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ESG policy

Our approach to Environmental, Social and Governance issues

At StatePlus, we believe that Environmental, Social and Governance (ESG) issues raise risks that affect the performance of investment portfolios over the longer term.  

Our aim is to manage ESG issues, and their associated risks, to improve portfolio outcomes and to support sustainable development across a range of environmental, social and governance issues. 

Find out why is ESG important

How do we respond to ESG issues?

We see ESG issues as individual concerns. That’s why we develop tailored approaches for each area. It ensures that our response is the most relevant and effective one for the issue at hand, as well as for our clients and StatePlus.  

This strategy directly reflects our clients' feedback.  

While there is strong support behind improving our clients’ financial wellbeing, especially in retirement, a high proportion of people let us know that they see ESG as an important issue.  

In response, we continue to integrate ESG considerations into our investment management processes and interaction with the companies we have invested in. 

What does our ESG approach mean for you?

Asset allocation is the primary driver of returns for portfolios, so we seek to include ESG risks into our process. We do not decline to invest in companies, asset types, or industry sectors, based solely on moral or ethical grounds. We have, however, made the decision to exclude direct tobacco exposures from our portfolios, as far as practical.

The majority of our clients suggest that they prefer to see ESG integrated holistically. This means that we take a well-rounded approach across our process and the investment portfolio, as opposed to stand-alone investment options, based on a specific ethos.

Tobacco exclusion

Effective from 2016, StatePlus has approved the exclusion of direct investments in those companies involved in the manufacture of cigarettes and other tobacco products (as defined by MSCI Global Industry Classification Standard Industry Sector 302030). StatePlus’ decision to prohibit these investments was based on a review of the tobacco industry and an assessment of the challenges and outlook for the sector. The decision to divest provides consistency and better alignment with StatePlus’ investment beliefs and principles. 

An example of an ESG risk is Climate Change

Not only is climate change an environmental issue, it is also a major economic force that is resulting in long term changes to the regulatory, business and social environment. 

We recently participated in a climate change research project undertaken by our investment consultant. The results of the study are being utilised to help define potential risks to our investment portfolios so that we can adjust asset allocations, where appropriate.

How StatePlus manages the risks of climate change

What’s next for ESG and StatePlus?

ESG risk factors are increasingly being considered for each asset class (shares, property, etc.). This consideration includes the way our external investment managers oversee ESG risks.   

While we’re not prescriptive in defining what ESG factors a manager must consider, we do expect them to take all relevant issues into account in relation to investment outcomes.  We also require that investment managers vote all proxies on our behalf, in accordance with best practice corporate governance standards.

It’s fair to say that ESG issues are complex and the implications they raise will continue to evolve over time.  For this reason, we will continue to evolve our approach to each aspect of Environmental, Social, and Governance issues.

A summary of our ESG policy principles

The table below provides an overview of our ESG policies. It has been prepared in accordance with the Financial Services Council’s (FSC) ESG standards.

1. How will StatePlus incorporate ESG considerations into investment decisions? 

We have an ESG Policy as part of our Investment Governance structure.
This policy outlines our approach of engaging with our external investment managers to incorporate ESG issues. We also request, that investment service providers integrate ESG factors into evolving research and analysis, as appropriate.
For example, we include the potential impacts of climate change on asset classes and sectors and consider this within our risk-adjusted return and scenario analysis for our strategic asset allocation process.
There is ongoing review and dialogue with investment managers regarding ESG issues. 

2. How will StatePlus monitor ESG exposure across its portfolio of investments? ESG exposure is monitored through our ongoing investment manager due diligence. This tracks their understanding of our ESG policy and implementation of their own policy.
We also monitor it through implementation of StatePlus’ Voting Policy. Occasional monitoring of key ESG trends also occurs across sectors within portfolios.
3. How will StatePlus act on ESG risks? We provide investment managers with our ESG policy and require they act with reference to it. We also ask them to undertake and report on ESG-related engagement.
Investment managers are expected to fully consider all resolutions at all meetings for investee companies.
4. How will StatePlus report to its clients on ESG-related actions it has taken? We disclose voting activities on an annual basis, or as required.

What approach does StatePlus take to Proxy voting?

Good governance is a core focus at StatePlus.

We also require good governance of our investment managers, service providers and the companies in which we invest. 

Key governance focuses at StatePlus, include: 

  • board structure and diversity 
  • independent board leadership 
  • separation of Chairman and CEO
  • fair and reasonable executive compensation 
  • shareholder rights 
  • accounting and audit quality  
  • corporate culture

We delegate the voting of proxies to our external investment managers.

Our preference is for our investment managers to support and vote in favour of a Board or management recommendation. However, where a recommendation is not consistent with good governance, the recommendation will not be supported.

StatePlus investment managers are mandated to vote Australian Equities holdings consistent with best practice corporate governance standards. We monitor these activities and reserve the right to override an investment manager’s ability to exercise such votes as we think fit.

Listed International Equities (including listed real estate and infrastructure), our investment managers have a mandate to exercise voting rights in relation to international equities holdings wherever possible and in accordance with best practice corporate governance standards. 

We retain the ability to override any voting instructions provided by an investment manager.

Proxy Voting is a key activity undertaken by our Investment Managers, across holdings in companies held on our clients’ behalf. This activity is governed by the StatePlus ESG and Voting Policy.

The following information provides summaries of voting activity undertaken during the period between 1 July 2016 and 30 June 2017.

Please note that complete proposal information and voting outcomes is available upon request. Please contact your StatePlus Financial Planner on 1800 620 305.

Our Investment Managers are able to support a proposal by voting “For”, against a proposal by voting “Against” or they can choose not to vote either for or against by “Abstaining”.

StatePlus did not directly engage the services of a voting or proxy consultant in exercising its voting rights for the financial year ending 30 June 2017, however, our managers may engage proxy advisers.

Table 1: Summary of Voting

Proxy Voting Details

Number of Resolutions

% of Total Resolutions

 

FY2016-17

FY2015-16

FY2014-15

FY2016-17

FY2015-16

FY2014-15

Total Resolutions

12,500

29,305 

36,120

 

 

 

Total Votes “For”

10,534

25,692 

32,904

84%

88% 

82%

Total Votes “Against”

1,350

2,770 

6,145

11% 

9% 

15%

Total Votes “Abstained”

 262

 283

294

 2%

 1%

1%

Total "No Votes" / "Withheld"

202
582
693
2%
2%
2%

 

Remuneration Reports include the specific compensation outcomes for companies where changes require shareholder approval. The table below includes outcomes of votes on Remuneration Reports.

Table 2: Summary of Voting on Remuneration Reports

Proxy Voting Details

Number of Resolutions

% of Total Remuneration Resolutions

 

FY2016-17

FY2015-16

FY2014-15

FY2016-17

FY2015-16

FY2014-15

Total Remuneration Reports

1039

1505

536 

 

 

 

Total Votes “For”

 872

 1337

412

84%

89%

77%

Companies typically raise proposals to be resolved through proxy voting. On occasion, shareholders may bring proposals to be voted upon. The table below highlights that in the year to 30 June 2017, our managers supported 16% of those shareholder proposed resolutions, from 23% the previous financial year.

Table 3: Summary of Voting on Shareholder Raised Resolutions

Proxy Voting Details

 Number of Resolutions

 % of Shareholder  Resolutions

 

FY2016-17

FY2015-16

FY2014-15

FY2016-17

FY2015-16

FY2014-15

Total Resolutions

143

800

818

 

 

 

Total Votes “For”

23

185

101

16%

23%

12%

Download PDF: Proxy Voting 2017 Q1, Proxy Voting 2017 Q2, Proxy Voting 2016 Q3Proxy Voting 2017 Q4

Other considerations

It is important to note that ethical investing is often closely associated with ESG investing but should be distinguished separately.  Ethical investing involves restricting investing according to ethical or moral criteria by screening and excluding investments purely on ethical or social grounds.

Climate change

Climate change is both an environmental issue and a major economic force that results in long-term changes to the regulatory, business and social environment. Find out what we’re doing to address it.

Why is ESG important?

Our aim is to manage environmental, social and governance issues and risks, as part of investment decision making, to improve portfolio outcomes.