Purpose and objectives of the policy
The Policy sets out Cbus’ approach to managing responsible investment including ESG matters, and climate change, in its investments and the Fund. It directs the Fund to adequately consider ESG risks and opportunities as part of the investment process in accordance with the Investment Governance Framework. It is applicable across all investment options. Cbus aims to apply best practice approaches for responsible investment to the Fund’s investments and within the organisation. The Policy is set by the Investment Committee and will be reviewed every two years, or more frequently.
This Policy applies to all Trustee Directors, all Cbus Group Executives, and all members of the Fund’s investment team.
The Trustee is at all times responsible for the Fund’s investments. The Trustee has delegated decision making responsibilities for responsible investment to Board Committees (primarily the Investment Committee) and management. The responsible investment team is primarily accountable for guiding the strategic direction for responsible investment. The investment team has accountability for supporting the implementation within the Fund’s investments activities.
Responsible Investment Philosophy and Beliefs
Responsible investment is a fundamental investment belief the Trustee considers necessary to deliver long term value creation for beneficiaries.
Responsible Investment Approach
The Trustee requires that responsible investment applies to all of the Funds investment activities including: across all geographic locations; all asset classes; direct, mandated and pooled funds; and all styles including active and passive.
The approach to implementation is shaped by the Fund’s investment strategy including outsourcing to investment managers to invest on its behalf and direct investment through internally managed investment portfolios.
The manner and extent to which responsible investment is incorporated into investment decision will differ and is dependent on the investment characteristics of each strategy. The Trustee acknowledges that implementation of responsible investment may require a tailored approach within and between asset classes.
Internally Managed Investment Portfolios
The Trustee has implemented an asset class specific internalisation model. The Fund implements responsible investment processes or procedures as internal capability is built for each asset class. The Fund will seek to be a leader in responsible investment for the asset classes in which it invests directly.
Responsible investment is a component of the investment manager selection and appointment process. The Fund prefers investment managers that have sound ESG practices or are actively developing their approach, which allows the Trustee to accommodate for managers at different stages in their responsible investment journey.
Investment managers are only appointed after a selection process in accordance with the Fund’s Due Diligence Policy and, where appropriate, its Outsourcing Policy. Investment Management Agreements (IMAs) detail the specific requirements for responsible investment, including reporting and monitoring requirements, and are based on the type of asset class and investment strategy being employed.
After an investment manager has been selected, the Fund actively engages with the manager and monitors the integration of responsible investment into their processes.
Mandates afford the Fund a greater level of control. They provide greater transparency and the ability to actively engage with both investment managers and the underlying companies on responsible investment. Some investments can only be accommodated in pooled arrangements. Where possible, the Fund uses its influence to ensure the terms of the pooled vehicles are aligned to its needs and will seek to incorporate the Fund’s approach to responsible investment in the governing documents.
Integration of responsible investment is the systematic and explicit inclusion of ESG considerations into financial analysis and decision making. This enables ESG risks and opportunities to be identified and factored into the risk return assessment for an investment. .
The Fund does not typically exclude particular companies, sectors or asset types. However, there are some circumstances in responsible investment where it is appropriate to consider exclusions of a sector or a specific stock from the Fund’s portfolio.
Any proposed exclusions require approval by the Investment Committee.
The Fund seeks to influence the companies and assets in which it invests through engagement and voting. The purpose is to communicate the interests of the Fund with the aim of enhancing long term value creation and minimising risk. Internal guidelines form the basis of the Fund’s approach to active ownership. These are approved by the IC and reviewed as required. Cbus acknowledges the additional responsibility of its influence in the Australian market. This reflects the size and ownership in Australian companies and assets and the location of Fund members.
Advocacy and collaboration
The Fund undertakes advocacy with the aim to influence the broader market and promote a shift towards a sustainable financial system. The focus is primarily on influencing standards, guidelines and regulatory reform that support long term value creation. The Fund has a preference to undertake advocacy through collaboration with other stakeholders.
Reporting and disclosure
Cbus seeks to take a leadership role on transparency and disclosure and will report its responsible investment activities and progress to all stakeholders through the Fund’s website and annual reports and through disclosure of the PRI Assessment Report.