LGS invests on behalf of our members using a responsible investment approach. We believe that this approach minimises risk, generates better long term returns and is in line with our members' interests. A responsible investment approach means integrating ESG considerations into investment decision making processes.
LGS is the largest whole of fund certified responsible investor in Australia having been externally certified by the Responsible Investment Association Australasia (RIAA) https://www.lgsuper.com.au/about-us/riaa/ with investments across Australian and international shares, property, infrastructure, fixed income, private equity and absolute return asset classes.
The LGS Sustainable and Responsible Investment (SRI) Policy provides a formal framework for integrating ESG considerations into all of our investments. Reviewed annually, the LGS SRI Policy details our internal processes for assessing and undertaking investments. It is available online at https://www.lgsuper.com.au/assets/Documents/LGS-Sustainable-and-Responsible-Invest-Policy.pdf. This Policy sets down the sustainability principles by which LGS will be managed and the requirements for all investments made by LGS. It covers the total investment portfolio, with specific policies for public and private equity investments and direct property. It includes the following strategies:
We aim to integrate, monitor and manage ESG risks throughout the investment process to ensure we are safeguarding our members' interests. Key ESG integration strategies we use include:
- Negative screens - We will not invest in controversial industries and limit our exposure to activities which we view as long term investment risks. LGS' negative screens exclude approximately 272 companies globally involved in tobacco, controversial weapons, gambling, coal mining, coal fired electricity and oil tar sands.
- Positive screens - We seek investment opportunities that have a positive social and/or environmental impact on society e.g. renewable energy generation, recycling plants, waste management, schools, hospitals and sustainable agriculture. We currently have approximately AU$4.7 Billion invested in sustainable and low carbon investments.
- SRI Overlay - We short sell or replace stocks when our fund managers are unable to direct funds away from controversial or high risk companies through investments in co-mingled trusts.
- Investment practices - We monitor our investments for ESG risks and engage with our fund managers and advisors on how to integrate ESG considerations into the investment process. To ensure that external managers are fulfilling our fiduciary duty, we integrate responsible investment parameters into the selection, appointment and monitoring processes.
We are committed to being an active owner of our investments and believe that by working with the superannuation industry and engaging with companies on ESG issues, we can minimise potential risks across our investment portfolio, maximise member returns and make a difference to society. Engagement strategies we use to influence change include:
- Company engagement - We actively engage with companies about ESG issues through one-on-one meetings, briefings, phone calls and letters.
- Proxy voting - We undertake voting at shareholder meetings for the companies we invest in and publish our decisions before meetings to ensure transparent voting practices.
- LGS' latest proxy voting report can be found at https://www.lgsuper.com.au/assets/Documents/Proxy-Reports/Proxy-Voting-Report-Dec-2019.pdf
- Industry collaboration - We work with the superannuation industry to advocate for change on environmental, social and/or governance risks across industries.
- Transparency - We disclose comprehensive information about our sustainable and responsible investment practices to raise awareness about how we manage our members' retirement savings.
- LGS' latest carbon emissions report can be found at https://www.lgsuper.com.au/investments/responsible-investment/sustainable-investment-reports-and-policies/carbon-emissions-report-december-2019/
- LGS' latest ESG risk report can be found at https://www.lgsuper.com.au/investments/responsible-investment/sustainable-investment-reports-and-policies/lgs-esg-report-december-2019/.