Our Approach to ESG

ESG and why it’s important

We believe it is important to take ESG considerations into account since a company’s approach to managing ESG risks and opportunities can have a meaningful impact on its long-term viability and success. When making investment decisions across our whole portfolio of investments, we look at:

Environmental factors	Climate change and its potential impact on investments Waste, pollution and contamination Water (eg. availability and supply) Biodiversity and sustainable land use
Social factors	Workplace health and safety Diversity and inclusion Adherence to international conventions Modern slavery/ forced labour (both in company operations and supply chains) The effectiveness of a company in maintaining its 'license to operate' and managing labour relations Product responsibility
Governance factors	Board composition (diversity, expertise & independence) Executive remuneration Transparency & reporting Conduct & culture Technology & innovation Data privacy & cyber security

By integrating ESG issues in our portfolios we behave as a responsible owner, not just an investor.

As an owner, it’s our responsibility to ensure that fund managers, boards or company executives act in our interests to provide strong long-term investment returns and good outcomes for our members.

Read our Responsible Investment Report 2023 Read our Destination Net Zero Report Read our Stewardship Report

Read our Responsible Investment Policy

Learn more

Integrating ESG – part of our responsible ownership approach

We believe it is important to take ESG considerations into account since a company’s approach to managing ESG risks and opportunities can have a meaningful impact on its long-term viability and success.

Over the long term, we think companies and assets with sound ESG management are more likely to increase in value. By contrast, companies that poorly manage ESG risks have the potential to destroy shareholder value and may also harm the broader community and environment.

Our approach is not limited to a set-and-forget analysis of an investment, but rather is a holistic approach to assessing ESG risks and opportunities over an investment’s life. We do this by considering ESG factors in our asset and manager due diligence and selection, when we first invest and through ongoing monitoring.

Investment selection

When selecting investment managers, it’s important to determine how well they integrate ESG issues into their portfolios because this supports better long-term returns for our members. We focus on managers’ policies, alignment, transparency, process, and active ownership approach. See below for more information:

Manager assessment criteria

Policy: Policy and philosophy covering approach to responsible investment.

Resourcing: People and resourcing to implement policies and procedures.

Stewardship: Process for voting (where applicable) and engagement decision making and execution.

Integration: Are ESG-related factors actively considered as part of the investment process?

Transparency: Transparency and reporting of ESG activities, portfolio exposures, voting and engagement.

Alignment: Alignment of firm and key professionals with long-term perspective and Aware Super's specific Responsible Ownership policy.

Climate change: Understand it as a risk and/ or opportunity. Commitment from manager on climate targets.

Modern slavery: Understand the manager's analysis and exposure of the corporate supply chain and the investments supply chain to the risks of modern slavery.

Corporate social responsibility: What is the manager's approach to their workforce, environmental and social footprint and, importantly, how they assess and measure progress in this area?

We have been recognised by the UN-backed Principles of Responsible Investment as leaders for our approach to manager selection, appointment and monitoring.

Learn more about our approach to climate change Learn more about our investment partners

Stewardship: engagement and voting

Our responsibility as an asset owner is to make sure companies we invest in are governed and managed to enhance their long-term performance. We do this through:

Voting shares – exercising our voting rights is an effective way to express our views on good governance. We use our voting rights to support resolutions that seek to enhance value for our members across a range of areas such as board composition, executive remuneration, diversity and culture – and importantly, climate-related disclosure and action.
Engagement – when engaging on ESG matters directly with companies or indirectly via fund managers, we pay close attention to risks and opportunities that can impact the long-term sustainability of our investments (e.g. climate change, worker health & safety, diversity, conduct & culture, social licence to operate, supply chain management ).
Exclusions – while we typically engage with a company or seek to influence its ESG-related practices, sometimes we exclude certain companies or sectors (e.g. if the investment causes damage to our fund’s reputation or contravenes international treaties).
Advocacy – we collaborate formally and informally with other super funds, institutions and global initiatives to support sustainability for the industry and economy.

Aware Super is a signatory to the Australian Asset Owner Stewardship Code. As a signatory, we have developed a Stewardship Statement which shows how we apply these principles.

Learn more about how we engage with companies and vote on shares Learn more about our responsible investment exclusions

Climate Change Portfolio Transition Plan

Advocacy and collaboration

We have committed to the Principles for Responsible Investment (PRI), a universal framework to help investors learn from each other and be a collective voice on ESG issues.

The Principles , which include incorporating ESG issues into investment analysis, decision-making, policies and practices, are set out below:
1.   Incorporate ESG issues into investment analysis and decision-making processes.
2.   Be active owners and incorporate ESG issues into our ownership policies and practices.
3.   Seek appropriate disclosure on ESG issues by the entities in which we invest.
4.   Promote acceptance and implementation of the Principles within the investment industry.
5.   Work together to enhance our effectiveness in implementing the Principles.
6.   Report on our activities and progress towards implementing the Principles.

Aware Super is required to report annually on our ESG activities to the PRI. Our PRI Assessment and Transparency Reports for the period ending 31 December 2020, reported in September 2022 are provided below:

PRI Assessment Methodology

2021 Aware Super Assessment Report

2021 Aware Super Transparency Report

We’ve also joined some initiatives that we believe can deliver on our ESG promise:
•   Carbon Disclosure Project - a global initiative aimed at requiring the largest companies to disclose information on their greenhouse gas emissions.
•   Water Disclosure Project – helping businesses and investors understand the risks and opportunities associated with water-related issues around the world.
•   ESG Research Australia – encouraging better investment decisions through investment research.
•   Investor Group on Climate Change (IGCC) – Australian and New Zealand collaboration on the impact of climate change on the financial value of investments.
•   Responsible Investment Association Australasia (RIAA) - the peak industry body representing responsible, ethical and impact investors across Australia and New Zealand. RIAA’s goal is to see more capital being invested more responsibly, shifting more capital into sustainable assets and enterprises, shaping responsible financial markets to underpin strong long-term investment returns and deliver a healthier economy, society and environment. Our Australian Equities Socially Responsible Investment Option has been certified by RIAA.

• Climate League 2030 – Climate League 2030 is a ten-year, private sector-focused initiative to pledge support for Paris-aligned emissions reductions and commit action towards this goal. Working together investors, businesses, insurers and banks can make a significant contribution towards Paris-aligned emissions reductions for Australia

• Global Investors for Sustainable Development Alliance: The GISD Alliance is made up of 30 CEOs, recognised leaders of major financial institutions and corporations spanning all the regions of the world. Aware Super is the only Australia member of the Alliance. The objective of the Alliance is to address incentives for long-term investment for sustainable development. This will be achieved through leveraging the unique insights of the Alliance members in identifying policy, institutional, market, and other impediments to financing sustainable development, as well as advancing viable solutions.

• Investors against Slavery & Trafficking Asia-Pacific (IAST APAC) is an investor-led initiative that has been convened to engage with companies in the APAC region in which we collectively invest, and promote effective action among them to find, fix and prevent modern slavery, labour exploitation and human trafficking. With over 40 million victims, there are more people enslaved today than at any other time in history. Aware Super is on the Steering Committee of this initiative. Read more about IAST APAC

• 40:40 Vision - 40:40 Vision is an investor-led initiative to achieve gender balance in executive leadership across all ASX200 companies by 2030 and seeks to move beyond tokenism to achieve this through business-oriented structural transformation, encouraging companies to set and publicly report on progress against composition targets for executive leadership.