reviews weekly all upcoming meetings where they are contentious, catalyst and recommendations against management of a company.

We have customized our voting, for example a vote against remuneration reports where any member of the executive team (mainly the CEO) gets paid more than twice as much as the next most highly paid executive. In our view, inequality is one of the leading drivers of poor ESG behavior. Excessive remuneration in the finance industry has led to some individuals having outsized influence in other areas.

Tax

We vote for more transparency on tax and lobbying efforts. We note many of the companies publicly supporting responsible approaches on these topics fund bodies are doing the exact opposite behind the scenes. Vision Super joined the PRI Collaborative Engagement on Corporate Tax Responsibility. We are co-leads with LUCRF on Sonic Healthcare and Ramsay. Our analysis suggest that both these companies pay a reasonable amount of tax. Both companies operate in multiple jurisdictions but do not undertake country by country reporting. This reporting would enable a better analysis of companies’ tax strategies. Our focus is to encourage companies to extend their reporting to segmentation by jurisdiction and to have Sonic join up to the Tax Transparency Code. This initiative is at a bit of an impasse currently. We have also agreed to look at signing up to this code ourselves as part of a scope with EY on a tax review.

ACSI Australian Asset Owner Stewardship Code (Code)

Earlier this year we confirmed with ACSI that we will be working towards becoming a signatory to the Code. The Code essentially refers to the responsibility that asset owners must exercise their ownership rights to protect and enhance long-term investment value for their beneficiaries by promoting sustainable value creation in which they invest.

There are six main principles under the Code. As a fund we essentially already do most of these items, which range from publicly disclosing our voting, to reporting to beneficiaries about our stewardship activities. We see this as more of a formal compliance statement, so it makes good sense to sign up and promote good stewardship practices across the board and in line with international processes.

The Code has been developed by and for asset owners and we aim to produce our stewardship statement within the first half of 2020.

Social Initiatives

We are in ongoing discussions with other organisations including the ACTU on what we can do about the S in ESG, an area where investors have traditionally had little input. We propose to continue this process and keep the Board informed. On 6 August 2019, management attended the Indigenous Super Summit where the key themes were on identification issues, the standardisation of forms and cultural issues. While some super funds have made some progress with engaging with their indigenous members, the experience on the ground is still sub-optimal. We plan on writing to the Indigenous Superannuation Working Group to recommend some revolutionary solutions that will go a long way towards solving these problems.

One major outcome from the Royal Commission was that all super funds are now expected to use the AUSTRAC guidelines for identification verification. In response to this recommendation, we have adopted the AUSTRAC guidelines for identification verification and formalised our processes for how we identify members by introducing an Identification Policy in September 2019.

Lastly, Vision Super also endorsed the "Just Transition" statement which was launched in Poland during COP24 and we are also working towards a detailed plan to becoming carbon neutral by 2050.


SG 11. Dialogue with public policy makers or standard setters

11.1. Indicate if your organisation - individually or in collaboration with others - conducted dialogue with public policy makers or regulators in support of responsible investment in the reporting year.

If yes

11.2. Select the methods you have used.

specify description

          We have done this through our membership base through the PRI, ACSI and RIAA and written to Federal Politicians on carbon issues and energy policy.
        

11.3. Where you have made written submissions (individually or collaboratively) to governments and regulatory authorities, indicate if these are publicly available.

11.4. Provide a brief description of the main topics your organisation has engaged with public policy-makers or regulators on.

ASX Corporate Governance Principles

These principles and recommendations set out recommended corporate governance practices for entities listed on the ASX that, in the ASX Corporate Governance Council’s view, are likely to achieve good governance outcomes and meet the reasonable expectations of most investors in most situations. We were asked by the Committee to address the consistency of our policy with the principles.

The principles are voluntary, with the Council noting it is up to Boards to choose whether an entity adopts particular corporate governance principles, and they seek to apply an “if not, why not” approach, where entities would explain why they have not chosen to adopt a particular principle or recommendation.

Some of the principles and recommendations are specific to protecting the interests of shareholders, while others are more general and could theoretically be adopted by Vision Super in those cases where we are not already following a similar practice.

The ASX Corporate Governance Principles and Recommendations are directed towards listed companies fulfilling their obligations to shareholders. While many of the governance principles can also apply to a profit-to-members superannuation fund, some do not translate.

Some of the recommendations where Vision Super does not comply directly contradict the long-held position of the organisation, for example the recommendation that the majority of Directors should be independent.

The Committee has also considered whether fulfilling disclosure requirements that are imposed on listed companies would add any value for members. For example, disclosures around which Committee members attended which meetings of a committee, or the skills matrix of the Board, in the context of Directors being elected by shareholders may be relevant information but may not add anything of value for a member of a super fund where Directors are nominated by a sponsoring organisation rather than being elected.

Likewise, further public disclosure of internal risk management processes may not be as relevant in the heavily regulated superannuation sector as it is for a listed company that faces many different risks.

SEC Proposed New Proxy Rule Regulations on Proxy Advisors

Vision Super co-signed the PRI's SEC response letter during mid-December 2019 where signatories urged that the SEC preserve the right of shareholers to make thier voices herad and the independence of proxy voting advice.

The US Securities and Exchange Commission voted 3-2 to issue a proposed rule on 5 November with respect to shareholder advisory companies. These rules would require the proxy advisors to give companies two chances to review voting materials before they are sent to shareholders. They will also be required to include a link to any response by the company in their advice.

This will have implications for investors as to the timeliness of when research is made available. It is hard to see how advisors can go through this process with enough time to give out advice before the cut-off times for voting before an AGM. The proposed rule also requires proxy advisors to provide additional disclosures of conflicts of interest, methodology and information sources, and to make the company’s written response to the report available to the proxy advisor’s clients.

ISS has sued the regulator claiming its rights to free speech had been infringed. ISS claimed in its lawsuit, among other things, that the guidance violated government rulemaking procedures by failing to provide any opportunity for public comment. The lawsuit asked for a permanent injunction to invalidate the SEC’s guidance.

Our proxy advisor Glass Lewis is continuing to work through these proposed rulings, and we should soon have a better idea of the potential impact to research timeliness in relation to meetings and vote cut-off dates. At this stage, the ability of proxy advisors like Glass Lewis to provide independent timely research is a big concern if the proposed rules become regulation. It could be the case that the proxy advisor model becomes broken in the US.

The SEC’s proposal was also subject to a 60-day public comment period following its publication in the Federal Register. Following on from the comment period closing, the SEC will have to decide whether it will move to adopt the rules, or some variant of them, and if so, on what timetable. We will most likely have a reasonable transition period if these regulations come into effect. We may need to significantly adapt what we do.

These developments are in stark contrast to the regulations for proxy advisers that the EU adopted in the Shareholder Rights Directive II (SRD II) earlier this year.

In the UK, the Financial Conduct Authority has implemented SRD with respect to proxy advisers, requiring the advisors to have a code of conduct disclosing any conflicts of interest.

The SRD II recommends that there is a code so that people would better understand what proxy advisors are doing and how they do it. In December 2015, the European Securities and Markets Authority (ESMA) concluded there was no need to overhaul the regulations for proxy advisers.

Global Investor Letter to the G7 and G20 Governments on Climate Action in 2019 

  • Focus to call on global leaders to do the following:
  • Continue to support and implement the Paris Agreement
  • Drive investment into the low carbon transition
  • Implement climate-related financial reporting frameworks

ACSI & RIAA Submissions

As members of ACSI and RIAA, these organisations engage with government, regulators and policy makers to better align comany's with the long-term interests of shareholder investors.

Please refer to the folloinwg links on respective website links for current and previous submissions:

https://acsi.org.au/submissions/ (tax, ASX Listing Rules and Modern Slavery Act)

https://responsibleinvestment.org/wp-content/uploads/2015/11/RIAA-Paper-on-Industry-Priorities-Driving-Long-Term-Investment_Nov2015.pdf

https://responsibleinvestment.org/wp-content/uploads/2017/05/RIAA-MSA-Submission-170428.pdf

Vision Super Letter to Federal Australian Politicians on Proactive Transition to a Low Carbon Economy - FY Ending 2017

Main objective here was to call on all sides of politics to develop a bipartisan public policy consistent with the science that will limit the devastation of climate change, facilitate the orderly transition to a low-carbon economy, and take responsibility on a federal level for action which cannot be achieved by individual Australian citizens and organisations alone. We attached this elsewhere in the document.

 


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