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Vision Super

PRI reporting framework 2020

You are in Strategy and Governance » Objectives and strategies

Objectives and strategies

SG 05. RI goals and objectives

05.1. Indicate if and how frequently your organisation sets and reviews objectives for its responsible investment activities.

05.2. Additional information. [Optional]

This is reviewed annually and is set out within the Investment Committee Working Program during the course of the financial year. As part of the Annual Investment Committee's Work Plan, the executive team will conduct a review of the ESG Policy and framework which is also set in conjunction with the strategy day with Directors/Board.

The Fund has a long term focus here as outlined under the Trustee's whole of fund investment belief 3:

 "We believe that environmental, social and governance (ESG) issues and sustainability considerations are important within the context of optimising net risk-adjusted returns."

Further to Item SG 02.3

Vision Super staff again participated in Plastic Free July, along with more than a million people world-wide from 130 countries. We pledged to give up four most common sources of plastic pollution for the month of July - water bottles, plastic straws, coffee cups, and plastic shopping bags. We added additional recycling options in the kitchen to divert more of our waste from landfill - including batteries, mobile phones, toothpaste tubes, pens, bottle lids, bread tags and coffee pods. We have a ‘bag library’ of reusable bags that staff can borrow, along with reusable containers to reduce single-use plastic takeaway containers.

Most recently, we made the decision to stop buying single-use plastic bottles of cleaning supplies such as hand soap and dishwashing detergent. We are now buying in bulk and refilling our plastic containers of dishwashing liquid, hand soap, sanitiser, spray and wipe, dishwasher powder, and rinse aid.

Vision Super uses Greenhouse Friendly ENVI 50/50 Carbon Neutral Paper which is an Australian Government certified Greenhouse Friendly product.  It is also Australian made, 100% recycled, ISO 14001 mill accredited, elemental chlorine free and 100% carbon offset. We've expanded the use of environmentally sustainable paper for publications, including Product Disclosure Statements, newsletters, brochures, flyers, and reports. We are also trying to minimise our printing and have stared a project to implement paperless processing across the organisation. These initiatives save members' money as well as being good for the environment.

Further to Item SG 04.2

Our service provider ACSI, on top of setting objectives for companies at the start of every year, also monitors incidents that emerge during the course of the year and set objectives around those as they occur. Examples of issues emerging throughout the year include tailings dam failures and wage fraud issues. ACSI’s process when these occur is to engage with the company to understand the issue, and then set objectives that we believe the company should work towards to avoid a similar issue.


SG 06. Main goals/objectives this year

06.1. List the main responsible investment objectives that your organisation set for the reporting year.

Responsible investment processes

Key performance indicator

          Attendance at major responsible investment conferences and seminar sessions which has given  the fund presence at these events and becoming aware of trends and practices.
        

Progress achieved

Vision has been a long standing signatory to the PRI.  It attended its first annual PRI In Person Conference in Berlin during 2017 where Mr Adam Karaelis (Chief Responsible Investments Officer/Chair of the ESG/Climate Action Team) represented the Fund and was followed up by Mr Michael Wyrsch (Chief Investment Officer) attending the conference in San Francisco in 2018 and Stephen Rowe (Chief Executive Officer) attending the conference in Paris France during September 2019.

Summary of Conferences/Training during 2018-2019:

  • ACSI PRI In Person Delegation, September 2018
  • PRI Climate Forum, Melbourne July 2018
  • PRI Tax Collaborative Initiative
  • IGCC Investor Masterclass, Practical challenges for investors of climate change disclosure, 31 July 2018
  • Responsible Investment Association Australasia (RIAA) Annual Conference Melbourne, 31 October & 1 November 2018
  • Various fund managers ESG seminar/sessions and industry roundtables
  • Fund Manager Webinars
  • PRI Tax Responsibility & Transparency Roundtable, July 2018
  • PRI Forum on Executive Pay - 27 February 2019
  • Research studies & articles/white papers (i.e. New Scientist & Nature)
  • ACSI Member Forums
  • ACSI Annual Conference - May 2019
  • Glass Lewis Corporate Governance Updates
  • ISS/Maurice Blackburn Securities Class Action Session - May 2019

Key performance indicator

          The Fund is very transparent with its ESG initiatives and level of information it discloses on its website, member updates and annual reports.
        

Progress achieved

The Fund is in the process of finalising and publishing its fourth Annual Corporate Responsibility Report for the 2019 which outlines our ESG initiatives and progress over the last 12 months.

The Trustee continues to maintain a high level of exposure around its ESG and responsible investing initiatives and transparent to its members and constituents.

We implemented a new section on our website named "Active Ownership" where we publish how we voted at Annual Company Meetings for our shareholdings. This now extends to more frequent updating on our voting where we disclose our proxy votes one business day after the completion of an AGM.

We also publish and reference any assessments and reports that we participate in through our affiliated bodies including memberships and as signatories of various ESG organisations.

Please refer to the following link on our website:

https://www.visionsuper.com.au/investments/active-ownership

Key performance indicator

          Listed Equities Proxy Voting
        

Progress achieved

Vision Super now votes directly on all equity holding exposures including in line with our International Policy with ACSI in conjunction with Glass Lewis.

The trustees investment managers no longer vote on behalf of the Fund, but on occasion we still seek their views on controversial or contentious matters.

If we believe or felt strongly about a specific ballot/resolution and that its not in line with our ESG/Proxy Voting Policy and investment beliefs, we will vote against the ACSI (Glass Lewis) International Policy.

One of the main reasons for doing this is that the Trustee was exposed to a significant amount of reputational risk as most managers have never been proactive in discussing or raising concerns regarding ballots/resolutions on contentious voting matters.

By doing the voting ourselves, we have the ability to oppose actions that would harm the environment (i.e. climate risk related shareholder resolutions), excessive pay for executives, and the use of cheap labor in unsafe conditions (i.e. labor rights/modern slavery risk and supply chain related shareholder proposals).

The Head of ESG in consultation with the CIO reviews all upcoming critical meetings weekly which relate to contentious reputation type matters, votes against management and catalyst related issues.

          Establishment of an ESG Team. The members of the team consist of the CEO, CIO, Head of ESG, Investment Operations Manager and Communications & Strategy Consultant.
        

Key performance indicator

          Discuss and debate various ESG themes broadly and specific to our portfolios and push for local and national government policy change.
        

Progress achieved

The Climate and ESG Action team has been looking at various issues related to ESG and has written to Federal MP's and Senators as well as Victorian MP's to call for urgent public policy action to address climate change and give renewable energy sector certainty.

Management has considered the issues with divestment, the divestment decision-making framework, measurement issues and other fund considerations. The Board agreed to approve the updated ESG Policy which was inclusive of divestment initiatives around thermal coal, tar sands and tobacco manufactures across our listed equity portfolios. We conducted extensive trial runs during the course of 2019 for an ESG research provider/platform and have recently appointed MSCI. We are now able to review company alerts, evaluate our portfolios against universe for carbon intensity metrics and screen for controversial weapons for exclusion consideration.

Our current divestments relate to companies who derive a substantial proportion of their revenue from mining thermal coal, tar sands and from tobacco. Our revenue threshold for divestment is 25% of revenues with a buffer of +/-5%. A buffer zone of +/- 5% is set so that investments close to the materiality threshold do not move between eligibility and ineligibility on a frequent basis. 

other description (2)

          PRI co-ordinated engagement on corporate tax responsibility for 2018-19
        

Key performance indicator

          Engage with high risk companies to enhance corporate income tax disclosure, tax transparency and improvemnets in corporate performance within governance, risk management and financial reporting.
        

Progress achieved

To date we have been provided the necessary access to benchmark analysis on target companies in order to understand current corporate performance and gaps along with various research and white papers.

The engagement will cover global and large multinational companies across a diverse regions primarily within the healthcare and IT sectors, who are perceived to be engaging in aggressive tax practices in relation to corporate income tax and or companies with poor disclosure practices.

Vision Super targeted Australian healthcare companies Sonic Health Care Ltd (LUCRF lead investor) and for Ramsay Health Care Ltd where Vision Super was the lead investor on that engagement. We conducted on site visits with respective appropriate representatives for both companies in late 2018.  

From what we’ve seen in Australia (and from the engagement notes we have read so far), there seem very few companies in these sectors who will voluntarily agree to (for instance) country by country reporting.  Hence the importance of public advocacy and pressure on governments to further transparency and corporate responsibility for tax. 

See additional notes in SG 06.2 below for Ramsay Healthcare which have been submitted to the PRI Tax Initiative Group in-early 2019 along with Sonic Health Care Ltd.

other description (3)

          Climate Action 100 Plus - A new five year investor-led initiative to engage more than 100 of the world's largest corporate greenhouse gas emitters.
        

Key performance indicator

          To support engagement with companies in our region to reduce emissions, strengthen climate-related financial disclosures and improve governance on climate change risks.
        

Progress achieved

The investor engagements have made good progress and have payed off, with an increasing number of commitments from focus companies (i.e. Glencore not to grow coal production capacity beyond current levels and Rio Tinto releasing their first TCFD report) and more anticipated over the next year. 

Company Benchmark Dashboard: The partner organisations of Climate Action 100+ have recently announced the release of its 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. The Company Dashboard provides a baseline assessment that will be updated after the 2019 reporting season.

The pace of company announcements has been picking up, with more expected in due course.

There has also been development of the online portal for tracking comany engagement - April 2019.

Vision Super has provided feedback/comments with respect to the context for preliminary engagement with companies, as well as the proposed list of companies for inclusion from Australia and the Oceania region, where we have nominated to support engagement on the following Australian based companies:

  • AGL Energy Limited
  • South 32 Limited
  • Woodside Petroleum Limited
  • Qantas Airways Limited

 

Financial performance of investments

Key performance indicator

          Investment Option Returns - Responsible Investment (RI) Super Study 2019 Leader Board vs Non-Leaders
        

Progress achieved

RIAA found that funds like Vision Super who invest responsibly have higher returns than those that don't.

Financial performance of MySuper investment options to 30 June 2019 as follows:

                                                                       1-year average               3-year average             5-year average

Non-leader (41 funds)                                               7.07%                           8.62%                           7.74%   

RI Super Study Leader Board (13 funds)              8.11%                           9.81%                           8.71%

Vision Super Balanced Growth                                 7.36%                           9.80%                           8.22%

Vision Super Sustainable Balanced Growth             8.76%                           8.47%                               -

Benchmark Average (54 funds)                                7.32%                           8.90%                            7.78% 

 

ESG characteristics of investments

Key performance indicator

          Carbon Intensity Exposure (Co2 emissions) Reporting on Australian and International listed equity holdings.
        

Progress achieved

Australian Equities

Overall, the portfolio as at 30 June 2019 is 20% less carbon intensive than the benchmark (233.2 vs 289.9 tCO2/eMil USD). The sector also had 16% less expsoure to fossil fuels than the benchmark along with 10% less exposure to stranded asset risk than the benchmark. The portfolio also falls into the medium carbon risk category and has a 2% lower carbon risk than the benchmark.

International Equities

Overall, the portfolio as at 30 June 2019 is 54% less carbon intensive that the benchmark (80.9 vs 175.8 tCO2/eMil USD). The portfolio also has 49% less exposure to fossil fuels than the benchmark as well as 92% less exposure to stranded asset risk than the benchmark. The portfolio also falls into the low carbon risk category and has 23% lower carbon risk than the benchmark.

Note: Carbon intensity is a relative metric used to compare company emissions across industries. We use Sustainalytics carbon reporting which divides the absolute emissions by total revenue, which is essentially expressed in tonnes of carbon dioxide equivalent per million USD of total revenue. The vast majority of companies still fail to report, so in many cases the emissions are based on proprietery estimation models.

 

Key performance indicator

          Exclude the more carbon polluting issuers from within the credit part of the Australian bond passive mandate (10%).
        

Progress achieved

Management requested Amundi Asset management to exclude fossil fuel for the Australian bond portfolio. The international mandate is all government issuers with company level exclusions not applicable within that portfolio.

We considered three levels of fossil fuel exposures as follows:

  • Upstream: Extraction
  • Midstream: Transportation via pipelines
  • Downstream: Users of fossil fuels (airlines, steel etc.)

Amundi subsequently proposed to exclude the upstream and midstream levels from the portfolio and keep the downstream level which is a main concern for investors in general. This ended up only creating an additional tracking error of 0.10% per annum.

The methodology Amundi uses means that the non-rated issuers will be assigned zero carbon footprint in the portfolio manager team's optimization and the the current available data, Amundi was comfortable to propose a 50% decarbonization of the portfolio. To reach and hold at this 50%, the following carbon exclusions were transacted within the Australian passive bond mandate:

  • Korea South East Power 5.75% Sep 2020 EMTN
  • Qantas Airways 7.75% May 2022 EMTN &
  • Holcium Finance Australia 5-25SER MTN 4 April 2019 which held 64% of the total footprint

On  24 February, we made a further exclusion for issuer Holcium Finance Australia 5-25SER MTN 4 April 2019.

Other description (1)

          Proxy Voting
        

Key performance indicator

          Proxy voting as per our voting guidelines.
        

Progress achieved

The Australasian Centre for Corporate Responsibility (ACCR) released a study of the proxy voting records of Australia’s largest super funds in May last year. Of the 50 largest Australian super funds, Vision Super was rated number two in Australia, finding we supported 88% of the shareholder proposals on ESG issues that we voted on in 2018. We were also listed as one of only five funds that disclose voting records less than a week after the company meeting. You can read the report here.

Our complete voting record is always available at the following link:

https://www.visionsuper.com.au/investments/active-ownership

 

Other activities

other description (1)

          Asset Owners Disclosure Project (AODP) Global Climate Index Report 2017. Vision Super was one of just six Australian super funds.
        

Key performance indicator

          Obtained a ranking of 19 out of 500 investors globally achieving an AA rating in the AODP Global Climate Index 2017.
        

Progress achieved

We received a AA rating in the index putting us in the leading top 6% of asset owners in the world when it comes specifically to how we manage climate risk and rated in the top four asset owners in Australia within the Global Climate Index for 2017.

As a result of feedback from AODP the fund established a Climate Action Team which consists of the CEO, CIO, Head of ESG, Investment Operations Manager and our Strategy and Communications Consultant.   The team was formed to manage climate risk in investments and push for policy changes needed at a national and global level.

Vision Super fell outside the scope of the 2018 Pension Fund Survey on the grounds of our FUM size. Under the ownership of Share Action, they aimed at introducing a different methodology based on the 2017 Global Pension Assets Study by Willis Towers Watson, effectively selecting the 100 largest pension funds globally excluding corporate funds. As an alternative, we were invited to participate in their out-of-scope assessment based of this year’s methodology without inclusion in the main index offering a public rating badge on our assessment and approach to ESG. (Winning Climate Strategies Report)

Refer to link:

https://aodproject.net/wp-content/uploads/2018/06/AODP-WinningStrategiesReport.pdf

 

other description (2)

          RIAA Super Fund Responsible Investment Benchmark Report for 2018 & 2019
        

Key performance indicator

          Quality and scope of responsible investment disclosures and investment frameworks.
        

Progress achieved

The Responsible Investment Association Australasia (RIAA) also recognised Vision Super in 2019, including us on their Responsible Investment Super Study Leaders Board. We were one of the top 14 out of the 57 funds they researched. They found we consistently articulate and demonstrate a comprehensive responsible investment approach across our investment framework. Importantly, RIAA found that funds like Vision Super who invest responsibly have higher returns.

Refer to link:

https://responsibleinvestment.org/wp-content/uploads/2019/12/RIAA-Responsible-Investment-Super-Study-2019.pdf

Vision Super participated in the RIAA Super Fund Responsible Investment Benchmark Report for 2018, ranking in the leading responsible investments super funds in the country for 2018.

We were assessed across the five pillars of RIAA’s assessment framework where we articulated and demonstrated a “comprehensive” scale on responsible investment approaches on at least 4 out of 5 pillars to gain the final overall rating of “comprehensive” in 2018, highlighting leading best practice amongst the super industry.

Vision Super ended up in the top 13 funds out of 53 where we articulated "comprehensive" repsonsible investment approaches across the five pillars of good governance for responsible investment by super funds as follows:

Governance and Accountability
Repsonsible Investment Commitment
Responsible Investment Implementation
Measurement and Outcomes
Transparency and Responsiveness

Refer to link:

https://responsibleinvestment.org/wp-content/uploads/2018/05/RIAA-Super-Fund-Responsible-Investment-Benchmark-Report-2018-web.pdf

 

other description (3)

          PRI Reporting Framework Submission 2019
        

Key performance indicator

          Assessement ratings versus average industry peer ratings
        

Progress achieved

Vision Super rated A+ across 9/10 categories

Vision Super documents our responsible investment activities each year as part of our PRI reporting.

Our PRI Reporting Framework assessment results for 2019 were outstanding - we scored an A+ across 9 out the 10 reporting categories, including the strategy and governance module. Our only non-A+ was an A score for the listed equity active ownership module – which was still an outstanding result, well above the median score of our peers. In fact, we outperformed the average scores of all PRI signatories across all asset classes.

To view our 2019 assessment report click here. https://www.visionsuper.com.au/images/policies/2019_PRI_Assessment_Report_for_Vision_Super.pdf

PRI Leaders’ Group

Vision Super was one of just six Australian super funds (out of a total of 206 industry, retail, public sector and corporate super funds) to be included in the 2019 PRI Leaders’ Group. The 2019 PRI Leaders’ Group showcases signatories to the UN’s Principles of Responsible Investment that demonstrate excellence in responsible investment broadly, and in selecting, appointing and monitoring external managers. The Leaders’ Group includes only around 10% of all investor signatories globally.

To read more about the PRI Leaders’ Group, please click here. https://www.unpri.org/download?ac=7038

06.2. Additional information.

PRI Co-ordinated Engagement on Corporate Tax Responsibility for 2018-19

Company Notes on Ramsay Healthcare (Lead Investor: Vision Super Pty Ltd)

As part of the Company’s commitment to transparency and being a responsible tax payer, the Board resolved during FY2017 that the Company would voluntarily disclose against the Australian Board of Taxation’s Voluntary Tax Transparency Code. A copy of the Company’s Australian Tax Governance Report can be found on the Company’s website (http://www.ramsayhealth.com/Investors/Australian-Tax- Governance). (p24 AR)

Ramsay’s tax corporate governance framework and its documented policies and procedures have been in place for many years. Important elements of Ramsay’s tax corporate governance documentation include: - The process by which Ramsay will identify, assess and mitigate Australian tax risks - The Board’s tolerable level of tax risk in accordance with its proactive and risk averse approach to taxation - A framework for the management of, and requisite reporting levels for, each type of tax risk/roles and responsibilities are clearly articulated. (TGR)

The Group Finance Director has concerns about country by country reporting and stated that people couldn’t match up Ramsay’s EBITDA with taxes paid, due to leverage, tax loss provisions from prior years etc.

Ramsay will not undertake country by country reporting. It does not wish governments to compare rates of tax payable in different jurisdictions.

Ramsay Healthcare has signed up to the Australian Board of Taxation’s Voluntary Tax Transparency Code. The Board robustly discusses tax twice a year (half year and full year results).

The audit partner presents and is questioned during these sessions. The Group Finance Director is usually absent from these sessions.

Ramsay has significant regulatory risk and informally characterizes itself as risk adverse on tax.

The Board of Directors’ role includes ensuring good tax corporate governance. Part of exercising good tax corporate governance involves the establishment of a strong framework for managing tax risk.

The Board acknowledges the need to articulate and disseminate the acceptable level of tax risk tolerance within Ramsay.

In this regard, Ramsay adopts a proactive and risk averse approach to taxation built upon transparency and pro-active engagement with the Revenue authorities.

Ramsay did not make any formal commitments to improve specifically any other areas around tax disclosure during our on-site meeting.

Ramsay’s business primarily involves the operation of private hospitals in Australia and overseas in England, France, Malaysia and Indonesia.

Ramsay is committed to being a responsible corporate taxpayer. Ramsay values ethical behaviour, integrity and respect in all aspects of its operations including its approach to tax.

Ramsay is open and transparent in its approach to tax. Ramsay supports and adopts the Board of Taxation’s voluntary tax transparency code and is pleased to present its Tax Governance Report.

The tax rate paid on average in Australia is around 29% which is close to the effective Australian corporate statutory tax rate of 30%. Ramsay pays an effective tax rate in France of 44%, its highest tax paying jurisdiction of business. 

Ramsay has most of its debt in France so that, its earnings are lower in France than they otherwise would be if debt was pro-rata’d across the business.  At our meeting the Group Finance Directors stated that this is because Ramsay’s investment is a joint venture and the debt is non-recourse. Ramsay has a Singapore office. There is a worldwide prosthetics global procurement business located there. Minimal tax is paid in Singapore but there are minimal revenues from this operation anyway. Ramsay approached the tax office about this before they implemented the arrangement.

Ramsay most likely structures their debt arrangements to be tax efficient.  Most of the debt is in France purportedly because they are in a joint venture and have non-recourse debt.  However, France is a large part of the business and a write off would be catastrophic. It seems likely that tax reasons are an important reason for more debt being taken out in France.

However, they do not undertake transfers of profit to low tax jurisdictions to minimize tax.

Ramsay is relatively transparent in its reporting. It is highly dependent on government for its revenues.  It recognizes that it has a high regulatory risk from aggressive tax policy.  The company is relatively conservative on taxation, but its debt is distributed in a tax efficient manner, it has lobbied government to protect its interests and it will not undertake country by country reporting unless compelled to do so.

SuperRatings Infinity Rating

Vision Super received a SuperRatings' Infinity Rating for environmental and social responsibilities for 2020. This was the 11th time that we have received a SuperRatings' Infinity Rating. The Infinity Rating recognises Vision Super as leading the industry in sustainable behaviour with genuine responsible investment principles, openly communicating with fund members and having sound internal sustainability practices underpinning our responsible investment practices.


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