Australian Indexed Equities
Vision Super’s Low Carbon mandate with IFM is an indexed strategy with the objective of replicating the performance of the S&P/ASX 100 Accumulation Index. Although this portfolio by nature does not allow IFM to take active stock positions, IFM exercise their shareholding rights in the following ways to influence responsible investment practices of investee companies:
- Voting at AGMs of all publicly listed companies
- Participating in shareholder resolutions
- Direct Engagement Programs with board members and executive management.
Our Australian equity fund managers do not vote our shareholdings as this is done internally and we follow the ACSI and Glass Lewis proxy guidelines. We will consider fund managers arguments for voting for and against company management recomendations when this is offered.
- The Low Carbon Emission Index mandate has an abatement objective of a 12.5% minimum reduction in carbon emissions compared to an equivalently sized index weighted portfolio. IFM endeavors to meet this objective whilst minimizing active risk. Given this, incorporation of ESG issues into the index funds that IFM manages has developed into a direct engagement process rather than an active stock weighting approach.
- Carbon emissions data is provided in metric tons (t CO2e) and includes both:
- direct emissions (from sources owned or controlled by the company) and,
- indirect emissions (from production of electricity consumed by the company).
As at 30 June 2019 our Carbon Footprint for the portfolio was as follows:
- Low Carbon Portfolio: 114,111.5 (t CO2e)
- Benchmark (S&P/ASX 100): 129,440.6 (t CO2e)
- Carbon Abatement: 11.84%
We assess this on a regular basis.
As of June 2019, the domestic weighted carbon intensity for the our Australian equities asset class was 20% less carbon intensive than the benchmark. This was significant improvement from the prior years carbon intensity levels versus the benchmark. Overall, the portfolio falls intio the medium carbon risk category, and has 3% lower carbon risk than the benchmark. The portfolio has 45% less exposure to comapnies with high and severe carbon risk than the benchmark. 13% of the portfolio's weight has involvement in fossil fuels which is lower than the benchmark's involvement and also has 10% less expsoure to stranded asset risk than the benchmark.
International Indexed Equities
A similar approach is applied to the international equities index allocation. For the international equities portfolio the mandate is benchmarked against the MSCI Low Carbon Index which essentially invests in companies that have a 70% lower carbon exposure than the rest of the market.
As of June 2019, the international weighted carbon intensity for the aggregated international equities asset class was 54% lower than the industry benchmark. The carbon emissions were publically reported for 66% market value for the listed companies. Sustainalytics carbon estimations where used to source companies that did not report their emissions. Overall, the portfolio falls into the low carbon risk category, and has 23% lower carbon risk than the benchmark. The portfolio has 49% less exposure to fossil fuels the benchark and has 92% less exposure to stranded asset risk than the benchmark and 6.08% of the portfolio's weight has involvement in fossil fuels. This is lower than the benchamark's involvement.
Diversified Bonds (Fixed Income)
Amundi Asset Management manages our Australian and International Passive bond portfolios. Here we have made initiatives with the manager to exclude the more carbon polluting issuers from within the credit part of the Australian index portfolio (8%).
Amundi is using TruCost as data provider with the aim to improve and integrate the Trucost ratings within their tools. Trucost ratings is integrated in Amundi's tools and platforms which covers approximately 71% of the ratable issuers are actually rated.
Recent carbon exclusions from the Australian bond mandate were:
- Korea South East Power 5.75% Sep 2020 EMTN
- Qantas Airways 7.75% May 2022 EMTN and
- Lafarge Holcim Finance Australia 5-25SER MTN 4 April 2019 which held 64% of the total footprint of the portfolio which essentially was concentrated on one issuer that represented 0.28% of the AUM.
Trucost ratings is integrated in Amundi internal tools (Media + Alto)
Furthermore, on the 24 February 2017 we had made a further exclusion for issuer Holcium Finance Australia 5-25SER MTN 4 April 2019 which had around 64% of the total footprint within the portfolio.
The Australian mandate had the following carbon footprint metrics:
On 16 May 2017
Footprint: Tons of CO2 per M$AUD invested
Actual Portfolio: 126
On 30 June 2019
Footprint: Tons of CO2 per M$AUD invested
Actual Portfolio: 34
The top 10 carbon contributors in the portfolio as as follows:
Issuers Tons of CO2 per M$AUD invested
- TOTAL CAPITAL INTL SA 7
- AUSNET SERVICES HOLD PTY LTD 6
- CALTEX AUSTRALIA LTD 5
- INCITEC PIVOT LTD 2
- SGSP AUSTRALIA ASSETS PTY LTD 2
- AURIZON NETWORK PTY LTD 2
- FBG FINANCE LTD 1
- WOOLWORTHS LTD 1
- GENERAL MOTORS FINANCIAL CO IN 1
- TOYOTA MOTOR CREDIT CORP 1
The Trustee determined that it will not invest in companies that derive material revenue from controversial weapons which include companies that are involved in the manufacture and or production of land mines, cluster bombs, nuclear weapons or within any other companies with similar characteristics. The existing list of excluded companies are as follows:
- Lockheed Martin
- General Dynamics Corporation
- Aeroteh SA
- Hanwha Corporation &
- Poongsan Corporation
Management is also working on a much more comprehensive list of controversial weapon and nuclear company listing along with tobacco manufactures with the aim to implement during the course of 2020. This will be presented to our Investment Committe and then to be ratified by our Board.