At State Super, we focus on investing for members over the long-term of their retirement and we consider a range of risks that may impact returns. One category of these risks is commonly referred to as ESG which stands for environmental, social and governance, and is key to Responsible Investment.
The State Super Responsible Investment Policy ensures we can continue to effectively integrate ESG factors in the changing environment. Here are some of the ways we have integrated ESG risks:
Climate scenario modelling
State Super understands that action on climate is a rapidly evolving area and our approach to climate is also evolving. Scenario modelling is one way we can better understand the potential impact of, and prepare for, climate change. With the help of our advisors, State Super assesses the potential impact of climate change using different potential circumstances and outcomes. These findings were reflected in the annual investment strategy review.
Physical climate risk assessment
We have commissioned research on the physical risks of climate change. This assessment is based on the location of assets and looked at the vulnerability of physical assets to risks such as floods, heat waves and cyclones. We initially undertook research in 2019 to identify potential vulnerabilities to State Super’s unlisted property and infrastructure assets and extended this in 2020 to include an assessment of the vulnerability of the physical assets within State Super’s listed equities portfolio. This analysis helps us inform future actions.
Carbon footprint analysis
State Super monitors the carbon footprint of its listed equities portfolios for Defined Contributions Options and is focussed on exploring carbon reduction strategies. This will form part of the ongoing management of ESG risk.
Voting as a shareholder
Voting and engagement is another way State Super communicates with the companies we invest in. We value engaging with companies to understand their approach to ESG and use our vote as shareholders as one other way to communicate with companies we invest in. For Defined Contribution Options, we transitioned to internal voting by State Super, with voting based on the Australian Council of Superannuation Investors guidelines. Voting for Trustee Selection has been delegated to TCorp. The first combined voting activities report was published on the website on 20 July 2020 enabling members to see how we apply our voting principles.