Systemic risk in the superannuation system likely doesn’t stem from funds themselves, but from their service provider relationships. Regulators need to be thinking harder about where and how it arises – something they’re not necessarily well set up to do.
Big asset owners and managers are embracing the private markets as one avenue for growth, but the complexity that brings to portfolios means they also need to get a better view of what might be decades of siloed information.
Future Fund’s governance committee exits tobacco
Australia’s Future Fund has decided to instruct its managers to exclude tobacco stocks from its portfolio following a review by the board’s governance committee, which was established in May last year. While the fund says the decision was its own, it follows pressure from several politicians, especially the Greens senator Richard Di Natale, to do so.
The fund actually has a long history of including ESG issues in its processes. It appointed Gordon Hagart as head of ESG risk management back in 2009 and progressively developed its approach to ESG issues under its foundation chief executive, Paul Costello. Costello, who was recruited from the top job at NZ Super to start the Future Fund, had nurtured similar processes there. Australia’s fund is prohibited from holding direct investments – it has to use external managers.
NZ Super has the onerous obligation, however, of having to report its investment performance on a monthly basis.
A Future Fund spokesperson said last week: “In line with the policy we exercise all voting rights in listed Australian companies ourselves and are guided by our voting principles on this. Voting rights in offshore listed equities are exercised by our external managers although we maintain the ability to overrule.
“Also in line with the policy, between 2009 and 2011 we excluded 10 companies as a result of their manufacture of cluster munitions and landmines. In February 2012 we refreshed our ESG policy to be explicit that we would consider excluding companies with sustained egregious operating behaviours who were not responding appropriately to shareholder influence.
“In May 2012 the Board set up a Governance Committee to provide additional oversight and review of the ESG policy and it was this Committee that undertook a review of tobacco holdings. It is worth noting that the decision by the board is entirely its own, and not one influenced by Government (which has consistently said it is a matter for the board)…”
The decision involves about $A221 million invested in10 stocks: Altria Group, British American Tobacco, British American Tobacco (Malaysia), GudangGaramTbk, Imperial Tobacco Group, ITC, Japan Tobacco, KT&G Corporation, Lorillard, Philip Morris CZ, Philip Morris International, Reynolds American, Souza Cruz and Swedish Match.
As of December 31, the $A82 billion fund had 18 per cent of its portfolio in developed market equities and 5.3 per cent in emerging market equities. It had 16.3 per cent in what it calls alternatives (excluding private equity, infrastructure, timberland and property).
