First State Super has established an assessment framework to review internal and externally managed investment managers and direct assets. This forms an integrated part of the initial due diligence process.
Potential externally managed investment managers are rated (positive, neutral, negative) on their:
- stage of ESG policy development;
- level of ESG integration in investment analysis and decision-making processes;
- stewardship (voting, engagement and stock lending practices);
- resources available to incorporate ESG in investment analysis and be involved in engagement activities;
- transparency; and
All else being the same, we prefer investment managers and assets that demonstrate sound ESG practices, and require any newly appointed investment managers to monitor ESG risks that relate to the Funds’ investments. Our Investment Management Agreements include clauses relating to Responsible Investment activities and reporting requirements.
Once an internal or externally managed investment manager or direct asset is assigned an internal rating (positive, neutral, negative), it is used to encourage improvements in ESG practices on an ongoing basis.
In addition, each investment manager who manages money on behalf of members is required to report at agreed intervals to the Trustee about:
- improvements to the integration of ESG considerations in its investment analysis and decision-making processes;
- how they exercised their voting rights (if any); and
- their ESG engagement activities with companies and how they intend to progress ESG issues with them.
We also discuss ESG issues in manager review meetings which occur quarterly or half-yearly depending on the location of the manager.