This report shows public data only. Is this your organisation? If so, login here to view your full report.

CBUS Superannuation Fund

PRI reporting framework 2020

Export Public Responses
Pdf-img

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 Through the Mercer Climate Change Project in 2015 we modelled expected returns for various asset classes under different climate scenarios. In 2018, our asset consultant analysed effects of different policy scenarios. While not directly impacting asset allocation, this work focussed our efforts.

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]

In 2019, Cbus implemented a new strategic asset class for climate change solutions. This is a multi-asset portfolio with investments from listed equity, infrastructure, debt, private equity.   

In 2018, Cbus undertook work to review its asset allocation to international and domestic Australian equities. Part of this review assessed the climate risks concentrated in the Australian equities market. Whilst climate risks was only one part of the consideration for asset allocation and shifting greater weight to international equities, the findings from the climate work supported this view.    We also engage with other funds to understand their approach to scenario analysis.


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

Cbus undertook work with our asset consultant, Frontier, using their Partners Platform Climate Change module that outlines the portfolio impact results (return outcomes) on Cbus’ Growth Option from a return perspective under five different climate change policy response scenarios:
•CMA -standard CMA returns are provided for comparison with the five scenarios
•No Action–a scenario where there is no effective policy action (this is considered to have relatively little significance in terms of likelihood)
•Limit t=2 –policy action that limits global average temperature rises to 2 degrees (with 50% probability), which is an aspirational target involving greater effort by most countries compared to current policy settings. Emissions follow an “optimal” pathway
•Limit t=2 (2030 delay) –policy action that limits global average temperature rises to 2 degrees (with 50% probability), but which is delayed until 2030 (prior to which the emissions pathway is similar to the “no Action” scenario). The rate of emissions reduction is relatively rapid after 2030
•Paris Pledges–policy action based upon the aggregate pledges made by countries at the Paris conference in 2015, with a continuing trend in emissions beyond 2030 (allowance has been made in respect of the proposed U.S. withdrawal)
•No Action (Extreme temperatures) –there is no effective policy actions and temperature rises follow the trajectory of the 90th percentile of outcomes in the IPCC estimates

The findings included:
•The scenario “No Action (extreme temp.)” had the biggest estimated cost on portfolio returns to 2060, due to higher damage costs, relative to other scenarios
•Negative return impacts on Australian and Emerging Markets’ asset classes were slightly higher than for Developed Markets (ex-Australia) due to greater carbon intensity and higher expected levels of physical impacts

Cbus will be undertaking further analysis during 2020. 

Describe

Following the work from Frontier, and our Carbon Pricing Risk research Cbus has been assessing how to tilt its factor strategies using a low carbon transition score the results to be implemented in 2020. 

Cbus made a commitment that its property managers would commit by 2020 to set a target of net zero carbon emissions by 2030.  All property managers have committed to these targets with Cbus Property making its commitment public. A new target has been set for our infrastructure fund managers to commit to net zero carbon emissions.This could assist to de-risk the unlisted portfolio from climate change.

Describe

The Frontier work suggests engagement from fund managers and asset owners, or other focussed active equity selection strategies, can be an effective way of dealing with the risks (e.g. by bringing greater scrutiny to more risky projected capital expenditures) alongside any approach to de-risk a portfolio by tilting away from energy stocks.

Given the high amount of active equity stocks in the Cbus portfolio (approx 70%), engagement is considered a highly effective approach to managing risks in this area. 

Cbus has joined the Climate Action 100+ initiative, and also engages through its third party service provider ACSI and Hermes. 

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.

Describe

This detail is outlined in SG1.7CC and SG13.4 CC. In May 2018, Cbus asset consultant, Frontier, undertook modelling of specific risks that relate to climate change and that could impact upon portfolio returns in the medium-term over 20 years. The analysis intended to provide results in advance of, and to complement, Cbus’ own climate change analysis and annual review.  

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:

          Frontier: No Action scenario
        
Other

Other (2) please specify:

          Frontier: Limit t=2
        
Other

Other (3) please specify:

          Limit t=2(2030 delay)
        

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.

As at Dec 2019 based on the low carbon registry taxonomy reflecting NABERS 5 star ratings (investment value is taken from Cbus Property value at Dec 2019)

 

 

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.

Cbus disclosed its carbon footprint using several different metrics. This informed and supported our engagement with companies individually and influenced which target companies to engage with through our service provider. 

Cbus has publicly reported using the TCFD recommendations. 

Cbus also uses its Annual Integrated report to communicate climate change related information. 

ACSI, Hermes and Climate Action 100+ use data from climate-related disclosures to inform company engagement and research reports

 

14.5. Additional information [Optional]

Our external engagement providers ACSI and Hermes use company engagement and proxy voting for ASX-listed companies as a tool for managing climate change risks and opportunities.

ACSI and Hermes have been engaging with ASX companies for years on the disclosure and integration of climate-related risks and opportunities. ACSI and Hermes engage with a broad range of companies on climate risk and also prioritises particular companies based on materiality and exposure.

ACSI also uses proxy voting as a mechanism to create engagement on climate-related resolutions and as a tool for signalling where improvement on climate-related issues can be made.


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
Climate-related targets
          investment and reduction
        
          Portfolio allocation 1%
net zero emissions 2030
        
          1% - invest in climate solutions
Net zero: Science based targets
        
Weighted average carbon intensity
          What is my portfolio’s exposure to carbon intensive companies?
        
          t/USD million sales
        
          The average weighted carbon intensity for our combined Australian, global and emerging markets equities portfolio
        
Carbon footprint (scope 1 and 2)
          What is my portfolio’ total carbon footprint?
        
          apportioned emissions in tons CO2eq.
        
          absolute carbon emissions
        
Carbon intensity
          What is my portfolio’s normalized carbon footprint per AUD$ million dollars invested?
        
          tons CO2eq. /$M AUD invested
        
          carbon emissions financed in investments
        

14.7 CC. Describe in further detail the key targets.

Target type
Baseline year
Target year
Description
Attachments
          2020
        
          
        
          % Australian property fund managers that have introduced science based targets to commit to net zero emissions by a specific date
        
          rolling
        
          2025
        
          1% allocation to climate change solutions
        

          
        
          
        
          
        

          
        
          
        
          
        

          
        
          
        
          
        

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

The Investment Committee (IC) and Audit and Risk Management Committee (A&RM) have delegation from the Board to deal with responsible investment matters, including climate change.

At least annually, responsible investment risks, including climate change, will be formally reviewed and presented to A&RM. This occurs in conjunction with the revision of the Cbus Risk Appetite Statement.

Formal reporting to the IC on progress against the climate change roadmap will occur on a quarterly basis. The CIO Monthly Report to the Investment Committee also outlines any other responsible investment matters in respect of climate change such as company engagement, voting and advocacy related work.

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

Cbus encourages TCFD adoption though its direct engagement, ACSI's engagement and through Climate Action 100.


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.

4.53 %

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

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

Brief description and measures of investment

- Bright energy investments - Direct renewable infrastructure. 

- Capital Dynamics -  international renewables fund manager in Climate Climate Solutions 1% Portfolio.

Asset class invested

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

Brief description and measures of investment

Using IGCC standard for low carbon investments registry for property, being a 5 star or above NABERS Energy rating. All Cbus property buildings are at or above this rating. 

Asset class invested

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

Brief description and measures of investment

In March 2019 we participated in the first National Housing Financing and Investment Corporation (NHFIC) bond issue which raised $315 million to support social housing. The bonds have a Government guarantee and a AAA credit rating, the highest credit rating a bond can receive. 

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



Top