Peter Lambert

Local Government Super (LGS) has bolstered its commitment to responsible investment practices by making three significant changes to the investment restriction criteria within its Sustainable Australian Shares investment option (SAS).

The latest changes to the SAS investment restriction criteria include:

1. A broadening of existing screens to exclude investment in companies which provide ‘significant services’ to prohibited industries (armaments, weapons, tobacco, mining and gambling).
2. A new screen to exclude companies exposed to fossil fuels (this means no investments in any fossil fuel industries).
3. An additional screen that excludes financial services companies based on their corporate conduct.

Peter Lambert, LGS Chief Executive Officer, said “these changes were made to distinguish our SAS as the ‘deeper green’, more responsible and sustainable investment option for existing and potential LGS members. However, these changes do not apply to our existing blended investment options.

“The SAS only invests in Australian companies listed on the Australian Stock Exchange (ASX). The changes to the SAS investment restrictions reflect the concerns that many of our members and our stakeholders have about some ASX-listed companies and particular sectors of the economy.

“These environmental, social and governance (ESG) issues can also pose significant investment risks and these changes to the investment restrictions are designed to ensure we are safeguarding our members’ retirement savings.”

The new screen which effectively excludes any investments in fossil fuel industries reflects increasing global concern about the impact of fossil fuels on climate and the environment.

Mr Lambert said “fossil fuels have emerged as an important factor for ethically-minded investors and the new screen complements our existing ‘high carbon’ screen and reinforces our belief that climate change remains one of the most significant long-term investment risks.

“There is also growing public concern about some corporate marketing and sales practices in the Australian financial services sector. The new innovative SAS screen uses external research to benchmark the sector on corporate conduct and then restricts investment in those companies with the highest number of serious repeated infringements. As a result, some financial services companies have been excluded from the SAS portfolio.

“The risks for investors as a result of poor conduct in the financial services sector include the potential of legal action, harsh penalties and increased regulation as well as the erosion of community trust and social license in the financial services sector.

“Some of the behavioural factors causing this poor corporate conduct, such as overt focus on short-term profits and excessive levels of bonus-based remuneration, may result in the re-emergence of long-term systemic risks to the financial sector and this is not in the interests of long-term shareholders such as LGS and our members.”

LGS’ ‘negative screening’ approach has been applied across the entire fund and has been regularly reviewed since its inception in 2000. The approach is designed to actively screen out investment in tobacco, gambling, armaments, old growth forests, high carbon sensitive sectors (such as coal mining, coal-fired utilities and oil tar sands) as well as excluding companies with poor management of ESG risks.

All companies that are excluded from the LGS investment portfolio due to the negative screens are subject to ongoing review.

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Peter Lambert

Local Government Super (LGS) has announced it has been certified as a responsible super fund by the Responsible Investment Association Australasia (RIAA), the peak industry body representing responsible and ethical investors across Australia and New Zealand.

The RIAA Certification Program aims to increase the uptake of responsible investment by guiding consumers towards more responsible and ethical investment choices. RIAA certification promotes consistent and standardised disclosure, ensures the highest standards of responsible investment are met and verifies this through stringent criteria and assessment.

LGS Chief Executive Officer, Peter Lambert, said LGS was pleased to receive this certification as further independent recognition of the super fund’s leadership in sustainable and responsible investing.

“LGS is one of the first super funds to be certified by RIAA’s new program. We will receive the RIAA responsible investor trade mark for our whole super fund, which endorses our long-standing commitment to superior environmental, social and governance (ESG) performance and ethical investment management and advice.

“Our commitment to responsible investment, combined with our competitive products, personalised service and non-commission based financial advice makes us a great superannuation option for everyone.

“The RIAA certification enables consumers to differentiate responsible investment products and services from other, more conventional investment options, making it easier for them to make an informed choice.”

LGS will also receive RIAA support in promoting responsible investment to the investment community and more widely to existing and prospective members.

Mr Lambert went on to say that “LGS was the first not-for-profit super fund to restrict companies with a material exposure to high carbon activities in its investment portfolio, and since then the need for genuine sustainable and responsible investing has become increasingly recognised in Australia and internationally.”

RIAA has over 165 members who manage more than $1 trillion in assets under management globally. For more information on the RIAA certification program, click here.

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Simon O’Connor

Responding to the surging consumer interest in responsible and ethical investments, RIAA has announced the re-launch of its Responsible Investment Certification Program – a tool designed to help consumers and financial advisers navigate towards the growing range of responsible investment options.

RIAA’s Certification Program has been in place for 10 years and in recent months was revised and strengthened with a focus on the internal governance, program requirements, criteria and verification processes.

“With the recent work we have done on the Certification Program, we are now very excited to be bringing this to market at a time when it couldn’t be more important to provide clear, verified and transparent information about the rapidly growing range of responsible investment products.” said RIAA CEO Simon O’Connor.

“A key objective of the Certification Program is to help the growing number of engaged consumers navigate more easily towards the range of responsible investment products and better understand the differences between them. This is about helping consumers be better informed before they make investment decisions.”

To coincide with announcing the re-launch, RIAA is also very pleased to be announcing the first ever Certification for whole superannuation funds that have met the rigorous requirements for integrating responsible investment.

RIAA congratulates three leading superannuation funds for meeting the demanding requirements to attain Certification:

• Australian Ethical Super
• Christian Super
• Local Government Super

Australian Ethical CEO Phil Vernon said “A rapidly growing number of Australians are using their choice of super to advance both a sustainable future and their best financial interests. RIAA’s Certification Program helps investors make that important choice, and we value their recognition of Australian Ethical’s leadership in investing for people, the planet and our members.”

Tim Macready, CIO at Christian Super said “RIAA’s Responsible Investment Certification is a valuable recognition of the work that our Fund does to achieve good outcomes for members using ethical and sustainable decision making principles and processes. We are privileged to be able to manage our members’ money in accordance with Biblical principles so that their superannuation can change the world for the better ”

Local Government Super’s Chief Executive Officer, Peter Lambert, said “We are very pleased to receive this independent recognition of Local Government Super’s leadership in sustainable and responsible investing. It also endorses our commitment to superior environmental, social and governance (ESG) performance, and ethical investment management.”

To attain Certification across the entire superannuation fund, these funds demonstrated leading practices to integrate responsible investment across their entire fund, specifically: apply at least two responsible investment strategies across the fund; with at least 75% of the assets under management under clearly defined responsible investment strategies; disclose their full portfolio holdings; systematically apply other active ownership strategies including engagement and proxy voting; and actively contribute to advocating for more responsible financial markets.

“We congratulate these three superannuation funds for meeting what are very strict requirements, showing a deep commitment to applying a responsible investment approach across their entire fund.” said Mr O’Connor.

The RIAA Certification Program website[1] currently profiles more than 80 products from 30 investment organisations across equities funds, fixed interest funds, ETFs, banking products, private equity, property, impact investments as well as 20 Certified Financial Advisers.

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[1] www.responsibleinvestment.org/program-overview/

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Peter Lambert

For the third year running, Local Government Super’s Accumulation Scheme has been awarded a five-star rating for outstanding value from CANSTAR. This is the highest rating granted by the independent, specialist researcher.

Local Government Super was one of just five funds to be awarded the five-star rating for outstanding value across all member profiles, including the new Wealth Accumulator profile. Overall Local Government Super was one of only ten super funds in total to receive the fivestar rating.

Chief Executive Officer, Peter Lambert, said: “We are pleased to again be recognised for consistently delivering truly outstanding value to our members.

“Our mission has always been to provide great service and achieve strong sustainable investment returns for our members and this rating is further endorsement that we’re on the right track with our products and services.

“Members of Local Government Super can be confident that we’ll be working just as hard over the next twelve months to maintain our five-star rating.”

The LGS Accumulation Scheme was particularly recognised for:

• a wide range of investment choice
• access to good quality scaled and comprehensive financial advice
• available death, and total and permanent disablement insurance cover.

CANSTAR evaluated the accumulation stage of 61 super funds available for personal super investment, taking into account the annual cost of the fund and fund features such as ease of member account access, number of investment options offered, and access to voluntary insurance, financial advice and strategy services within the fund.

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Peter Lambert

Local Government Super (LGS) yesterday announced it has won the SuperRatings Infinity award for the fourth time – taking out the prestigious award in recognition of its leadership in sustainable and responsible investment.

LGS Chief Executive Officer, Peter Lambert, said: “Winning the SuperRatings Infinity Award is great acknowledgement for the work we do to safeguard our members’ savings and achieve the long-term sustainable returns essential for our members’ retirement.

“We now have more than $5 billion of our members’ savings in sustainable and responsible investment strategies, including shares, private equity and direct property assets, and this commitment is the largest of any super fund in Australia.”

This year, SuperRatings assessed super funds on a wide range of criteria such as management of climate change risk, member engagement and the types of investment options available to members.

“Our Sustainable Australian Shares option is an alternative for members who have a strong commitment to sustainability and it has performed strongly this financial year to May with a 20.97% return on our members’ retirement savings,” Mr Lambert said.

“Winning the Infinity Award again just provides us with more motivation to further improve the way we manage our environmental, social and governance risks right across our investment portfolio.”

LGS is the only superannuation fund that has won the Infinity Award four times since SuperRatings introduced the award in 2008, previously taking the top spot in 2014, 2012 and 2011.

This latest award follows on from LGS’ number one global ranking for the management of climate change in the Asset Owner’s Disclosure Project (AODP) earlier this year.

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Peter Lambert

Local Government Super (LGS) has launched a shareholder voting website making LGS the first super fund in Australia to disclose their voting intentions in advance of investee company shareholder meetings.

LGS Chief Executive Officer, Peter Lambert, said “the main objective of the new site is to increase transparency and disclosure of how we invest our members’ retirement savings”.

As LGS holds shares in the majority of the top listed companies in Australia and overseas, they are entitled to vote at the shareholder meetings of most of the ASX200 companies and 500 of the largest listed companies in the world.

The new website discloses company proposals for consideration by shareholders and LGS’s voting intentions in real time using CGI Glass Lewis’ Viewpoint voting platform. Where LGS votes against a proposal due to concerns that it may lead to a loss of shareholder value, they will also provide a reason for their voting decision.

Mr Lambert said “We engage with companies on a range of environmental, social and governance (ESG) issues to ensure we are addressing potential risks across our investment portfolio. Voting at shareholder meetings forms a key element of this engagement and is an important element of our ownership rights as long-term investors.

“An essential part of this process is sharing our voting decisions with our members and the general public. In doing this, we are raising awareness of where we invest our members’ savings and how their rights as ultimate beneficiaries of the shares are being honoured.”

As a rule LGS votes in accordance with Australian Council of Superannuation Investors (ACSI) and CGI Glass Lewis recommendations, but will vote against these recommendations if they believe there is a long-term ESG risk which may lead to the loss of shareholder value.

LGS has voted against company proposals in the past as a result of concerns with:

• board diversity and independence
• remuneration report recommendations
• sustainability reporting disclosure
• climate change

LGS also engages on ESG issues by filing shareholder proposals and board nominations. Recent examples include participating in the co-filing of BP and Shell climate disclosure shareholder resolutions and nominating a climate change expert to the board of BHP Billiton.

Peter Lambert said “By engaging in this way, our aim is to increase our investee companies’ awareness and understanding of current and future ESG issues, improve standards of governance and encourage greater disclosure.”

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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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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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