As a result of the Board selling its investment in the Wonthaggi Wind Farms in regional Victoria Australia after being built and owned for an extensive period by Vision Super. The Board agreed in principle to make a $A100 million allocation for an alternative renewable investment.
Vision Super’s Board has approved an allocation to renewables energy, subject to asset class and fund/manager level due diligence. Renewable energy offers a wide spectrum of investment opportunities, from lower-risk green bonds to higher-risk private equity/venture capital.
It was determined that a renewables strategy targeting similar risk/return objectives to the unlisted infrastructure and infrastructure debt sectors was preferable for various reasons, including: direct access to renewables projects, reasonable risk-adjusted returns, and access methods via both pooled vehicles and funds. Investment considerations within renewable energy have mainly focused around bio-mass, geothermal, solar, tidal/ocean, water/hydro and on and offshore wind.
Vision Super moved to the fund/manager assessment stage which involved investment and operational due diligence, which ultimately led to a decision not to proceed with Vision Super’s initial preferred strategy. Vision Super is now reviewing alternative strategies, both within the infrastructure debt asset class where the initial preferred investment was identified, as well as infrastructure equity where other opportunities have been identified for further due diligence.
Sustainable Balanced Investment Option
The Fund launched a Sustainable Balanced/Low Cost Investment Option during 2017 which closely mimics the performance of the market index and invests in a diversified portfolio with a moderate exposure to cash and diversified bonds.
- The Sustainable Investment Option differs from other investment options in the following ways:
- simpler option with fewer asset classes
- no unlisted assets/securities
- passively managed
- 100% of the equity allocation is managed to a low carbon benchmark
Engagement & Proxy Voting
We continue to focus our energies on engagement with managers and companies and away from "tick the box" ESG approaches. ESG is one of our core investment beliefs which is streamlined within our investment philosophy and investment governance framework.
Vision Super votes carefully on all proxy voting ballots for shareholding meetings and there is no delegation to fund managers for any voting. Vision Super uses the Australian Council of Superannuation Investors (ACSI) voting alert service which assesses company votes against the ACSI Governance Guidelines and recommends voting outcomes. These guidelines are a set of practices that ACSI believes companies should follow and cover topics such as board structure, operation and compensation. The Trustee is in broad agreement with the ACSI guidelines, but retains the right to vote differently to the ACSI recommendations if it believes that it is not in the best interests of members of the Fund our its investment beliefs.
Furthermore, we ensure that support of resolutions will maximize the Funds value and where cost effective the Trustee will seek to vote outside of the ACSI voting alert service universe. We customize our voting and for example, vote against remuneration reports where any member of the executive team 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.
Reduce amount of abstentions in voting and engage with fund managers on contentious related resolutions.
Low Carbon Benchmarks/Mandates
The Trustee introduced new low carbon benchmarks for our index/passive mandate arrangements by moving the international equities portfolio to the global MSCI Low Carbon Index. This means the Fund now invests in overseas companies that have a 70% lower carbon exposure than the rest of the market. The Fund also moved the Australian equities portfolio to the IFM Low Carbon portfolio which reduces our exposure to Australian companies with a high carbon emission risk.
Controversial Weapons & Tobacco Company Exclusions
- Vision also 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 controversial weapons, land mines, cluster bombs, nuclear weapons or within any other companies with similar characteristics. Our current list includes companies that are involved in the manufacture and or production of controversial weapons, land mines, cluster bombs and some nuclear weapons. The companies are as follows:
- Lockheed Martin
- General Dynamics Corporation
- Aeroteh SA
- Hanwha Corporation &
- Poongsan Corporation
We indicated to the Investment Committee and the Board in 2019 that we would come back with a more comprehensive list around controversial weapons including nuclear manufacturers and tobacco, once we finalised the appointment of our ESG research provider, now being MSCI. Since then, we have developed exclusion screens on the MSCI platform against the benchmarks as well as individual equity and debt portfolios.
The Board also determined that it will not invest in companies that derive material revenue from the mining of thermal coal, tar sands or tobacco manufacturers with a materiality threshold set at 25% of revenues with a buffer zone of +/- 5% so that investments close to the materiality threshold do not move between eligibility and ineligibility on a frequent basis.
Further to this, an investment classified as being ineligible would need revenues from excluded categories to fall below 20% of total revenues to be considered eligible. An investment classified as eligible would require revenues from excluded categories to increase to in excess of 30% of total revenues to be considered ineligible. 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% each for Australian and emerging market equities, and 5% of developed market equities ex-Australia apply.