At First State Super, our role goes beyond making sure your investment looks good on paper. We see ourselves as ‘stewards of your capital’.
We see ourselves as ‘stewards of your capital’. This means ensuring that we help generate real value, by going beyond the bottom line to assess the real-world impact of our investments. As one of the , we see ourselves as ‘universal owners’, meaning we must consider the broader impact of our 60-billion-dollar investment footprint. We recognise that the actions we take have far reaching consequences on society, and as a result – on your retirement savings.
The pillars of universal ownership
Universal ownership is more applicable to large investors operating in smaller markets, like us – we often describe it as being mindful of the ‘investment footprint’ we leave in our wake, and seek to ensure this has a positive socio-economic impact, on balance, over time.
At First State Super the three core components of universal ownership are:
- A larger lens to investing
Longer horizons: strategic investing and a greater focus on long-term sustainability.
Wider assessment: analysing impacts on markets, community and the environment, and evaluating the associated risks.
- ESG and engagement
ESG integration: external and internal investment managers.
Engagement: working with corporate boards, policy makers and stakeholders.
- Relevant investments
Product design: we have dedicated socially responsible investment options.
Proactive deal sourcing: compelling investment ideas that are relevant to our members.
How we get the job done – research!
Our core principle of universal ownership posits that the actions of larger, long-term asset owners to support better governance of listed companies (among other things) can deliver a long-term return dividend to members.
Universal ownership is not about how we buy and sell stocks – it is about how we own them on behalf of our members (the real “owners” of the capital). In the past we’ve studied how this might be achieved through encouraging climate change adaptation or more aligned executive remuneration. The purpose of our latest research paper is to explore how long-term value can be created through advancing stronger governance and leadership.
Industry debate about what constitutes good governance (the ‘G’ in ESG) has resulted in a wide range of views being shared. Many zero in on executive remuneration, while others focus more on the independence and/or diversity of directors, so-called “over-boarding” or accounting practices. Many senior executives also lament that asset owners often confront them with different views on the same issue.
We believe this misses an opportunity for asset owners to add value. It prevents deeper, more constructive engagement with senior executives about long-term value drivers. In our research paper we make two key assertions about corporate governance and leadership
- The primary driver of long-term value creation is the alignment of an organisation’s workforce around its purpose and strategic vision.
- The success of any long-term strategy depends on its level of management skill and discipline, and the extent to which it builds organisational resilience.
Our aim was to explore these assertions and establish a coherent basis for our future engagement with listed companies around governance and leadership. However, a key challenge is identifying companies and management teams that are well positioned to create long-term value and discovering how to support them in their efforts. Financial reports and investor communications are too narrow for this purpose – often focusing on just the latest year in review, or providing guidance only for the next six months. There is often little narrative around longer-term vision, culture, innovation or organisational resilience. We believe there is more chance of a greater return for our members if we engage in deeper and richer conversations around these topics.
Active ownership is one of the key strategies to realising our role as ‘stewards of your capital’. We vote to hold companies to account on governance, but more importantly we create a constructive dialogue with companies and policy makers. Then, we continue to engage, with the aim of helping them to better manage ESG risks and encouraging disclosure.
An example of our work and as Australia’s largest energy supplier is AGL who also has one of Australia’s largest emissions footprint. We know that divestment is not the only solution, so instead we collaborated with other shareholders to help AGL develop better disclosure, champion a smooth transition to low carbon power supply and ensure energy security for every day Australians. This lead AGL to forgo investment in coal seam gas and allocate two billion dollars to renewable energy over the next four years.
Here is a snapshot of our activities underpinning our role as a Universal Owner
Relevant InvestmentsShow more
We’ve partnered with the NSW government and ROC Partners to implement the $150 million GO NSW Equity Fund. The fund will provide expansionary capital to high-growth and high-potential small to medium-sized enterprises based in NSW that have reached the stage where they wish to expand. The fund will also focus on companies that demonstrate positive socio-economic benefits such as job creation, regional growth or building intellectual property. Target industry sectors include food and agribusiness, tourism, smart cities infrastructure and advanced manufacturing.
Bendigo HospitalShow more
Bendigo Hospital is a superb facility for patients, a world-class working environment and a rewarding investment for our members.
The $630 million hospital (of which we’ve invested $368 million *approx. from June 2016) is the largest in regional Victoria. In addition to standalone power generation, the hospital has roof-mounted solar panels, rainwater harvesting, recycled water systems for irrigation and toilet flushing, and green roof space with native grass and shrubs to create a tranquil and natural environment.
The project won the International Interior Design Association (IIDA) award for Best Interior Design of any healthcare facility in the Asia Pacific region. The Chicago-based IIDA described the hospital as ‘a shining example of innovative, world-class hospital design where patient needs are front and centre’. The hospital also won an award at the 2017 Premier’s Sustainability Awards for its sustainable construction and cost-effective power solutions.
Sunshine Coast University HospitalShow more
Sunshine Coast University Hospital won the Australian Institute of Architecture’s prestigious Public Architecture Award at the 2017 National Architecture Awards.
The hospital was also awarded the Gabriel Poole Award for Building of the Year at the 2017 Queensland Regional Architecture Awards.
Making good use of its natural surroundings, the hospital provides green corridors, public outdoor spaces and community infrastructure. It is also a world-class health and educational facility.
The hospital is the largest single green-rated development undertaken by Lendlease in Australia, achieving best practice in sustainability design principles and construction. Lendlease was awarded Queensland Project of the Year for the hospital at the 2017 Master Builders Queensland Housing & Construction Awards.