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Empowering Sustainable Decisions
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GRI: Walking the walk on sustainability reporting
CBUS, Australia's largest super fund for the building, construction and allied industries, talks to GRI about the importance of ESG issues in investment decision making. We spoke to Kerry Lindupp, Head of Investment Relations and Reporting, about how stakeholders are becoming more active in demanding information and action towards investments that contribute to improving their community and the world. More and more, research shows that companies who understand and manage ESG issues generate higher financial returns to investors over time. Caring about ESG issues just makes economic sense. And with this knowledge, members and stakeholders of CBUS expect that, as fiduciaries of their retirement savings, we will be taking ESG issues into account in our investment decision making.
And, what does that mean for CBUS in practice?
Cbus is the leading Australian Industry Super Fund for all those working in the building, construction and allied industries. Our stakeholders care about how we support the local economy and employment in their industry. They care about how we contribute to a more sustainable built environment (eg. green buildings), how we are taking climate change transition into account across our portfolio, and about occupational health and safety practices, payment of wages and rights of association, and the environmental impacts of companies including water and energy. It is important to Cbus to ensure we are communicating our outcomes to our stakeholders.
Is it realistic to think that a majority of investors will ever truly be able to take on the type of longer-term thinking needed to become interested in sustainability data?
From our perspective, we are seeing the rise of pension funds as owners in companies. For example, industry superannuation funds in Australia roughly make up over 11% of the ASX200. Over AUD$2.3 trillion is now invested in superannuation in Australia, and this is expected to rise to AUD$9 trillion by 2035. This is a considerable swing towards investors who are long term investors, and who are incorporating management of ESG issues into valuations of companies. We think that this trend will continue in Australia, and is rising overseas. This will create greater focus on company sustainability performance more generally.
We need greater transparency and consistency on communicating material ESG issues from companies. This will enable us to engage in more meaningful conversations on sustainability and to make better investment decisions. It still surprises us that there are so many companies who do not report on sustainability.
And how is CBUS encouraging companies to report?
We expect the companies we invest in to report on their management of sustainability issues. Most importantly we expect them to demonstrate that they have incorporated sustainability into their company strategy, including how sustainability shapes their strategic direction and how they manage ESG impacts.
To encourage the companies that we invest in to engage in sustainability reporting, we use several levers. We engage directly with companies, and through our service providers who engage on our behalf. We also encourage guidance to companies. For example, Cbus is a member of the Australian Council of Superannuation Investors (ACSI), who collaborated with the Financial Services Council to produce an ESG Reporting Guide for Listed Australian Companies in 2015. We see opportunities for improvement in reporting by privately owned companies, and this is an area we are focused on. Our CIO sits on the Principles of Responsible Investment (PRI) infrastructure working group, which is seeking to drive improved disclosure within that asset class.
How are you engaging with GRI specifically?
We think we should be “walking the talk”, so we report using the GRI framework, as a leading global framework for company sustainability reporting. Also, we are a financial services provider for over 750,000 members, and we believe we have a duty to them to be transparent about our material sustainability issues, whether in the investment portfolio or at the broader fund level, including how we deliver on our services.
I am part of GRI’s Stakeholder Council and this engagement enables feedback to GRI on how investors view sustainability reporting – we hope that this helps to complete the loop between companies and institutional investors.
How are the Sustainable Development Goals (SDGs) influencing investment strategies, and more specifically CBUS' investment strategy?
We know that the SDGs will not be achieved by maintaining the status quo, and that considerable additional public and private investment is required. Investors can play a significant role through a variety of mechanisms. One is the allocation of capital towards SDG targets. Investors are working together to better identify how we can invest into the SDGs. Dutch pension funds PPGM and APG have worked on a taxonomy for investing into the SDGs, and have collaborated with other funds (including Cbus) on guidance materials. This area is still new ground for investors and we expect that guidance and metrics will continue to develop.
At Cbus, we have identified several SDGs where we believe we can make a difference through how we allocate capital. For example, we can make positive contributions through developing highly green credentialed sustainable commercial buildings, and as a direct investor in infrastructure, seeking appropriate opportunities to invest in clean energy.
Other mechanisms include:
* Engagement with companies for example, on management of the transition to a lower carbon economy, gender diversity and on supply chain issues such as modern slavery
* Taking opportunities to influence company reporting on SDGs through joining collaborative investor agreements and initiatives
* Getting involved in broader initiatives such as our public advocacy, for example Cbus has contributed significantly to the public debate on underpayment of superannuation entitlements to workers
What is your approach regarding collaborating with other funds and organisations to drive better reporting outcomes?
We strongly believe that better company reporting outcomes can be driven through investor collaboration. By ourselves we may have a small investment in the total capital of a company. When we collaborate with other investors, we start to be able to shift the conversation.
Cbus participates in a number of initiatives in collaboration with other funds to encourage the integration of environmental, social and governance practices in investment decision-making. We are a signatory to the Principles for Responsible Investment, which were developed to provide a framework for the investment community to achieve better long-term returns and more sustainable markets by considering environmental, social and governance issues in their investment decision-making. We are a signatory to the Climate Action 100 + and to the Global Statement on Investor Obligations and duties.
We are a founding member of ACSI, Australia’s peak corporate governance body for institutional investors. Each year ACSI publishes a report on ASX200 companies on the level of their sustainability reporting practices. And, Cbus has publicly supported the recommendations of the Task Force on Climate Related Financial Disclosures, and we encourage companies we invest in to report against these recommendations.