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CBUS Superannuation Fund

PRI reporting framework 2020

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Outsourcing to fiduciary managers and investment consultants

SG 12. Role of investment consultants/fiduciary managers

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12.1. Indicate whether your organisation uses investment consultants.

12.2. Indicate how your organisation uses investment consultants in the selection, appointment and/or monitoring of external managers.

Asset class

Asset class

12.3. Indicate if your organisation considers responsible investment in the selection, appointment and/or review processes for investment consultants.

12.4. Indicate whether you use investment consultants for any the following services. Describe the responsible investment components of these services.

Describe how responsible investment is incorporated

          Frontier acknowledges that each of its clients will approach responsible investment (RI) considerations in a different way, depending on its unique set of objectives, constraints and values.  Frontier therefore works closely with clients to understand and clarify their ESG investment beliefs and objectives in order to help define matters that are most important to them and assist with the development of their ESG/RI philosophy and policies.  Emphasis is placed on ensuring the client’s RI philosophy is fully integrated into their broader investment philosophy
Frontier draws on its experience as an adviser to superannuation funds and other institutional investors to inform its dialogue with clients on developing RI policy.  Specialists from Frontier's Responsible Investment Group, and Governance, Advice, Risk, Decisions and Strategy team work directly with clients to assist them in developing an investment governance philosophy and framework, including an ESG/RI policy.
        

Describe how responsible investment is incorporated

          In advising clients on integrating responsible investment into their strategic asset allocation, Frontier is primarily guided by the client’s responsible investment beliefs and policy. Frontier firstly seeks to ensure that responsible investment factors deemed most material to the client are appropriately reflected in their overall objectives, which ultimately define the parameters within which the strategic asset allocation process operates.

Frontier’s Capital Markets and Asset Allocation Team (CMAAT) integrates ESG considerations into the development of its long-term capital market assumptions on an annual basis.  The CMAAT draws on ESG research from across the broader business including Frontier’s sector Research Teams.  ESG factors deemed material by the CMAAT, e.g. transition to a lower-carbon economy, are considered alongside traditional factors, e.g. macroeconomic drivers, in determining the long-term expected returns, risk, correlations etc of major asset classes.  These metrics are the key inputs into the optimisation process which forms a core component in determining a client’s strategic asset allocation.  In 2019, the CMAAT reduced its long-term, “equilibrium” return assumption for cash, partly based on its base case expectation for the impact of climate change on economic activity.  This resulted in Frontier’s capital market assumptions declining across all asset classes.   

To assist its clients considering climate change factors as part of determining long-term investment strategy, Frontier has incorporated a Climate Change Module into Prism, its proprietary portfolio analytics system.  The objective of the Climate Change Module is to permit clients a better understanding of the potential impacts of climate change on investment portfolio outcome under different but plausible climate transition scenarios.
        

Describe how responsible investment is incorporated

          The consideration of and research into ESG factors are formally integrated into Frontier’s broader investment research efforts.  Frontier’s clients are asset owners with highly diversified, long-term portfolios and therefore considered “universal owners”.  Such asset owners are reliant on a sustainable real economy, as well as predictable and reliable global systems, to achieve their performance objectives.  As such, the objective of Frontier’s responsible investment research effort is to positively impact long-term investment outcomes by identifying, assessing and communicating relevant and material investment risks and opportunities arising from ESG factors.
At the delegation of Frontier’s Investment Committee, Frontier’s Responsible Investment Group has primary responsibility to formulate and drive the firm’s responsible investment research agenda.  This process is continually informed by Frontier’s interactions on responsible investment issues with a broad range of industry stakeholders including clients, investment managers and responsible investment advocacy groups.
Given the large number and wide variety of ESG factors, the formulation of Frontier’s responsible investment research agenda also considers the materiality of these factors.  ESG factors expected to have a material impact on the long-term performance of client portfolios are prioritised for research.  
Frontier is further directed by the UN Sustainable Development Goals which in aggregate are viewed as providing tangible and detailed guidance on the likely evolution of development-related policies and capital funding requirements to achieve them.  Frontier focusses on those goals where it believes it can materially influence the outcomes on behalf of clients.
Responsible investment research is primarily undertaken by Frontier’s Research Teams, reflecting the domain expertise required to effectively analyse ESG factors within specific asset classes/capital markets.  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.
        

Describe how responsible investment is incorporated

          Responsible investment considerations are formally integrated into Frontier’s investment manager assessment, monitoring and engagement processes.  The objective of integrating responsible investment in Frontier’s investment manager research effort is to positively impact long-term investment outcomes by identifying, assessing and communicating the relative credibility and capabilities between investment products with respect to ESG.  
Consistent with the broader investment product rating process, the responsible investment assessment process is multi-faceted, drawing on a range of quantitative and qualitative inputs determined as being material by the relevant Research Team in accordance with Belief 5.  Such inputs are sourced variously as needed, although direct discussions and case studies with the investment manager are standing elements of the process as these support a greater depth of understanding relative to sole reliance on manager-supplied documentation.
Typical areas of assessment include the following, with individual Research Teams determining the materiality of each with respect to the specific product.  Emphasis is placed more on the appropriateness and suitability of the investment manager’s responsible investment approach in the context of its overall strategy rather than on strict and potentially arbitrary metrics.
1.	Responsible Investment/ESG Philosophy, and Policy 
2.	Responsible Investment Resourcing 
3.	Integration of Responsible Investment into the Investment Process
4.	Stewardship 
5.	Collective Activity
6.	Climate Change
7.	Reporting and Client Service 
Responsible investment considerations are formally incorporated into annual reviews of investment products.  The objective is to review, update (as required) and/or re-confirm the Research Team’s current assessment of the investment manager’s responsible investment capability with respect to the product.  A focus of the review is to document the evolution of the investment manager’s responsible investment approach over the prior 12 months.  The review also accounts for the evolution of responsible investment integration in the product’s peer group over the same period to determine the Manager’s relative level.
Research Teams actively engage with investment managers on an ongoing basis to encourage improvement across all facets of their operations.  This formally includes the integration of responsible investment considerations.  The objective is to have investment managers continually deliver progressively better services to Frontier’s clients over time
        

12.7. Additional information [Optional].


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