The Sustainable Balanced and Sustainable High Growth options specifically seek to invest in companies that are considered sustainability leaders whilst also screening out companies with material exposure to alcohol, gambling, weapons and fossil fuel exploration and production (in addition to the Fund-wide screen on tobacco companies). We also seek to exclude companies identified as being in breach of the UN Global Compact.
This product is responsible/Sustainable as it screens out companies that generate more than 5% of their revenues from products that are widely accepted as being harmful to individuals and/or the climate. The screened sectors include alcohol, gaming, fossil fuel exploration and production, and weapons (in addition to the fund wide exclusion on tobacco). In addition we also exclude companies that are in breach of the UN Global Compact. This option also invests in bonds and equities that target social and environmental solutions through green/social bonds and companies that generate more than 50% of their revenues from addressing environmental concerns (renewable energy, energy efficiency, water and waste management, and green buildings.
UniSuper’s Investment team is responsible for stock selection and portfolio construction for all of the underlying portfolios of the Sustainable Options. This includes significant input from the ESG team at every stage and in conducting ongoing portfolio monitoring.
We use the MSCI ESG research tool, Bloomberg data, broker information and other data sources (i.e. proxy voting reports, GRESB survey etc) to screen companies.
Sustainable Australian and International Shares portfolios (which comprise the equity component of the Sustainable Balanced and High Growth Options):
- Apply a negative screen to the appropriate index, excluding stocks that have material exposure to alcohol, tobacco, gambling, weapons and fossil fuel exploration and production. In addition to this, we also screen for UN Global Compact breaches
- Apply a positive screen using research combining specialist ESG research and an internal quality review process conducted by the ESG team.
- Qualitative overlay and review of the holdings proposed to be eligible for investment.
- Optimise the portfolio with regard to ESG factors whilst attempting to maintain similar investment return characteristics of the relevant index.
The Global Environmental Opportunities portfolio:
- Identifies companies that receive more than 50% of their revenues from addressing environmental themes including alternative energy, clean technology, water infrastructure and technologies, green buildings and waste management and pollution control.
- Applies a negative screen excluding stocks that have material exposure to the excluded sectors of alcohol, tobacco, gambling, weapons and fossil fuel exploration and production.
- Identifies those companies involved in electricity generation and ensure that the majority of generation comes renewable energy and confirm that any back up generation capabilities comprise less than 30% of total generation, and comes from gas generation (coal generation is excluded) to allow for energy security / back up generation capabilities.
- Considers ESG and investment quality in the portfolio construction process with significant involvement and input by the ESG team.
Moderate Risk Equity Portfolio
- High quality infrastructure and listed property stocks as assessed by our internal equities and ESG team - meeting exclusions as detailed above.
- the investable universe (by definition) does not have any exposure to the excluded sectors (which acts in place of the negative screening process applicable for the Australian and international equities portfolios).
- In managing this portfolio, an assessment is undertaken of sustainability criteria, recognising that sustainability is a key driver of quality stocks in the sector.
- The ESG team is responsible for assessing the suitability of REITs for inclusion from a sustainability perspective.
- Where a REIT derives the bulk of its revenue from tenants involved in the excluded activities we seek to exclude these REITs (e.g. Viva Energy REIT – is excluded on the basis that its tenant derives the bulk of its revenue from the sale of fossil fuels). However, this is not a hard coded rule, rather something that we do as a matter of practice
- Refer to attached Sustainable Property Process document.
- As a low risk, high opportunity area with respect to ESG, a key activity is extensive engagement with companies in the sector focused on ESG activities.
Green Bonds portfolio:
- Issuances are considered on a case by case basis, with the ESG team conducting due diligence to ensure they exhibit the characteristics of the Climate Bonds Initiative and are compatible with the ESG characteristics of the borrowing organisation as well as the underlying project.
- Financial assessment done to ensure that returns are comparable with other bonds with the same risk characteristics.
Australian Sovereign Bonds:
- the investable universe (by definition) does not have any exposure to the excluded sectors
As with all UniSuper portfolios – mainstream and sustainable- we seek to be an active owner, voting at all company meetings, and discussing and engaging regarding ESG issues when we meet with company management and boards.