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Vision Super

PRI reporting framework 2020

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

Selection

SAM 02. Selection processes (LE and FI)

02.1. Indicate what RI-related information your organisation typically covers in the majority of selection documentation for your external managers

Your organisation’s investment strategy and how ESG objectives relate to it

ESG incorporation requirements

ESG reporting requirements

Other

No RI information covered in the selection documentation

LE

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
FI - Securitised
Private equity
Property
Infrastructure
Your organisation’s investment strategy and how ESG objectives relate to it
ESG incorporation requirements
ESG reporting requirements
Other
No RI information covered in the selection documentation

02.2. Explain how your organisation evaluates the investment manager’s ability to align between your investment strategy and their investment approach

Strategy

Assess the time horizon of the investment manager’s offering vs. your/beneficiaries’ requirements

Assess the quality of investment policy and its references to ESG

Assess the investment approach and how ESG objectives are implemented in the investment process

Review the manager’s firm-level vs. product-level approach to RI

Assess the ESG definitions to be used

Other

None of the above

LE

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
FI - Securitised
Private equity
Property
Infrastructure
Assess the time horizon of the investment manager’s offering vs. your/beneficiaries’ requirements
Assess the quality of investment policy and its reference to ESG
Assess the investment approach and how ESG objectives are implemented in the investment process
Review the manager’s firm-level vs. product-level approach to RI
Assess the ESG definitions to be used
Other
None of the above

ESG people/oversight

Assess ESG expertise of investment teams

Review the oversight and responsibilities of ESG implementation

Review how ESG implementation is incentivised

Review the manager’s RI-promotion efforts and engagement with the industry

Other

None of the above

LE

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
FI - Securitised
Private equity
Property
Infrastructure
Assess ESG expertise of investment teams
Review the oversight and responsibilities of ESG implementation
Review how is ESG implementation enforced /ensured
Review the manager’s RI-promotion efforts and engagement with the industry
Other
None of the above

Process/portfolio construction/investment valuation

Review the process for ensuring the quality of the ESG data used

Review and agree the use of ESG data in the investment decision making process

Review and agree the impact of ESG analysis on investment decisions

Review and agree ESG objectives (e.g. risk reduction, return seeking, real-world impact)

Review and agree manager’s ESG risk framework

Review and agree ESG risk limits at athe portfolio level (portfolio construction) and other ESG objectives

Review how ESG materiality is evaluated by the manager

Review process for defining and communicating on ESG incidents

Review and agree ESG reporting frequency and detail

Other, specify

None of the above

LE

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
FI - Securitised
Private equity
Property
Infrastructure
Review the process for ensuring the quality of the ESG data used
Review and agree the use of ESG data in the investment decision making process
Review and agree the impact of ESG analysis on investment decisions
Review and agree ESG objectives (e.g. risk reduction, return seeking, real-world impact)
Review and agree manager’s ESG risk framework
Review and agree ESG risk limits at athe portfolio level (portfolio construction) and other ESG objectives
Review how ESG materiality is evaluated by the manager
Review process for defining and communicating on ESG incidents
Review and agree ESG reporting frequency and detail
Other, specify
None of the above

02.3. Indicate the selection process and its ESG/RI components

02.4. When selecting external managers does your organisation set any of the following:

ESG performance development targets

ESG score

ESG weight

Real economy influence

Other RI considerations

None of the above

LE

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

02.5. Describe how the ESG information reviewed and discussed affects the selection decision making process.[OPTIONAL]

          ESG information is reviewed as part of the overall determination within the selection decision making process. Fund managers are required to outline how they assess ESG risks within portfolios.
An established approach to ESG by short rated fund managers will form a major part of due diligence completed by Frontier Advisors, both at the time of initial manager assessment, and as part of an ongoing review.
All manager's initial assessment and ongoing review work, managers will be rated on their approach to ESG aspects taking into account a number of areas ranging from culture and ESG philosophy/beliefs, significance of governance in managers's process, level of engagement with company management and voting.
Furthermore, Vision Super will annually conduct asset class sector reviews and as part of this working program, will ask all it's fund managers to highlight the ESG initiatives that hey have conducted within portfolios.
If the management team has concerns with any managers approach or lack off within ESG, the investment team will report this to the Investment Committee for review and potential actioning.
Management also conducts quarterly conference calls for listed equity/bond managers which includes an agenda on non-financial ESG related matters.
In our experience this is a relative process.  No manager's approach to ESG is the same as ours and the majority of managers place little importance on this.  However since we begun voting all our shares we have noticed that our managers are starting to pay more attention, particularly when we vote differently to how they are voting.
Vision Super's asset consultant Frontier Advisor undertakes responsible investment research primarily through their research teams, reflecting the domain expertise required to effectively analyse ESG factors within specific asset classes/capital markets. As outlined in Frontiers Responsible Investment Policy, a research team may collaborate on responsible investment research with other business units including but not limited to, other research teams, the Responsible Investment Group, client teams and the Governance Advice, Risk, Decisions and Strategy Team, on an as-needs basis. Where relevant, a research team may draw on externally-produced responsible investment intelligence to supplement its proprietary analysis.
Each research team formally reports on material responsible investment matters across all major asset classes/capital markets on at least an annual basis. More generally, where deemed material, asset class/capital markets research reports will include consideration and analysis of relevant responsible investment issues.
Research teams actively engage with investment managers on an ongoing basis to encourage improvement across all facets of their operations. This formally includes engaging with investment managers on the integration of responsible investment considerations into their processes. The objective is to have investment managers continually deliver progressively better services to Frontier’s clients over time.
        

SAM 03. Evaluating engagement and voting practices in manager selection (listed equity/fixed income)

03.1. Indicate how your organisation typically evaluates the manager’s active ownership practices in the majority of the manager selection process.

Engagement

Review the manager’s engagement policy 1

Review the manager’s engagement process (with examples and outcomes)

Ensure whether engagement outcomes feed back into the investment decision-making process

Other engagement issues in your selection process specify

LE

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
FI - Securitised
Review the manager’s engagement policy
Review the manager’s engagement process (with examples and outcomes)
Ensure whether engagement outcomes feed back into the investment decision-making process
Other engagement issues in your selection process specify

03.2. Describe how you assess if the manager’s engagement approach is effective.

03.4. Additional information [OPTIONAL]

          Corporate engagement with companies is one of the most effective mechanisms of creating value along with voting our shareholding interests at annual general or extraordinary meetings.
As example, SSgA our global passive equities fund manager have been engaging on climate related issues since 2012.  In 2019 SSgA engaged with 136 companies on climate related issues across 22 industries. They aim to leverage the four pillars of the Task Force on Climate-related Financial Disclosures (TCFD) framework – Governance, Strategy, Risk Management and Metrics - during engagement to understand the companies’ approaches and activities to mitigate and manage climate related issues.
For portfolios managed by Brandywine Global Investment Management that allow exposure to corporate debt, a company the manager held was facing pressure from investors to put into place a credible plan to refinance its upcoming 2020 bond maturity. The Investment team met with management on multiple occasions over a two-month period, including the CEO, CFO, head of IR, and equity holder, to assess whether the company represented significant default risk. The company showed little corporate governance and oversight, which increased their concern that the chairman was able to asset strip the company at low valuations, move assets into another entity, and default on the debt while maintaining control of good, cash-producing assets. Additionally, assessing the price and yield, risk was believed to be limited, but a stronger dollar and potential for additional pressure on emerging market credits outweighed the positives. An operational turnaround has also been slow to materialize. The company was not able to satisfy Brandywine's concerns over the engagement period, and the positions in the company were sold.
Furthermore, Brandywine's Global Fixed Income team also engages with government finance and central bank officials to gain information on an emerging country’s policies and plans when visiting a country and through participation in conferences such as those hosted by the IMF and IIF. They view these interactions as beneficial to our research process to gain direct insights into a country.
Engagement also provides fund managers with the opportunity to share their philosophy and corporate governance values and make a positive contribution to investee companies. Furthermore, it often provides us with a deeper and different perspective on how the company operates.
IFM Investors who manage a number of portfolios for Vision Super ranging from equities, debt, infrastructure and private equity believe active company engagement is critical to the advancement and promotion of 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. Furthermore, IFM's activity is prioritised around pre-determined themes and objectives, which are reviewed on an annual basis. They also frequently engage with regulators, industry associations and the investment community to promote best practice responsible investment standards.
        

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