Peter Lambert

Local Government Super (LGS) has reaffirmed its strong commitment to responsible and sustainable investing by enhancing its ‘negative screening’ approach to combat the future impact of climate change on its portfolios.

The latest changes to the already comprehensive and well-established LGS negative screen methodology incorporates an additional screen to exclude companies with a material exposure to ‘high carbon sensitive’ activities such as coal and tar sands mining, as well as coal-fired electricity generators. The threshold for this ‘high carbon sensitive’ negative screen has been set at a minimum of one third of company revenue.

According to Peter Lambert, LGS Chief Executive Officer, this decision was driven by the understanding that this sector will be adversely affected from an investment perspective by the likely transition to a lower carbon economy as governments respond to the increasing threat of climate change.

“Climate change is an unarguable scientific reality and one which poses a very real investment risk. Governments around the world have begun to act on climate change, which is having a negative impact on the future outlook for the coal industry. This focus will likely continue as coal companies become increasingly difficult to be relied on as a low-cost energy source,” Mr Lambert said.

“Coal and oil sands are the most carbon intensive forms of energy and most susceptible to carbon regulatory risks. With trends such as competitive pressures in the coal industry, concerns in China over pollution and water, and the introduction of energy and carbon efficiency standards on the utilities sector in the US indicating a shift away from a high carbon to a lower carbon economy, we believe that support for these sectors will decrease as will shareholder value.”

“In moving away from high carbon investments, we are supporting environmental and economic alternatives to investing in these sectors.”

“At the same time while the use of renewable energy will increase, it will not be able to meet all the energy needs around the world in a lower carbon future, so alternatives need to be considered. Because of this we have decided to remove the nuclear energy screen from our list of excluded industries, as we believe nuclear energy is increasingly becoming a viable, low carbon emitting energy source globally.”

“Nuclear energy is currently the only proven alternative to fossil fuels that provides baseload power capacity, so outright exclusion of nuclear energy directly conflicts with our view on the importance of reducing our reliance on high carbon energy sources.”

Local Government Super’s ‘negative screening’ approach has been applied and regularly reviewed since its inception in 2000. It is designed to actively screen out investment in tobacco, gambling, armaments and old growth forests, as well as excluding companies with poor management of environment, social and governance (ESG) risks.

Additional recent changes to LGS’ ‘negative screening’ approach include:

• removing the revenue threshold (to a zero threshold) for ‘controversial weapons’ (e.g. land mines and cluster bombs) and tobacco
• clarifying the definition of an excluded activity to that of manufacture and production only.

The changes to LGS’ ‘negative screening’ approach were approved by the LGS Board and are being implemented immediately. The approach is reviewed regularly and updated when required.

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Local Government Super (LGS) has been announced as the winner of this year’s SuperRatings Infinity Award. The Award is presented to the superannuation fund that best demonstrates its commitment to addressing its environmental and ethical responsibilities.

Local Government Super CEO, Peter Lambert, accepted the Award on behalf of the Fund at theAustralian Institute of Superannuation Trustees (AIST) Conference of Major Super Funds (CMSF) on the Gold Coast.

Mr Lambert said that “Our overriding aim at Local Government Super has always been to achieve strong long-term sustainable returns for our members and you can only hope to do that if you closely manage the environmental, social and governance risks right across your investment portfolio”.

“We recognise that we need to earn returns for our members over the long term, and that means you’re looking at an investment horizon of 20, 30, or even 40 years. And that’s why we are so active in implementing genuine long-term sustainable and responsible investment strategies across all asset classes.”

He also said that “the SuperRatings Infinity Award is a highly coveted award and winning it for the third time is great recognition of all the hard work our team has done over the last few years.”

The criteria for the Infinity Award encompass all aspects of a superannuation fund’s ability to support sustainable and responsible investment. These span criteria such as sustainability, risk management policies and initiatives and performance, through to member engagement and operations, engagement with service providers, asset allocation and a general fund overview.

This latest award follows on from the previous Infinity Awards Local Government Super picked up in 2011 and 2012, and also after recently being ranked second globally, with a ‘AAA’ rating, for the management of climate change in the Asset Owner’s Disclosure Project (AODP), a global survey of the world’s largest super funds.

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LGS ranked second globally for its sustainable investment.

Australian super fund Local Government Super (LGS) has ranked second globally for its sustainable investment practices and maintained its AAA rating, according to yesterday’s release of the results of a global survey of the world’s top-ranked green investors.

The Climate Institute’s Asset Owner’s Disclosure Project (AODP), assesses how 458 of the world’s biggest investors, including many pension funds, are managing the risks and opportunities associated with climate change.

“Investment markets are continually changing and increasingly, that change includes greater awareness of the associated environmental, social and governance (ESG) risks. LGS sees climate change as the most important ESG investment issue facing our portfolios,” said LGS said CEO Peter Lambert.

“Local Government Super is proud to be a leader in managing these risks, which we have long recognised as affecting long-term investment outcomes. Speaking for a Board whose major commitment is securing long term, sustainable returns for our members, this ranking is a badge we will wear with pride.”

Over $4.2 billion – more than half – of LGS’s total assets are invested in responsible strategies. Significantly, that includes responsible options across multiple asset classes: Australian and international shares, property, absolute return, private equity and fixed interest.

Mr Lambert went on to say that as ESG practices at various levels become more widely adopted, especially within the superannuation industry, LGS will persist in setting and adhering to the highest standards. He also stressed that it is important to recognise that this is an evolving field – not something that’s ‘set and forget’.

“We are doing all we should to secure our members’ financial futures by investing sustainably. This requires us to remain open to new innovations that continually improve ESG performance,” he said.

“Building more sustainable investment portfolios involves not only investment per se, but also a commitment to ongoing transparency about the impact of these investments and active participation as asset owners.”

Mr Lambert went on to highlight some of the areas in which LGS has amplified its ESG commitment in the past year or so:

Mr Lambert concluded by saying that LGS is looking ahead to further developments in 2014.

“Members can expect more from us in the new year as we work to safeguard their investments from environmental, social and governance risks.”

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Local Government Super (LGS) has appointed Joanna Davison to its Board. Ms Davison replaces Ian Robertson who has resigned after 16 years as a Director on the Board.

Ms Davison brings to the role extensive experience in a number of senior leadership and strategic positions in financial services with a focus on the management of environmental, social and governance (ESG) risks. She currently serves as the Acting Chief Executive of Fund Executives Association Ltd (FEAL).

Previously, Ms Davison was the Regional Managing Director for Australia and New Zealand at CFS Global Asset Management (CFS GAM). During this time she was integral in CFS GAM’s positioning as a leading position as an ESG manager. Ms Davison was also a member of the Executive Committee and Operating Group responsible for strategy and development of the global CFS Asset Management business.

Prior to her tenure at CFS GAM, Ms Davison was a Director at Russell Investments.

Chair of Local Government Super, Bruce Miller, said, “Joanna has an impressive background in leading business strategy and development and her experience will be of great benefit to our Board and our members.

“Her demonstrated understanding not only of the importance of sustainability in investing but of how to successfully address ESG issues in everyday investment planning and practice, makes her an excellent choice for the Board. We are pleased to welcome her and look forward to working with her over the coming years.”

Ms Davison’s appointment was confirmed by the LGS Board at a meeting in Sydney on 30 October 2013 and is effective immediately.

Ian Robertson served as a Director since the inception of LGS in 1997 and was instrumental in developing the fund’s sustainable and responsible investment strategy.

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Mr Montague brings extensive local government and management experience to the position, having served in local government for 48 years, notably as General Manager of the City of Canterbury, one of the biggest councils in NSW, for the last 31 years.

In recognition of more than 40 years in local government, Mr Montague was awarded the Public Service Medal in the 2006 Queen’s Birthday Honours.

Chair of Local Government Super Bruce Miller said: “We are pleased to welcome Jim Montague to the LGS Board. Jim brings to the Board an unrivalled track record of service in local government and I’m certain we will benefit from his extensive experience and his intimate knowledge of local government.

Mr Miller continued, “We thank John Beacroft for the great contribution he has made to Local Government Super over the past five years as a Director and as a former Chair of the Board.”

Mr Monatgue’s tenure will begin on 9 October 2013.

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Industry super fund Local Government Super (LGS) further cemented its position as a leader in responsible investment this month with a series of local and global initiatives and awards. This included investing in the European Bank for Reconstruction and Development (EBRD) Green Bond, receiving a Green Star rating from the Global Real Estate Sustainability Benchmark (GRESB), receiving a ‘Highly Commended’ rating in the Green Globe Awards and supporting the latest Environmental, Sustainability and Governance (ESG) disclosure guidelines to be released by the ASX.

Local Government Super was the only Australian super fund to invest in the EBRD Green Bond, issued on 10 September 2013. The bond focuses on environmentally sustainable projects in the areas of as energy efficiency, clean energy, water management, waste management, sustainable living, environmental services and sustainable public transport.

Fund CEO Peter Lambert said of the investment, “Our decision to invest in the EBRD bond reflects our longstanding view that investing sustainably is the key to delivering returns to our members over horizons in the order of 40 years or more.”

Around $3.7 billion – or just over half – of LGS’s total assets are in responsible investment strategies across Australian and international equities, property, absolute return, private equity and sovereign bonds.

Local Government Super’s sustainable property strength was confirmed with a Green Star rating from the Global Real Estate Sustainability Benchmark (GRESB), released this month. LGS was ranked 36^th out of over 500 property funds globally.

Its ‘Highly Commended’ rating in the Green Globe Awards for its Marketplace Leichhardt Energy Management represents recognition from the leading environmental awards in New South Wales, acknowledging the achievements of business, government, community and individuals.

Mr Lambert said, “The results of this year’s GRESB survey show that Australia and New Zealand lead the world in sustainability in the real estate sector. We are proud that other local players see the same value that LGS does in improving and promoting sustainable practices in this vital area.”

Mr Lambert went on to emphasise that LGS is supportive of the recent ASX guidelines on ESG disclosure requirements.

“This is another positive development that once again demonstrates increasing understanding in the broader investment community that the key to long term investment success is to ensure that whatever we invest in – be it companies, properties or any other asset – is going to go the distance. For that reason we welcome the stronger reporting of ESG risks proposed in these guidelines.

“We’ve been working steadily to build a more sustainable investment portfolio for over 10 years and to see our initiatives being recognised on a global and local scale is a real honour. Speaking for a Board that has made a massive commitment to securing sustainable returns for our members, it’s been a very satisfying month. And our members can look forward to more to come.”

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LGS to support the ‘Investor Statement on Bangladesh’

Local Government Super (LGS) has become the first Australian super fund to support the ‘Investor Statement on Bangladesh’.

Local Government Super joins over 190 global shareholders and investors, representing more than $US1.5 trillion, in calling on brands and retailers to implement the internationally recognised core labour standard of the International Labor Organization (ILO).

The Statement is a response to a series of deadly accidents in Bangladesh garment factories over the past six months which have collectively resulted in the deaths of over 1,500 Bangladeshi garment workers. These incidents include the November 2012 fire in a Tazreen garment factory, the collapse of Rana Plaza in April and a second fire in Dhaka in May.

Peter Lambert, CEO of Local Government Super, said: “We support the action being taken by brands and retailers to help improve worker safety and welfare. In signing the Investor Statement on Bangladesh, Local Government Super is taking a first – but important – step to support change for the better from an investment perspective.

“The Statement includes a pledge to engage with relevant companies to highlight the investment risks associated with perpetuating the unsafe working standards that are all too prevalent in emerging markets. We are also committed to asking for meaningful action to improve the industry.”

Local Government Super and its fellow signatories on the Statement, ask companies to:

“Our support of this Statement reflects our long-standing commitment to responsible investment which we believe is the best way to earn long-term sustainable returns for our members.” Mr Lambert continued.

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Mr Miller brings extensive local government and financial management experience to the position, having been a Councillor at Cowra Shire Council for 22 years, including 14 years as Mayor. He is also a Director and a former Chair of StateCover Mutual Limited.

Existing Director, Martin O’Connell, replaces Leo Kelly as Deputy Chair of the Board.

These appointments were made in accordance with the fund’s two-year rotation policy. Both John Beacroft and Leo Kelly remain on the Board as Directors.

Local Government Super is also pleased to announce the appointment of two new directors, Michelle Blicavs and Keith Rhoades, who replace outgoing directors Beverley Giegerl and Sam Byrne.

Both directors bring a wealth of financial management and local government experience to the Board of Local Government Super.

Ms Blicavs has more than ten years senior management experience in the service and not-for-profit sectors. She is currently a Councillor at Wollongong City Council and the Finance and Operations Manager at the International Association for Public Participation (IAP2) Australasia. 

Mr Rhoades has been a Councillor at Coffs Harbour City Council for 21 years, including eight years as Mayor, and is currently the Joint President of Local Government NSW. He also holds directorships with Local Government Procurement Pty Ltd and StateCover Mutual Limited.

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In recent years, LGS has been acknowledged in a number of key arenas for its holistic approach to sustainable investment, one that is considered market-leading. It sees around half – or $3.3 billion – of the Fund’s total assets in responsible investment strategies across Australian and international equities, property, absolute return and private equity classes and, more recently, sovereign bonds. This investment is far the largest commitment of any Australian super fund in sustainable investment.
 
According to LGS CEO, Peter Lambert, having a strong sustainability strategy is core to the Fund’s main aim of achieving strong, long-term investment returns for members.
 
“The bottom line is that we believe that sustainability must be a key consideration in any investment approach that aims to deliver returns to investors over timeframes that can be in the order of 40 years or more,” he said. “The reality is that a failure to effectively address social, environmental and related risks in business and investing is increasingly likely to result in a serious downside for all concerned – and that includes our members.”
 
Mr Lambert went on to point out that LGS’s approach differs from those of many other socially responsible or ‘ethical’ funds precisely because it is holistic.
 
“While we naturally support any efforts to bring social responsibility considerations into the portfolio, we often see organisations addressing only certain asset classes. At LGS we’ve taken a more diversified and robust path, by selecting sustainable options across the entire portfolio.”
 
In 2012, this holistic approach was expanded to include the LGS global government bond strategy, by way of a $170 million diversified portfolio with an explicit focus on environmental, social and governance (ESG) risks.
 
Other 2012 ESG activity which contributed to receipt of this latest Award includes:

• Specific allocation of up to 15% of the portfolio in primarily ‘AAA’ rated ‘green’ or ‘climate’ bonds issued by agencies such as the World Bank, European Investment Bank or Asian Development Bank
• Introduction of Sustainable Australian Shares as one of the Fund’s new single sector investment options
• Continued activism in proxy voting on behalf of shareholders with a specific focus on monitoring and curbing excessive executive remuneration and establishing strong independent boards to protect shareholder value.

The flagship LGS ‘green’ direct property portfolio also continues as a prime example of its ESG commitment, comprising a range of independently accredited low-emission and ‘green’ starred buildings.
 
“We’re very happy to be recognised for this Award and hope that we can continue to lead the way by demonstrating that, in a rapidly changing environment, sustainability is the constant that can and does deliver the security and long term returns that we’re committed to delivering for our members,” said Mr Lambert.

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