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Vision Super

PRI reporting framework 2020

You are in Strategy and Governance » Governance and human resources

Governance and human resources

SG 07. RI roles and responsibilities

07.1. Indicate the internal and/or external roles used by your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for responsible investment.

Roles

Select from the below internal roles

          Chief Responsible Investment Officer
        

Other description (1)

          Climate Action / ESG Team
        

07.2. For the roles for which you have RI oversight/accountability or implementation responsibilities, indicate how you execute these responsibilities.

The Board is responsible for ensuring the appropriateness of the ESG framework.

The Chief Investment Officer, Chief Responsible Investment Officer and other investment team members are responsible for ensuring that any investment that is being considered meets the requirements of our ESG policy, investment framework and investment beliefs.

Principles

Our approach is based on applying a set of principles for guiding the development of policy and action that will contribute to developing a more sustainable global financial system. It should be noted that Vision Super manages less than 0.5% of Australian superannuation assets. Our limited resources are primarily directed towards developing, selecting, managing and monitoring our investments and investment strategies.

The Vision Super ESG principles are set out below. These Principles are espoused in the context of our commitment to the development of a Vision Super Reconciliation Action Plan recognizing the traditional owners of the land on which our Members work and live:

  • We will urge companies to disclose their carbon emissions and targets for reductions in Scope 1, 2 and 3 emissions that are aligned with the Paris Agreement.
  • We will push for companies to provide independent evidence of action taken to progress towards the Paris climate change agreement emissions reduction target.
  • We support diversity and respect the protection of internationally proclaimed human rights and labour standards.
  • We support freedom of association to collectively express, promote, pursue and defend common interests.
  • We will consider community concerns that play a critical role in facilitating a social licence to operate.
  • We will engage with companies, rather than divest from them, because this is more effective in improving the way companies operate, reducing the environmental impact and increasing transparency.
  • We may divest from some category of investment where these investments are not aligned with the values of the fund and community expectations.
  • We will encourage the adoption of best practice in corporate transparency and reporting, including knowledge of at least one level below the company in the supply chain.
  • We believe corporations should pay their fair share of tax on a country by country basis and we support tougher measures on tax transparency that will reduce tax avoidance.
  • We believe that companies who position themselves as ‘climate-aware’ should avoid industry associations and lobby groups whose policies are inconsistent with the Paris climate change agreement.
  • We will participate in class actions against companies only where this has been evaluated to be beneficial to members.
  • When evaluating new managers and existing managers, our due diligence includes a demonstration of how an assessment of ESG risks is incorporated into the investment process, including the use of positive screens if any.
  • Our responsible investment oversight includes ongoing monitoring and review of portfolios managed by our fund managers.
  • More generally, active fund managers retained by Vision Super must undertake a reasonable assessment and price risks to the value of an investment of companies that have a high ESG risk profile and appear to be poorly managing ESG risks.
  • Where possible, agreements with investment managers will specify the ESG evaluation process outlined above. Vision Super will endeavour to incorporate the ESG evaluation process across all of our asset classes including fixed income, credit and unlisted assets (as far as practical).

Manager selection and monitoring

When searching for new investment managers, due diligence should include a demonstration of how an assessment of ESG risks is incorporated into the investment process, including the use of positive screens if any. The investment manager should also specify the resources available to analyse ESG risks, including personnel and their expertise, and external research services used.

Investment managers will be encouraged to discuss ESG and other risks in their investment reports to Vision Super. Our internal Investment team monitors the investment portfolios of our investment managers and analyses exposure to significant specific risks, such as climate change risk.

The Investment manager appointments and terminations policy covers the general selection and monitoring of managers.

Collaboration and engagement

Vision Super is a founding signatory to the Principles of Responsible Investment (PRI), so we are committed to:

  • Incorporating ESG issues into our investment analysis and decision-making processes
  • Being an active owner that incorporates ESG issues into our ownership policies and practices
  • Seeking appropriate disclosure on ESG issues from our investment managers
  • Promoting the acceptance and implementation of the PRI within the investment industry
  • Collaborating with other organisations to ensure that the PRI are effectively implemented
  • Reporting on our activities and progress towards implementing the PRI.

We are also a member of Responsible Investment Association Australasia (RIAA) where the goal is to have capital invested more responsibly; shifting more capital into sustainable assets and enterprises and shaping responsible financial markets to underpin strong investment returns and deliver a healthier economy, society and environment.

Vision Super is involved with several other industry groups who seek to improve responsible investment practices. In particular, we are involved with groups that are focused on understanding the investment risks that relate to climate change.

We will encourage our agents to undertake company-specific engagements where we believe that:

  • Engagement will lead to an improvement in the value of a company’s shares over the long term
  • Engagement will lead to an improvement in the company’s current operations in relation to environmental, social and/or governance considerations
  • It is in our members’ best interests.

We believe it is our duty, along with our investment managers, to engage with companies to communicate our concerns and position on environmental, social and governance issues. In engaging with a company, we assess the likely impact of the engagement and the ultimate benefit to the value of our holdings.

Engagements may involve meetings with company directors and executives, discussions with other shareholders of the company, participation in collaborative investor initiatives and the submission of shareholder resolutions at company meetings.

07.3. Indicate the number of dedicated responsible investment staff your organisation has.

1.5 Number

07.4. Additional information. [Optional]

The Board implemented a revised ESG Policy along with a new Proxy Voting Policy which was finalised in December 2019. These policies should be read in conjunction with Vision Super's Investment Governance Framework, Investment Policy Statement, Risk Management Strategy and  Investment Beliefs. This is consistent with the funds long term investment objectives and risk tolerances.

The Board is responsible for ensuring the appropriateness of the proxy voting framework and reviewing the policy as required. The Chief Investment Officer is responsible for ensuring that all proxy votes are cast in accordance with the requirements of this policy.

Principles

Our approach is based on applying a set of principles to achieve genuine, measurable and permanent improvements in the ESG practices and performance of the companies we invest in. It should be noted that Vision Super manages less than 0.5% of Australian superannuation assets. Our limited resources are primarily directed towards developing, selecting, managing and monitoring our investments and investment strategies.

The Vision Super proxy voting principles are set out below. These Principles are espoused in the context of our commitment to the development of a Vision Reconciliation Action Plan recognizing the traditional owners of the land on which our Members work and live.:

  • We will subscribe to proxy advice voting research and we will vote in line with these principles.
  • We will vote consistently on all proxy ballots for our shareholdings at all meetings. There is no delegation to the underlying investment managers for any voting.
  • We will strive to recall all securities for proxy voting purposes that are part of the custodian’s securities lending program.
  • We believe that all shareholders should be treated fairly.
  • We believe that significant merger or acquisition activity should be decided by shareholders.
  • We will support executive remuneration that is not excessive and performance incentives that are in line with the long-term goals of the company.
  • We will endorse executive bonus structures that are based on long-term performance, and on factors that are within management’s control.
  • We believe companies should provide adequate notice of at least three weeks for upcoming meetings to allow shareholders time to properly consider the proposed resolutions.
  • We will encourage the disclosure of all lobbying, advertising and advocacy activities, along with an evaluation of whether or not they are positively in line with the Paris climate change agreement and community values.
  • We believe that companies should provide transparency around and justification of any political donations and partisan political advertising.
  • We will encourage Board gender and cognitive diversity, and a corporate culture that is inclusive of women.
  • We will promote limits on multiple board positions for directors and CEOs.
  • We will advocate for company boards to have an independent non-executive chair.
  • We will aim to maximise risk adjusted returns to members.

Vision Super seeks to vote consistently on all proxy ballots at all shareholders meetings and on all resolutions in relation to companies in which we have an equity interest, or any other interest which entitles Vision Super to vote on corporate resolutions. There is no delegation to the underlying investment managers for any voting where we hold equity investments directly. Decisions on how to vote will be made on a company by company and resolution by resolution basis, according to the principles outlined above.

We do not review every single company resolution but instead focus on where our policy would suggest we vote differently from the way the company’s management is recommending. Contentious vote recommendations are discussed internally by management. We ensure that we have enough time to review the contentious votes prior to the cut-off time for each company meeting.

We use proxy advisers in considering our votes and will seek advice on contentious issues from other parties including fund managers. We determine our own votes in this context and according to our principles. We are not bound by advice from any party.

We endeavour to recall all securities that are lent out under the custodian’s securities lending operating program from third parties to enable voting of company resolutions. Our custodian uses predictive modelling to ensure that securities that are out on loan are recalled back in a manner that minimises the risk of being unable to recall securities in time to meet the voting cut-off timelines.

Generally, we do not have the ability to exercise voting rights for listed securities that are held in pooled trust/fund structures and in interposed entities. In these cases, Vision Super does not hold direct and immediate voting rights because of the interposition of a trust or other structure between the Fund and the ultimate investments.

Directly held unlisted investments

Where we have directly held share certificates for unlisted companies as part of a separate mandate, the investment manager may have discretion to act on our behalf. This may include receiving notices, giving consents, signing shareholder documentation and voting shares whether in writing, in person or by proxy. The investment manager retains voting rights for all of our unlisted investments due to the nature of their relationships with management of private businesses, and the way in which votes are processed.

Reporting

Vision Super is committed to being transparent and accountable. We have a dedicated active ownership page on our website where our full voting record is updated in real time. We disclose our votes the day after each company meeting has been held. We also publish a full voting record and summary report annually, as well as including the highlights in our annual Corporate responsibility report.

Shareholder resolutions

The Fund may on occasions file or co-file a shareholder resolution for our listed equity shareholdings as a means of company engagement on an ESG issue that the Trustee perceives will have a detrimental impact over the long-term shareholder value. Our focus on shareholder resolutions is generally on Australian listed equities as the dynamics are different for other markets and jurisdictions.

ACSI

Alongside ACSI's internal staff who manage responsible investment, they ustilise ACSI’s governance, research, engagement and proxy voting team to implement their responsible investment program.


SG 07 CC. Climate-issues roles and responsibilities

07.5 CC. Indicate the roles in the organisation that have oversight, accountability and/or management responsibilities for climate-related issues.

Board members or trustees

Chief Executive Officer (CEO), Chief Investment Officer (CIO), Chief Risk Officer (CRO), Investment Committee

Other Chief-level staff or heads of departments

Portfolio managers

Investment analysts

Dedicated responsible investment staff

Investor relations

External managers or service providers

Other role, specify (1)

          Climate Action / ESG Team
        

07.6 CC. For board-level roles that have climate-related issue oversight/accountability or implementation responsibilities, indicate how these responsibilities are executed.

The Trustee considers ESG risks to be material risks that have the potential to affect our members' interests. Specifically, the Trustee identifies climate change risk as a primary concern among environmental risks. In addition ignoring sustainable investment opportunities such as energy efficiency, water and waste management in investment portfolios may lead to a loss of value and materially increase risk.

The Trustee considers climate change to be one of the greatest environmental risks that its investment portfolio faces. The Trustee is committed to:

  • Considering, identifying and managing climate change as a material financial risk for the purposes of our risk management framework. We will consider, identify and seek to take advantage of any investment opportunities available from the transition to a zero carbon emissions economy;
  • Monitoring the carbon performance of the portfolio and striving for improvements;
  • Ensuring that climate change risks are considered by the Trustee’s advisors and investment managers including proper assessment of the data available and full company disclosures;
  • Ensuring that climate change risks are analysed as part of the due diligence procedures for new investments; and
  • Participating in climate change related collaborative initiatives.

ACSI, on behalf of members, managers and monitors climate-related priority companies and provides updates to member funds via formal semi-annual engagement reports and other informal member briefings on a quarterly basis. These reports track progress on climate-related objectives for specific companies and provides updates on broader climate change trends in the market.

Management can also be informed on climate-related issues through ACSI’s Member Council and climate specific events and meetings. We also have CGI Glass Lewis as the other proxy research provider who also assists with climate-related issues and through their partnership with ESG research provider Sustainalytics.

Note: The reference to ‘informal member briefings’ above relates to shorter updates provided at Member Council meetings.

Management have also appointed MSCI as an ESG research provider where it will allow the fund to evaluate in detail its carbon emission exposures across portfolios (equities & bonds) to a much more granular level. 

07.7 CC. For management-level roles that assess and manage climate-related issues, provide further information on the structure and processes involved.

Management conducts a formal review of its ESG policy minimum annually which is considered by the Investment Committee, and the Board. Management is constantly looking to improve and extend what we do. In our annual reviews we assess efficacy including a review of our proxy voting, impact on returns and use of resourcing.

The internal investment team looks to implement any decision making in an efficient way as soon as practical without adversely affecting returns to its members. This can be fairly rapid for liquid investments (generally less than 6 months) but can take longer for unlisted/private market investments. We also look to avoid unnecessarily inconvenience our managers by making several changes at once rather than piecemeal.

Management also has a regular schedule of reviews for each product on an annual basis and performance against responsible investment strategies and objectives form part of this review.

Lastly, ESG integration is managements preferred approach, however,we do not believe that many managers do this effectively. 

Further, ACSI on behalf of members, managers and monitors climate-related priority companies and provides updates to member funds via formal semi-annual engagement reports and other informal member briefings on a quarterly basis. These reports track progress on climate-related objectives for specific companies and provides updates on broader climate change trends in the market.

Management can also be informed on climate-related issues through ACSI’s Member Council and climate specific events and meetings.

07.8 CC. Indicate how your organisation engages external investment managers and/or service providers on the TCFD recommendations and their implementation.

Specify

          We formally write to all our fund managers annually with respect to their ESG initiatives over the last year and specifically focus on TCFD recommendations.
        

SG 08. RI in performance management, reward and/or personal development

08.1. Indicate if your organisation’s performance management, reward and/or personal development processes have a responsible investment element.

Board members/Board of trustees

08.1b. RI in personal development and/or training plan

08.2. Describe any activities undertaken during the reporting year to develop and maintain Board members’ skills and knowledge in relation to responsible investment.

Management provides the Investment Committee and Board with access to specific reporting and research topics and other relevant material during the agenda for the year.

Furthermore, Vision Super has a committed budget to training and development and will consider relevant ESG seminars, courses, wroskshops and conferences that would be beneficial to the dedicated responsible investment team members.

We generally consider and evaluate relevant ESG training as part of an ongoing process around the funds ESG initiatives, learning and developement of the funds in the space.

Our investment committee members and Directors also attend various conferences and sessions on relevant ESG sessions through our membership and signatory bases with these organisations. i.e. ACSI Annual Conference, PRI In Person Conference and RIAA Annual Conference.

Almost half of our Board Directors are union officials or union sponsored and have a natural interest and exposure to many ESG topics. Most of employer sponsored Directors, being put forward by local councils and water authorities also have a natural interest in this area.

Chief Executive Officer (CEO), Chief Investment Officer (CIO), Chief Operating Officer (COO), Investment Committee

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Other C-level staff or head of department

          Chief Responsible Investment Officer
        

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Portfolio managers

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Investment analysts

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Dedicated responsible investment staff

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Investor relations

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Other role (1) [from SG 07]

          Climate Action / ESG Team
        

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

08.3. Provide any additional information on your organisation’s performance management, reward and/or personal development processes in relation to responsible investment.

Vision Super's responsible investment team and Directors attend ESG events through many of its affiliations (directly and indirectly) and memberships on specific ESG themes.

The fund also evaluates any relevant training as part of its ongoing process which is a reflection of Vision's commitment to responsible investment.

As outlined in our 2018 and 2019 reporting framework reports, the trustee does not philosophically agree with performance based fee arrangements. The general policy of the fund is to appoint and pay staff members who undertake a solid work ethic, are willing to learn, are team players rather than pay people a bonus to do an appropriate level of work. We have seen how bonuses work in the financial markets and business more generally and are consciously seeking to avoid the problems we see there.

08.4. Describe the level of experience board members/trustees/chief-level staff have with incorporating ESG factors into investment decision-making processes.

          The Board of Directors and management have a broad range of experience and skill levels. The Directors backgrounds range from industry experience within unions and employer backed organisations, through to consulting on governance matters and experience in implementing the funds Investment Governance Framework and ESG policy.
        

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