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UniSuper Management Pty Limited

PRI reporting framework 2020

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You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe We have considered a range of risk factors and exposure in scenario analysis on our investments. The outcome of this analysis found that our portfolios are not overly exposed to climate risks, but that continual monitoring is required

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

The primary SAA decision (debt/equity split) does not consider ESG - however ESG is considered (in particular with respect to the quality of governance and rule of law in particular countries) when establishing SAA's - which has resulted in a home and developed market focus. 

We also offer 3 sustainable/ESG focused options to members which consider ESG factors as central aspects of their porfolio construction process.

SG 13 CC.

13.4 CC. Describe how your organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, its results, and any future plans.

Describe

Please refer to our public climate risk disclosures report. UniSuper has been focused on the investment related risks of climate change since 2007

UniSuper has prioritised exposure analysis, to stress test the portfolio. If this analysis brings to light material risks, then further senarios are run. This analysis is performed annually and published to members.

  • Transition - exposure to fossil fuels- exploration, production, transportation and use
  • Transition - exposure to supporting infrastructure and industrials reliant on fossil fuels - eg Airports, steel manufacturing
  • Transition - exposure to financial services sector - Insurance and banking
  • Transition - exposure to green products and services
  • Carbon Footprint - Relative to MSCI benchmark
  • Physical Risks - exposure to severe weather events
  • Physical risks - exposure to rising tides for large asset exposure (property and infrastructure) - using a 4 degree scenario
  • Company response -  measuring how companies are responding - with carbon targets, renewable energy and energy efficency

Describe

Please refer to our public climate risk disclosures report. We consider climate risk as part of our investment decision making process.

Describe

We have been very active in engaging on climate risk for over 6 years. 

We assess our portfolio holdings and identify specific companies that we will raise climate risk with, in a detailed and targeted manner. However, more broadly, we also raise climate risk in almost all company engagement meetings. As a direct consequence of UniSuper's active ownership practices we have seen companies increase their focus on and disclosures regarding climate risk management.

We also measure and track company committments and actions as part of our climate risk analysis

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether your organisation has evaluated the potential impact of climate-related risks, beyond the investment time horizon, on its investment strategy.

Please explain the rationale

We do not think that UniSuper's strategic asset allocation (Listed Equity/Infrastructure/Property/Fixed Income) will be impacted by climate change. However, underlying investments and decisions within these categories do consider the risks of climate change on the business model and earnings sustainability. 

13.7 CC. Indicate whether a range of climate scenarios is used.

13.8 CC. Indicate the climate scenarios your organisation uses.

Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify: 

          Multiple scenarios - see below
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

Option for members:

  • 2 screened Fossil Fuel Free options - Sustainable High Growth and Sustainable Balanced (which has an allocation to green bonds)
  • 1 environmental thematic option on offer (Global Environmental Opportunities)
  • 4 additional fossil fuel free options (as a result of investment universe - not counted in AUM above) - Global Companies in Asia, Listed Property, Australian Bonds and Cash

Investments

  • 2 investments in water infrastructure - Prospect Water and the Aquasure - Desalination water plant
  • Timber investments 

other description 

          - Offer fossil fuel free options to our members
- Invest in green bonds
- Portfolio level risk assessment

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

We use company reported information (no estimates), as such coverage is not complete. 

While we monitor this information, we believe that there are material limitations in the use of carbon footprinting as a measure of climate change risk management. Considering emissions, along with other information and assessing how companies are managing their risk provides a more comprehensive view of the risks. 

14.5. Additional information [Optional]

Consideration of these risks, and a broad range of other risks are an essential part of conducting rigourous and detailed investment analysis.

SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Weighted average carbon intensity 
          To understand and identify carbon risks in our portfolio
        
          CO2 Tonnes/Revenue/%ownership
        
          Thomson Reuters data
Carbon footprint (scope 1 and 2) 
          To understand and identify carbon risks in our portfolio
        
          CO2 Tonnes
        
          Thomson Reuters data
Portfolio carbon footprint
Carbon intensity 
          To understand how carbon intensive our equities portfolios are vs the benchmark
        
          CO2 Tonnes/Revenue
        
          Thomson Reuters data
Exposure to carbon-related assets 
          To understand and identify carbon risks in our portfolio
        
          NA
        
          Subjective assessment

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

Please refer to our detailed public climate risk disclosure report.

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

We commit a sigificant amout of time and resources to engaging with investee companies to encourage reporting in accordance with the TCFD recommendations. Further, prior to the TCFD coming into existence, we had for a number of years engaged with investee companies to encourage them to report on what climate risks (physical and transition) their businesses face, how they are managing such risks and why their businesses will remain resilient into the future.

As a direct consequence of our engagement activities we have seen companies that we have engaged with increase their transparency (and also take action to better manage climate risk).

SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

6 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

2 Percentage of AUM (+/-5%) per asset class invested in the area
6 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

We provide our members the choice to invest in a specific Global Environmental Opportunities Option which excludes fossil fuels and focuses on alternative energy, clean technology, clean water, waste and pollution control and green buildings. This is an equity only portfolio

The sustainable balanced option, as part of the fixed income component, now also has exposure to World Bank green bonds and also green bonds issued by ANZ and NAB.

Asset class invested

100 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

All of UniSuper's investments in forestry are in sustainably managed softwood timber plantations

Asset class invested

4 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

UniSuper invests in the Victorian Comprehensive Cancer Center. This is a cancer research and treatment factility. 

Asset class invested

26 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

We provide our members the choice to invest in a specific Global Environmental Opportunities Option which excludes fossil fuels and focuses on alternative energy, clean technology, clean water, waste and pollution control and green buildings. This is an equity only portfolio - these investments have been counted in the energy efficency/clean tech category.

UniSuper also invests in an Australian water treatment plant and desalination plant in its infrastructure portfolio.

15.4. Please attach any supporting information you wish to include. [OPTIONAL]


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