Consideration of ESG issues in allocation of assets between (or within) asset classes and/or between geographic markets is undertaken informally. ESG considerations are not specifically built into any asset allocation model.
Allocation between asset classes
Our asset consultant works collaboratively with our internal team for recommending allocations to major asset classes. Their allocation process incorporates expectations about returns within each asset class and also the volatility and correlations between asset classes. Neither our asset consultant nor internal team price or evaluate ESG considerations at the asset class level.
Allocation of assets between geographic markets
Our asset consultant does not set the allocation of assets between geographic markets, rather, this is generally outsourced to the fund managers within the asset class. When selecting fund managers that may impact the allocation of assets between geographic markets, HESTA considers any specific ESG issues associated with different regions or countries.
Allocation to ESG themed/focused investments
During 2018 HESTA's Board approved an additional allocation to the Social Impact Investment Trust (SIIT), managed on behalf of HESTA by Social Ventures Australia (SVA). Our partnership with SVA on the SIIT aims to catalyse the nascent impact investment market in Australia.