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.
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.
The options have an allocation to the following actively managed portfolios – none of which have material exposure to the excluded sectors of alcohol, tobacco, gambling, weapons and fossil fuel exploration and production, either through a negative screen or due to the nature of the investable universe. As noted above we also use the MSCI ESG research tool to screen out companies that are in breach of the UN Global Compact.
- Sustainable Australian (Negative and positive screen applied to S&P/ASX 200 Index)
- Sustainable International (Negative and positive screen applied to MSCI All Country World Index)
- Global Environmental Opportunities Equities (Negative and positive screen applied to MSCI Investable Market Index)
- Moderate risk equity portfolio (ESG assessment of suitability for the Sustainable Options, meet certain investment metrics and are individually approved by the Investment Committee)
- Australian Listed Property portfolio (S&P/ASX200 Australian Real Estate Investment Trust (A-REIT) index)
- Green Bonds portfolio (Sustainable Balanced only) (ESG assessment of suitability for the Sustainable Options
- Australian Sovereign Bonds (Sustainable Balanced only)
Sustainable Australian and International Shares portfolios:
- 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
- Identify 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.
- Apply a negative screen excluding stocks that have material exposure to the excluded sectors of alcohol, tobacco, gambling, weapons and fossil fuel exploration and production.
- Identify 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.
- Consider 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.