Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Rest hands ESG mandate to Calvert, Parametric
The $60 billion industry fund has appointed Calvert and Parametric to implement sustainable screens across its real assets portfolio.
Rest has awarded an enhanced ESG mandate to Parametric and Calvert to provider further diversification to its Sustainable Growth ethical investment option. The mandate will see Rest implement ethical and sustainable screens and tilts across its real assets portfolio, which includes global listed infrastructure and global and Australian-listed REITs.
“We are delighted that Rest has appointed Calvert to work towards enhancing its ESG investing credentials and Parametric as its implementation partner,” said Chris Briant, Parametric’s head of Australia and New Zealand (photo at top).
“This is due to our expertise in providing custom indexing solutions and reducing frictions like transaction costs, taxes, brokerage, foreign exchange costs and unintended exposures for super funds.”
Rest previously handed a combined mandate to Calvert and Parametric to manage the equities allocation across the Sustainable Growth option in 2021. The Sustainable Growth option is tilted to companies that are “demonstrated leaders in environmental sustainability and resource efficiency” or who are socially equitable and respect human rights. It has screens against companies involved in controversial weaponry, tobacco, and gambling, as well as those with excessive executive remuneration.
“These additional sector mandates allow for further diversification for Rest members invested in Sustainable Growth, and also adhere to the option’s strict ethical and sustainability requirements,” said Rest CIO Andrew Lill. “Adding listed real assets to the option’s existing unlisted property and infrastructure assets at this time is expected to provide further resilience in an inflationary environment.”
“Rest’s purpose is to help our members achieve their personal best retirement outcome. With Sustainable Growth, our aim is to provide our younger cohort of members with more choice in how their money is invested, while also delivering a high-performing growth option that outperforms both peers and the benchmark over the long run.”
Rest has a long-term goal of achieving a net zero carbon footprint for the fund by 2050 and aims to increase its investment in renewable energy and low-carbon assets to $2 billion by 2025. It previously announced that it intended to divest from all listed companies that derive more than 10 per cent of their revenue from thermal coal mining – unless the company has a credible net zero by 2050 plan or “science-based targets”.
“As a pioneer in Responsible Investing, we recognised decades ago that strong Environmental, Social and Governance practices can have positive implications for corporate performance,” said Anthony Eames, Calvert director of responsible investment strategy. “We look forward to working with Rest to deliver a highly customised investment solution reflecting Rest’s ESG priorities while leveraging Calvert’s proprietary insights.”
