The RIAA said its Superfund Responsible Investment Benchmarking Report involved a detailed assessment and survey of the largest 50 superfunds in Australia which accounts for around $1.3 trillion of assets under management. It found that 86% of these funds now have in place some form of responsible investment approach – from environmental, social and governance (ESG) integration, screening, corporate engagement or sustainability themed investing – across at least one asset class.
However, deeper analysis found that far fewer superfunds were able to demonstrate comprehensive measures to ensuring commitments were implemented across the funds’ investments, with only a third of superfunds having responsible investment requirements embedded in investment management agreements with their external fund managers.
RIAA chief executive Simon O’Connor said: “This report provides a window into the rapid emergence of more sophisticated responsible investment approaches being rolled out by Australia’s largest superfunds. Although not yet universally taken up, the research provides an insight into the strategies and approaches taken to embed environmental, social and governance and ethical considerations into investments.”
The RIAA said the public discussion around responsible investment remains steadfastly focused on divestment and exclusions are ever more frequently used – with a third of funds (17 funds) having in place ‘whole of fund’ exclusions, with tobacco being the most common. However, this was used along with a broad range of other approaches to responsible investing the RIIA said.
The survey found that there is an ever stronger focus on ESG integration and active ownership practices, which aim to influence companies through engagement and voting were the most cited approaches adopted by funds. The RIAA said that many funds are now using multiple strategies to deliver the best investment outcomes and meet the interests of members, including sustainability-themed investing (17 funds, such as low carbon tilts) as well as impact investing (7 funds).
Superfunds are becoming more transparent about investment activity, the survey found. The report indicates that 44% of funds (22) make annual disclosures on their responsible investment activities. Additionally, 10% of funds (5) have already implemented full portfolio holdings disclosure, with 60% disclosing voting records and 20% reporting on their corporate engagement activities.