VicSuper Socially Conscious Investment Option

Product Name

VicSuper Socially Conscious Investment Option

Issuer

VicSuper

Category

Superannuation

Type

Superfund option

Target

Retail

Certified Since

2016

Asset Classes

Diversified / Multi-asset

Markets

Australia

Investment Approaches

Negative Screening, ESG Integration

It Includes:

  • No inclusions5 No inclusions

It fully excludes:

  • Riaa icons 41 Alcohol
  • Riaa icons 36 Armaments
  • Riaa icons 33 Fossil fuels
  • Riaa icons 42 Gambling
  • Riaa icons 45 Genetic engineering
  • Riaa icons 52 Human rights abuses
  • Riaa icons 50 Nuclear power
  • Riaa icons 99 Pornography
  • Riaa icons 35 Tobacco

Overview

Socially Conscious investment option VicSuper’s Socially Conscious investment option incorporates a wide range of explicit social and environmental objectives and it aims to help our members: • take action on climate change by not investing in companies that hold fossil fuel reserves used for energy purposes; • minimise social harm by not investing in companies that are materially involved in activities that potentially cause social harm, for example tobacco production, alcohol, gambling, military weapons, civilian firearms, nuclear power, adult entertainment and genetically modified organisms; • protect human rights, labour rights and the environment by not investing in companies that have been involved in severe incidents and/or controversies, or have been found not to be adhering to widely accepted global conventions. The objectives are achieved by applying a number of exclusionary screens when selecting companies for investment. These exclusionary screens only apply to the equities and fixed interest components of the investment option. We may introduce additional screenings in the future. Investments across the other asset classes apply an ESG integration approach, with the exception of Cash, which is not subject to ESG integration. Investment risk may be slightly higher for the Socially Conscious investment option because the portfolio is not as well diversified and has fewer underlying investment managers compared to our standard investment options. Investment risk may also be higher due to the exclusion of specific industries including fossil fuels, alcohol and gambling. Notwithstanding, its investment universe is sufficiently diverse to avoid inadequate diversification. Socially Conscious investment option (table) Environmental, social and labour objectives and exclusionary screens Take action on climate change Excludes investment in companies: • with coal, oil and/or gas reserves used for energy purposes. • deriving 30% or more revenue from mining of thermal coal or thermal coal based power generation1. • whose principal business revenue is derived from direct fossil fuel activity in the following GICS2 sectors: Integrated Oil & Gas; Oil & Gas Exploration & Production; Oil & Gas Refining & Marketing; Coal & Consumable Fuels; Oil & Gas Storage & Transportation; Oil & Gas Equipment & Services1,3 Minimalise social harm Excludes investment in companies materially4 involved in: • Tobacco • Alcohol • Gambling • Civilian Firearms • Military Weapons (cluster munitions, landmines, depleted uranium, biological/chemical, nuclear, conventional) • Nuclear Power • Adult Entertainment • Genetically Modified Organisms Protect human and labour rights and the environment Excludes companies that have been found not to be adhering to international norms represented by the UN Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, and the UN Global Compact. Excludes companies that have been involved in significant5 ESG controversies. Equities Colonial First State Asset Management (Australia) Limited (CFSAMAL AFSL 289017) is the manager of the Australian and international equity investments in the Socially Conscious investment option. CFSAMAL invests in companies sourced from a custom index prepared for VicSuper. The custom index combines the MSCI Global Fossil Fuels Exclusion Index and the MSCI Global Socially Responsible Index plus an additional fossil fuel direct activity screen. After applying the exclusionary screens listed in the table above, a best-in-class selection process6 is applied to the remaining equities in the selection universe. Links to detailed methodologies and criteria for the applicable MSCI indices and additional fossil fuel direct activity screen can be found at vicsuper.com.au/sociallyconscious The composition of the MSCI Global Fossil Fuels Exclusion Index is maintained and reviewed by MSCI on a quarterly basis. The composition of the MSCI Global Socially Responsible Index is reviewed by MSCI on an annual basis. CFSAMAL is provided with updates on any changes following these reviews. If there are any changes to the index, CFSAMAL will ensure that these are implemented within two weeks, where practicable, of receiving this change. A full list of the equities that Socially Conscious invests in is available at vicsuper.com.au/sociallyconscious. Fixed Interest BlackRock Investment Management (Australia) Limited (AFSL 230523) is the manager of one of the Australian fixed interest investments in the Socially Conscious investment option. It applies exclusionary screens to the corporate bonds it invests in. BlackRock is also the manager of the international fixed interest investments in the Socially Conscious investment option. For international fixed interest, it applies exclusionary screens to both corporate bonds and Treasury and Government-Related bonds it invests in. VicSuper’s Socially Conscious investment option is invested in BlackRock’s iShares ESG Australian Bond Index Fund (ESGB) and iShares ESG Global Bond Index Fund (ESGOBI), which implement customised indices. ESGB uses a Bloomberg Barclays MSCI Australian Socially Responsible (SRI) and ESG-weighted Index. ESGOBI uses a Bloomberg Barclays MSCI Global Aggregate SRI Select ex-Fossil Fuels Index. Both BlackRock funds exclude non-government securities associated with fossil fuels, alcohol, tobacco, gambling, adult entertainment, genetically modified organisms, military weapons, civilian firearms and nuclear power, as well as companies with an MSCI controversies score of 0. In addition, ESGOBI excludes Treasury and Government-related issuers with an MSCI ESG Government rating below BB. The definitions for exclusion, together with the ESG weighting methodology for ESGB, can be found at vicsuper.com.au/sociallyconscious The composition of the indices is maintained and reviewed regularly and rebalanced monthly. VicSuper undertakes an annual review of the Socially Conscious investment option and its objectives. (RIAA Symbol) The Certification Symbol signifies that a product or service offers an investment style that takes into account certain environmental, social, governance or ethical considerations. The Symbol also signifies that the VicSuper Socially Conscious investment option adheres to the strict operational and disclosure practices required under the Responsible Investment Certification Program for the category of Superfund Option. The Certification Symbol is a Registered Trade Mark of the Responsible Investment Association Australasia (RIAA). Detailed information about RIAA, the Symbol and the VicSuper Socially Conscious investment option's methodology and performance can be found at responsiblereturns.com.au, together with details about other responsible investment products certified by RIAA.6 1. This criterion applies to equities only. 2. The Global Industry Classification Standard (GICS) is an industry taxonomy developed in 1999 by MSCI and Standard & Poor’s (S&P) for use by the global financial community. 3. Companies who demonstrate that they are transitioning to clean energy may remain investable. 4. Materially means the company generally derives greater than 5% revenue from the activity. 5. For equities, companies with MSCI controversies score of 3 or below are excluded. For fixed interest, companies with a score of 0 are excluded. 6. The Responsible Investment Certification Program does not constitute financial product advice. Neither the Certification Symbol nor RIAA recommends to any person that any financial product is a suitable investment or that returns are guaranteed. Appropriate professional advice should be sought prior to making an investment decision. RIAA does not hold an Australian Financial Services Licence. 7. Companies with an ESG ratings score below a specified threshold will not be selected for investment.


Description


Our Socially Conscious Investment Option gives our members the opportunity to align their super savings with their social and environmental values.

VicSuper’s Socially Conscious investment option incorporates a wide range of explicit social and environmental objectives and it aims to help our members: 
• take action on climate change by not investing in companies that hold fossil fuel reserves used for energy purposes; 
• minimise social harm by not investing in companies that are materially involved in activities 
that potentially cause social harm, for example tobacco production, alcohol, gambling, military weapons, civilian firearms, nuclear power, adult entertainment and genetically modified organisms; 
• protect human rights, labour rights and the environment by not investing in companies that have been involved in severe incidents and/or controversies, or have been found not to be adhering to widely accepted global conventions. 

The objectives are achieved by applying a number of exclusionary screens when selecting companies for investment.  These exclusionary screens only apply to the equities and fixed interest components of the  investment option.  We may introduce additional screenings in the future. Investments across the other asset classes apply an ESG integration approach, with the exception of Cash, which is not subject to ESG integration.

The following table outlines the exclusionary screens applied to the equities and fixed interest 
Socially Conscious - Environmental, social and labour objectives and exclusionary screens 
 
Take action on climate change 
Excludes investment in companies: 
• with coal, oil and/or gas reserves used for energy purposes. 
• deriving 30% or more revenue from mining of thermal coal or thermal coal based power generation1. 
• whose principal business revenue is derived from direct fossil fuel activity in the following GICS2 sectors: Integrated Oil & Gas; Oil & Gas Exploration & Production; Oil & Gas Refining & Marketing; Coal & Consumable Fuels; Oil & Gas Storage & Transportation; Oil & Gas Equipment & Services1,3 
 
Minimalise social harm 
Excludes investment in companies materially4 involved in: 
• Tobacco • Alcohol • Gambling • Civilian Firearms • Military Weapons (cluster munitions, landmines, depleted uranium, biological/chemical, nuclear, conventional) 
• Nuclear Power • Adult Entertainment • Genetically Modified Organisms 
 
Protect human and labour rights and the environment 
Excludes companies that have been found not to be adhering to international norms represented by the UN Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, and the UN Global Compact. 
Excludes companies that have been involved in significant5 ESG controversies.

What investment methodology is applied to equities?
The equities component of VicSuper’s Socially Conscious investment option invests in companies sourced from a custom index prepared for VicSuper. The custom index combines the MSCI Global Fossil Fuels Exclusion Index and the MSCI Global Socially Responsible Index plus an additional fossil fuel direct activity screen. 

After applying the exclusionary screens listed above, a best‐in‐class selection6 process is applied to the remaining equities in the selection universe.

For detailed methodologies and criteria for the applicable MSCI Indices (including thresholds) see:
 •           MSCI Global Socially Responsible Index Methodology (https://www.vicsuper.com.au/~/media/files/investments/msci_sri_methodology_may18.pdf?la=en
•            MSCI Global Fossil Fuels Exclusion Indexes Methodology (https://www.vicsuper.com.au/~/media/files/investments/msci_global_ex_fossil_fuels_indexes_methodology_dec2017.pdf?la=en)
 
The additional fossil fuel direct activity based screen excludes companies that operate in the following GICS2 sub-sectors: Integrated Oil & Gas; Oil & Gas Exploration & Production; Oil & Gas Refining & Marketing; Coal & Consumable Fuels; Oil & Gas Storage & Transportation; Oil & Gas Equipment & Services. 

What investment methodology is applied to fixed interest?
 The fixed interest component of VicSuper’s Socially Conscious investment option invests in a range of securities. For Australian fixed interest, where the option invests in company issued securities, VicSuperis invested in an ESG Australian bond index fund. For international fixed interest, VicSuper is invested in an ESG Global bond index fund. Both funds implement customised indices. The ESG Australian bond index fund uses a Bloomberg Barclays MSCI Australian Socially Responsible (SRI) and ESG-weighted Index. The ESG Global bond index fund uses a Bloomberg Barclays MSCI Global Aggregate SRI Select ex-Fossil Fuels Index. Both apply very similar exclusions those applied to equities investment including non-government securities associated with fossil fuels, alcohol, tobacco, gambling, adult entertainment, genetically modified organisms, military weapons, civilian firearms and nuclear power, as well as companies with an MSCI controversies score of 0. In addition, ESGOBI excludes Treasury and Government-related issuers with an MSCI ESG Government rating below BB. 
 
For detailed information on the Bloomberg Barclays Index exclusion methodology (including thresholds) and ESG-weighting7 methodology see:
•            Blombery Barclays MSCI ESG Fixed Income Indexes (https://www.vicsuper.com.au/~/media/files/pdfs-and-downloads/socially-conscious/bloomberg-barclays-msci-esg-fi-index-guide.pdf?la=en

1. This criterion applies to equities only. 
2. The Global Industry Classification Standard (GICS) is an industry taxonomy developed in 1999 by MSCI and Standard & Poor’s (S&P) for use by the global financial community. 
3. Companies who demonstrate that they are transitioning to clean energy may remain investable. 
4. Materially means the company generally derives greater than 5% revenue from the activity. 
5. For equities, companies with MSCI controversies score of 3 or below are excluded. For fixed interest, companies with a score of 0 are excluded. 
6. Companies with an ESG ratings score below a specified threshold will not be selected for investment.
7.  Issuers with high and/or improving MSCI ESG ratings are over-weighted and those with lower and/or declining ESG ratings are under-weighted.

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