Excellence in ESG engagement

10 Mar 2021

At every stage in our 40+ year history, we have put you – the customer – first.

Our sole investment focus is to achieve a comfortable retirement for Australian Government workers and Defence Force employees. We have achieved this sustainably for many generations through robust governance and continuous innovation.

Australians are now expecting their financial institutions to invest responsibly and contribute positively to society; that’s something we have taken seriously for years.

In 1996, we were the first Australian fund to collaborate with Monash University to identify and measure environmental, social and governance (ESG) risks in Australian public companies, laying the foundations for making sustainable investments to grow our members’ savings.

At the recent AsianInvestor Institutional Excellence Awards 2020, CSC was named ‘Asia Pacific’s Leader’ for ESG engagement. Here’s a look at why we have dedicated so much on this for the last two and a half decades.

Sustainable investing, commonly referred to as ‘ESG’

We seek to manage all systemic risks in our total portfolio in an integrated way because risks are inter-related and action to address one issue in one aspect of a portfolio can have unintended impact on another.

We measure the net financial returns, capital-loss risks, and environmental, social and governance (ESG) impact of our entire portfolio, with the objective of continuous improvement across all these measures over time.

Some of the key systemic risks are often grouped as ‘ESG’ risks:

  • Environmental, e.g. whether a company’s products and services are sustainable and their impact on scarce natural resources such as water use, waste generated and carbon footprint.
  • Social, e.g. a company’s policy, track record and commitment on social issues like human rights, modern slavery and occupational health and safety.
  • Governance, e.g. the composition and skill set of a company’s board and executive leadership.

CSC’s history of ESG innovation and recognition

1996: Pioneer - CSC seeks rigorous assessment of Australian public company governance or use of their social and environmental resources, in collaboration with a team of academic researchers at Monash University.  

2003: Global recognition - CSC received the United Nations Royal Innovation award for excellence in sustainability, recognising CSC’s identification of the seriousness of long-term thematic risks and poor operational practices. 

2006: Collaboration - CSC was a founding member of the UN Principles for Responsible Investment (PRI) 

2006: Engagement - CSC built a collaborative platform with Regnan, a responsible investment pioneer, for informed asset-owner engagement with material investee companies.  

2009: Systematic risk process - Growing global availability of ESG scoring enabled CSC to be the first Australian super fund to begin to incorporate this data, alongside financial metrics, into portfolio risk systems.  

2009: Transparency - First Australian super fund to have our portfolio carbon footprint assessed by the Climate Institute of Australia, a now-closed policy think-tank that was a pioneer in trying to get large asset owners, such as superannuation funds, to recognise and disclose carbon risk.

2015: Collaboration - CSC was an early signatory to the Montreal Pledge, committing to measure and disclose carbon footprint of public market equities at least annually.

2017: Global recognition - CSC named as the only Australian fund in the Bretton Woods II “25 Most Responsible Asset Allocators” amongst sovereign wealth funds and government pension plans. 

2019: Global recognition - CSC named in Top 20% of Bretton Woods II’s biennial Responsible Asset Allocator Initiative (RAAI), which is part of the overall Bretton Woods II effort to help large asset allocators reduce risks and optimize returns through strategic investments in responsible investing and sustainable development.

2020: Systematic risk management - First Australian super fund to appoint Osmosis Investment Management to reduce ESG risks from investing in companies that misuse scarce natural resources. Osmosis have a robust, effective and objective way to optimise our investment exposure to companies that use water and energy efficiently and reduce waste.

2020: Decarbonisation of international shares index portfolio - optimised to reduce carbon exposure, rather than the more common market-capitalisation weighted index, which reduces our carbon footprint by approximately 50% relative to benchmark

2020: Collaboration - CSC became signatory to the Partnership for Sustainable Capital Markets, an organisation that focuses on ESG in long-term investing and warns that companies not taking it seriously damage their investing appeal.

2020: Global recognition - CSC was awarded an AsianInvestor Institutional Excellence Award for ESG Engagement, designed to identify and recognise excellence and best practice among Asia Pacific-based institutional investors. 

2020: Collaboration and transparency - Supported the taskforce for Climate-Related Financial Disclosures (TCFD) which commits to raise transparency and disclosure of climate related financial risks.

Transparency and carbon footprint

We practice what we preach. As well as seeking transparency on the financial risks arising from corporate governance, environmental and social practices in the businesses we invest in, we also strive to be transparent to you about where your money is being invested and the processes we have for that investment (more information can be found in the 'Your Super and Climate Change' fact sheet). 

For example, we currently have A$989 million invested in high quality sustainable assets such as wind farms, waste management infrastructure projects and renewable energy initiatives.   Our carbon footprint was 18% less than our public equities benchmark as at 31 December 2020.

Genuine, continuous improvement

Creating enduring wealth for our customers is our goal, but how we create that wealth is critical to this.  We’re not – and never have been – afraid to lead, and will continue to do so by incrementally adding genuine enhancements with the intention of growing your savings and positively impacting our society too.

We believe the most successful companies consider the long-term sustainability of their business. We recognize the potential for reflexivity between environmental, social, governance and financial factors to accelerate or erode the pathways for robust transitions to sustainable states.  This underscores our preference for engagement, wherever possible, to improve net financial outcomes to our customers and effect genuine change.  We believe that enduring change requires robust transitions that consider all stakeholders.

We will continue to focus on identifying structural change and innovation early; prioritising and allocating resources to the most significant risks and where we can have genuine impact (measured as improved ESG outcomes).

Our ethos is about improving the retirement outcomes of our customers while impacting society in a positive way. That is at the heart of our excellence in ESG engagement.

ESG engagement award vertical image

*Please note, past performance is not a reliable indicator of future performance.

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