The Responsible Investment policy framework has been established by the ACT Government for the financial investment assets managed by Treasury.
The Responsible Investment policy outlines the ACT Government's approach to addressing the Principles for Responsible Investment (PRI). The Responsible Investment policy was first approved by the Chief Minister and Treasurer of the ACT Government in July 2012 and is reviewed on an ongoing basis, with key enhancements to the overall policy framework being approved by the Chief Minister and Treasurer in 2014, 2015 and 2018.
The ACT Government recognises that financial as well as environmental, social and corporate governance performance can impact long-term investment value and performance. The Government considers that environmental, social and governance risks and ownership responsibilities should be incorporated in investment decision-making processes in order to mitigate investment risks and improve the sustainability of the investments for the long term. The responsible investment objective is to generate both financial and sustainable (long-term) value. The objective of the Responsible Investment policy is to focus on long-term value creation for the Government's financial investments, including not just economic value but also broader values such as sound corporate governance and environmental sustainability. The approach adopted to meet the responsible investment objective is to combine both financial and non-financial ESG criteria in the selection and management of the financial investment portfolio assets.
Key elements of the approach to Responsible Investment include a direct integration of ESG and global norms analysis into investment decisions, a comprehensive proxy voting policy framework, as well as increased transparency and accountability of the investment operations and management of the investment assets with ongoing required reporting and public information disclosure.
The policy framework includes individual listed company screening for compliance with, or violations of, criteria that are consistent with recognised and widely accepted global norms and conventions, including the UN Global Compact, the ILO Declaration on Fundamental Principles and Rights at Work and the Universal Declaration of Human Rights. The analysis provides an assessment of the extent of company violations or controversies resulting from the impact of company operations and/or products and services that allegedly violate national or international laws, regulations, and accepted global norms and conventions. Companies highlighted by this assessment are excluded from the ACT Government's allowable investment universe.
The policy framework also includes individual listed company screening to assess a company's exposure to and management of ESG risks. The ESG risk assessment considers significant exposures to potential ESG risk and investment valuation impacts arising from changing global macro ESG trends.The assessment is based on key ESG themes including climate change, natural resources, pollution and waste, environmental opportunities, human capital, product liability, stakeholder engagement, social opportunities, corporate governance and corporate behaviour. These key ESG themes incorporate the assessment of a broad range of ESG risks and issues such as carbon emissions and carbon footprint, biodiversity and land use, water stress, labor management, health and safety, product safety and quality, supply chain standards, Board structure and diversity, business ethics and anti-competitive practices. Companies that are assessed as having very high and unacceptable ESG risk are excluded from the ACT Government's allowable investment universe.
The policy framework also includes listed company business activity exclusion-based screens where there is a strong ACT Government policy position and wide public support. These business activity exclusions are based on reasonable grounds that all, or a material, or in specific circumstances, any part of a listed company's revenue or core business is attributable to the manufacture of tobacco and related products, and the manufacture of cluster munitions and land mines.
The policy framework also includes listed company screening to assess a company's carbon emissions, carbon intensity and exposure to fossil fuel reserves. Companies that exceed set thresholds for carbon emissions and/or carbon intensity and/or exposure to fossil fuel reserves are excluded from the ACT Government's allowable investment universe.
The ACT Government's approach to Responsible Investment also includes a comprehensive proxy voting policy framework which is aligned with the requirements of being a signatory to the PRI. The ACT Government makes full use of the rights of share ownership through actively exercising all voting rights. The ACT Government votes all directly-owned shares for the promotion of effective corporate governance, environmental and social practices, as well as long term value creation.
Transparency and accountability are key elements of the Responsible Investment policy framework. This includes the requirement for ongoing reporting of investment activities, as well as the public disclosure of the ACT Government's Responsible Investment policy, Investment Plans, directly-owned share holdings, proxy voting policy and share voting activity for the financial year.