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Vision Super

PRI reporting framework 2020

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

Monitoring

SAM 05. Monitoring processes (listed equity/fixed income)

05.1. When monitoring managers, indicate which of the following types of responsible investment information your organisation typically reviews and evaluates

ESG objectives linked to investment strategy (with examples)

Evidence on how the ESG incorporation strategy(ies) affected the investment decisions and financial / ESG performance of the portfolio/fund

Compliance with investment restrictions and any controversial investment decisions

ESG portfolio characteristics

How ESG materiality has been evaluated by the manager in the monitored period

Information on any ESG incidents

Metrics on the real economy influence of the investments

PRI Transparency Reports

PRI Assessment Reports

RI-promotion and engagement with the industry to enhance RI implementation

Changes to the oversight and responsibilities of ESG implementation

Other general RI considerations in investment management agreements; specify

None of the above

LE

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
FI - Securitised
Private equity
Property
Infrastructure
ESG objectives linked to investment strategy (with examples)
Evidence on how the ESG incorporation strategy(ies) affected the investment decisions and financial / ESG performance of the portfolio/fund
Compliance with investment restrictions and any controversial investment decisions
ESG portfolio characteristics
How ESG materiality has been evaluated by the manager in the monitored period
Information on any ESG incidents
Metrics on the real economy influence of the investments
PRI Transparency Reports
PRI Assessment Reports
RI-promotion and engagement with the industry to enhance RI implementation
Changes to the oversight and responsibilities of ESG implementation
Other general RI considerations in investment management agreements; specify
None of the above

If you select any `Other` option(s), specify

Listed Equity & Fixed Income Asset Classes

Responsible investment considerations are formally incorporated into annual reviews for all listed investment portfolios. The objective is to review and  update (if required) the current assessment of the investment manager’s responsible investment capability for the mandate they are managing on our behalf. Frontier Advisors also conducts formal annual reviews for our fund managers which is inclusive of responsible investment considerations. 

Investment managers are encouraged to discuss ESG and other risks as part of their portfolio reporting and metrics with the internal team monitoring and analysing exposure to significant ESG risks. i.e. climate change risk 

Frontier Advisors research team actively engage with investment managers on an ongoing basis to encourage improvement across all facets of their operations.  This formally includes the integration of ESG considerations. The objective is to have investment managers continually deliver progressively better services to Frontier’s clients over time.

Furthermore, company engagement is also becoming an increasing focus for our alternative debt fund managers like Barings. As example, they intend to work to become signatories to the UK Stewardship Code 2020 and will also look to meet requirements of other upcoming regulatory guidance in this area in during 2020.

05.2. When monitoring external managers, does your organisation set any of the following to measure compliance/progress

ESG score or assessment

ESG weight

ESG performance minimum threshold

Real world economy targets

Other RI considerations

None of the above

LE

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
FI - Securitised
Private equity
Property
Infrastructure
ESG score
ESG weight
ESG performance minimum threshold
Real world economy targets
Other RI considerations
None of the above

If you select any `Other` option(s), specify

Vision Super monitors its carbon exposure across its listed equity portfolios via ESG research provider Sustainalytics. Sustainalytics uses company-reported comapnies through statistcical estimation. Sustainalytics estimates absolute scope 1 and 2 GHG emissions along with company's carbon intensity.

This reporting is undertaken by combining Sustainalytics carbon data with the NAS holding data which has functionality to drill down to exposure reporting by industry. Furthermore, the carbon exposure reporting can also be customized to any preferred reporting timeline with the ability to provide back dated analysis.

Sustainalytics forms the source of data emissions and carbon intensity metrics used within the calculation of carbon intensity. Around 70% of the value for the portfolio has reported emissions collected through the Carbon Disclosure Project (CDP) and companies publicly available reports. For the remaining companies Sustainalytics’ estimation models are used to provide emission estimates.

The fund's equity holdings are assessed by CO2 tonnes per $1M AUD Revenue and compares the benchmark across five carbon assessements ranging from risk-rating, carbon-intensity, fossil-fuel-involvement, standed-assets exposures along with carbon-solutions exposure.

The carbon intensity of a portfolio is the weighted average (weighted by index holding weight) of the carbon intensity of each benchmark constituent.

GRESB scores are evaluated for property managers.

05.3. Provide additional information relevant to your organisation`s monitoring processes of external managers. [OPTIONAL]

          The Trustee will encourage its agents and fund managers to undertake company specific engagements where it is believed that:
1. Engagement will lead to an increase in the value of a company’s shares over the long term.
2. Engagement will prevent or limit a decrease in the value of a company’s shares over the long term.
3. Engagement will lead to an improvement in the company’s current operations in relation to environmental, social and/or governance considerations.
In determining whether (and how) the engagement is to be taken forward, due regard must be given to the level of the company’s exposure to the issue/s at hand and the likelihood of engagement success and the potential to bring about positive change. Such considerations are based around an assessment of the likely impact of the engagement and the ultimate benefit to the value of the Trustee’s holding in the company.
ACSI annually creates a list of engagement priority companies with specifically defined concerns and objectives for each company.
Vision Super policy for monitoring Investments is set out in detail in the Investment Governance Framework policy, including;
•	Performance monitoring
o	At the portfolio, asset class and Investment option level
o	Daily, monthly and annual
•	Manager monitoring
o	Mandate compliance
o	Regular onsite interviews and calls
o	Review of Investment Advisor notes
o	Regular Operational due diligence review
o	Annual outsourced material business activity attestation
•	Sector (asset class) reviews
Manager monitoring
All portfolios have specific mandates detailing information such as authorised investments, reporting and exposure limits. The master custodian provides a frequent reporting on mandate compliance for both internal and external, which is reviewed by the Investment team.
The Investment team and Investment Advisor (Frontier Advisors) conduct regular sector reviews (annual for the major sectors, at least biennially for other sectors).
Frontier Advisors reviews the performance of all internal and external managed portfolios and their quarterly report is reviewed by the Investment Committee as part the annual work program. Responsible investment considerations are formally incorporated into annual reviews of investment products. The objective is to review, update (as required) and/or re-confirm the Research Team’s current assessment of the investment manager’s responsible investment capability with respect to the product.  A focus of the review is to document the evolution of the investment manager’s responsible investment approach over the prior 12 months.  The review also accounts for the evolution of responsible investment integration in the product’s peer group over the same period to determine the Manager’s relative level. 
Responsible investment considerations are also integrated and recorded where relevant within investment manager interactions outside the formal annual review cycle, e.g. update meetings, ESG surveys.
The internal cash portfolio and any direct investments are not monitored by the Investment Advisor. The Investment team directly monitors these investments, using external advice where appropriate.
In addition, the internal investment team undertakes the following process as part of monitoring all external managers both for seperately managed portfolios or for investments within pooled/fund trust arrangements; 
•	Conducts regular onsite interviews and calls with both domestic and off-shore managers
•	Attends annual general meetings for Australian fund managers
•	Reviews meeting notes provided by the Investment Advisor
        

SAM 06. Monitoring on active ownership (listed equity/fixed income)

06.1. When monitoring managers, indicate which of the following active ownership information your organisation typically reviews and evaluates from the investment manager in meetings/calls

Engagement

Report on engagements undertaken (summary with metrics, themes, issues, sectors or similar)

Report on engagement ESG impacts (outcomes, progress made against objectives and examples)

Information on any escalation strategy taken after initial unsuccessful dialogue

Alignment with any eventual engagement programme done internally

Information on the engagement activities’ impact on investment decisions

Other RI considerations relating to engagement in investment management agreements; specify

None of the above

LE

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
FI - Securitised
Report on engagements undertaken (summary with metrics, themes, issues, sectors or similar)
Report on engagement ESG impacts (outcomes, progress made against objectives and examples)
Information on any escalation strategy taken after initial unsuccessful dialogue
Alignment with any eventual engagement programme done internally
Information on the engagement activities’ impact on investment decisions
Other RI considerations relating to engagement in investment management agreements; specify
None of the above

If you select any `Other` option(s), specify

Fixed Income

Amundi who manage passive and inflation link bond portfolios, publishes an annual Engagement Report highlighting the main activities of its Engagement policy, the studied topics and the results of the analyses, together with the results and statistics of pre-AGMs dialogue. This document is publicly available and can be downloaded on Amundi website: https://www.amundi.com/int/ESG/Documentation.

In 2019, Amundi developed a climate change investment framework in partnership with the Asian Infrastructure Investment Bank (AIIB) in order to select issuers who are either fully aligned with the Paris Agreement, and engage others to transition to a low-carbon and climate-resilient business model. To assess climate change mitigation and transition risk, Amundi combined two current best practices on the market for the framework.

Equities

Vision's equity managers undertake engagement in order to maximize and protect the long-term value of companies they invest in our behalf. They also meet with Directors, Chairperson's/representatives of board committees. We review these details as part of ESG reporting deliverables.

Our Low Carbon Indexed Australian Equities strategy which IFM Investors managers on our behalf, applies a number of operational rules to produce a bias to low carbon stock selection at minimal risk.

 


SAM 07. Percentage of (proxy) votes

07.2. For the listed equities for which you have given your external managers a mandate to engage on your behalf, indicate the approximate percentage (+/- 5%) of companies that were engaged with during the reporting year.

1888 Number of companies engaged
Proportion (to the nearest 5%)

07.3. Additional information [OPTIONAL]

          As a reminder, Vision Super's fund managers do not vote on our behalf. The number of companies engaged in item SAM 07.2 relates to our proxy research advisors over the 2019 reporting period. Our proxy research advisor ACSI held 288 engagement meetings with more than 200 companies over the financial year 2019 period. For most of these effecting either significant change or commitments to improve from 112 of a record 174 priority companies. 
Climate Change: Eighteen of ACSI's 20 target companies made material improvements in their management of climate change risks and opportunities. Woodside Petroleum and James Hardie are significantly lagging peers and may require direct action from investors.
Industry associations with views not aligned to their members are increasingly coming under scrutiny. These formal engagements and company meetings were an increase from the prior financial period.
Governance: Westpac Bank was the most high-profile of the 7 priority companies which announced succession plans following engagement on board and management accountability. Structural improvements in executive remuneration were made in 27 target companies including higher hurdles, reduced quantum and improved alignment with long-term investors.    
Gender Diversity: Of 81 target companies, 34 appointed women to their boards – many for the first time. Board gender diversity topped 30% in the ASX200, reflecting ACSI’s many years of engagement and strategic voting work. ACSI is now looking at strategies to drive acceptance of its 40-40-20 policy.
Workforce: Eight of 10 priority targets on workforce and supply chain issues, including modern slavery, made improvements although ACSI remains concerned by endemic issues. ACSI engaged with several companies including Woolworths on widespread underpayments.
Overall, around $500m of underpayments were revealed by ASX-listed companies in 2019.
Our other proxy research advisor Glass Lewis held meetings with more than 1,600 listed companies around the world. Over 1,400 companies took part in its Issuer Data Report program, and their engagement team reached out to more than 37,500 contacts across the issuer community to encourage interaction with Glass Lewis. 
Glass Lewis’ engagement teams are located in their global offices, to ensure timely follow up to inquiries and meeting requests, and to facilitate more effective engagement dialogue by helping set agendas and allocating the appropriate Glass Lewis analysts to meetings. Last year  Glass Lewis's engagement team contacted more than 37,500 issuers, inviting them to engage with them.
Vision Super’s Australian index equity fund manager, IFM undertakes active company engagement as a critical aspect in order promote responsible investment considerations across the broader corporate and financial sectors. This approach aligns with their Responsible Investment Charter and the values of their clients and their beneficiaries. IFM have an intimate knowledge of their investments and regularly engage with businesses either directly, or through the Australian Council of Superannuation Investors (ACSI). In their activity they seek to encourage positive change in corporate behaviour. Typically, IFM's activity is prioritised around pre-determined themes and objectives, which are reviewed on an annual basis. It also engages with regulators, industry associations and the investment community to promote best practice responsible investment standards.
Vision’s alternative debt fund manager Barings, acts as a steward for their clients' capital across the asset classes, which means that they believe in using their influence as a large asset manager to safeguard and generate value for their clients through the realisation of improved sustainability practices. Stewardship may involve engaging and voting with the entities in which they invest or are considering investing in, as well as policy makers, other asset managers and promoting a healthy financial system to drive change towards sustainable practice.
Through engagement, Barings aim to enhance the performance of their investments in line with their fiduciary duties. They do not, however, attempt to impose an inflexible approach that ignores local norms and contexts. Barings believe that value is derived from transparent communication with the entities in which they invest, coupled with the expertise and discretion of their experienced analysts and portfolio managers.
Barings also prioritises engagements according to the materiality of a topic to the investment case, as determined by their analysts’ ESG research, as well as by the size of their holdings. The former affects the value they may realise, and the latter may affect their chance of success. Barings prefer to engage proactively and on longer-term issues that may meaningfully affect their investors, but will also engage reactively and on shorter-term threats to value.
Most of Barings engagements are private, but in some cases an escalation to the public domain may be necessary.
One of our active global equities manager Harris Associates, have developed a strong reputation as a long-term, shareholder-oriented investment firm. This approach is a byproduct of their value investment philosophy that requires every investment to meet the following criteria: 
1) they are companies that they believe are priced at significant discounts to their estimate of the company’s intrinsic value, 
2) that have a path to grow per share value and 
3) are run by managers who think and act as owners. 
Harris Associates view each stock purchase as if they are buying a piece of the business and, in turn, believe that discussing relevant issues that may affect the company’s long-term performance is part of their due diligence process. They utilize engagement as a way to act in shareholders’  best interests to maximize the expected value of the investments they manage on behalf of clients. However, Harris has been honest but average on climate change issues and the firm houses a well known climate sceptic. We have discussed this issue with the firm on multiple occasions. We encourage them to think about climate impacts each time we meet. We are satisfied that the David Herro does not represent the views of the firm as a whole.
        

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