Rest's approach to sustainable investing

Rest's approach to sustainable investing

Managing the retirement savings of around 2 million Australians is serious business. We are responsible for helping our members achieve the best retirement outcome by ensuring our decisions are in their best financial interests.

We believe that investing sustainably is an important part of managing financial risk and generating competitive, long-term returns for our members. This involves considering a broad range of matters, including environmental, social and governance (ESG) factors. When Rest invests through investment managers, we expect them to adequately address ESG matters in their processes and investment decisions.

We may also at times decide to exclude certain types of investments from our portfolio based on several factors, including labour, environmental, social or ethical standards. For example, Rest will not invest in companies that are directly involved in the manufacture of tobacco or controversial munitions such as landmines, cluster bombs and chemical weapons. Managing sustainability and considering the impacts of our investment decisions is just another way Rest can help give our members confidence in their financial future.

Staying on top of risk

One of the keys to investing is managing uncertainty and risk, which is why we continually monitor, amongst other things, the likes of changing expectations in the direction of interest rates, exchange rates, inflation and the fortunes of individual investee companies.

Long-term investment returns may also rise or fall based on wider sustainability factors like the impact of environmental, social and governance issues (ESG), changes in regulation and political outcomes, as well as technological advancements.

Considering climate change risk

Climate change can create risks for many types of investments, particularly over the long term. But you can rest easy knowing we’re on top of everything.

Climate change issues are factored into our asset allocation and strategy-review processes. What’s more, we work with investment managers and the Australian Council of Superannuation Investors (ACSI) to encourage full disclosure of climate change risks by companies.

We look to improve the ways to factor climate change into our investment processes, including our investment manager selection and ongoing monitoring processes.

Read about our take on climate change.

Keeping an eye on ESG

A deep understanding of ESG issues is important to sound investing.

We consider ESG-related risks in a balanced manner alongside other investment risks. So rather than including or excluding investments solely on a single risk or issue in isolation, we balance each risk against the probable benefit of holding an investment.

We seek to actively consider and manage these risks, which helps improve the sustainability of returns, through direct engagement with a range of partners such as investment managers and advisers.

Selecting the right investment managers

Our investment managers are the experts who actively manage your investments. Their role is one of great responsibility, so we carefully assess candidates by considering their experience and credentials, together with their ability to invest sustainably and meet set investment objectives.

We look for investment managers who consider the full range of relevant factors in their investment decisions, including sustainability in the context of long-term investment performance, when exercising voting rights and participating in all aspects of our investment.

Driving outcomes through engagement

We believe we’d be letting our members down if we simply sat back and watched events unfold. Our preferred approach is to actively engage with investment managers, advisers, peers and industry bodies to make sure sustainability issues are properly factored into our investment process.

Having a ‘seat at the table’ with investees is one important way of promoting our members’ interests.

Turning theory into practice

How does one of our investment managers consider ESG risks before purchasing a stock?

First comes a fundamental analysis to determine whether a company is a good investment. It’s this analysis that provides an assessment of a stock’s value, and its overall financial health.

This is followed by a comprehensive company ESG review. Our investment manager scores every company out of 10 based on environmental, social and governance criteria – only those that score six or more are considered for inclusion in our portfolio. Anything less may indicate risks to the company’s long-term investment performance.

After that, our investment manager continues to monitor ESG scores using a combination of internal and external research services. Our investment adviser also monitors and questions the retention of companies with poor or declining ESG scores in regular reviews of the investment manager.

ESG risks x stock purchasing method Chart

Adding another layer of checks and balances

Above our investment managers sits an investment adviser that continually reviews our managers as additional oversight of your investment.

Dedicated team approach
Our adviser analyses the managers’ approach to risk and opportunity assessment, including ESG-assessment where it is considered by the managers to be a material consideration to the investment thesis of underlying investments. This is reviewed as part of the manager research and selection process.

Manager evaluation process
Each investment manager’s approach to ESG must be in line with their peer group of managers, within their relevant investment asset class and investment strategy type.

Ongoing monitoring
Together with its asset class research teams, the investment adviser continually monitors investment managers to ensure that the manager’s approach to risks and opportunity assessment, pricing of risk and portfolio sizing is being undertaken appropriately – to assist Rest’s ability to meet its investment objectives over the long term.

Rest's investment beliefs

The central tenet of Rest’s investment philosophy is the active management of our investments in order to meet the investment return objectives of each of the investment options. Rest’s investment philosophy and approach is guided by eight core investment beliefs.

SEE BELIEFS

Australian Council of Superannuation Investors (ACSI)

Rest is a member of ACSI, an organisation that collaborates with Australian and international asset owners, bound together by their common interests as long-term investors in the capital markets. ACSI's research supports advocacy, engagement and voting programs and includes long-running annual projects, such as CEO Pay in ASX200 Companies and Sustainability Reporting Practices of the ASX200, as well as thematic research on specific material ESG issues.

SEE REPORTS

Rest to become the sole owner of Collgar wind Farm in WA

Rest has agreed to fully acquire the Collgar Wind Farm in Western Australia, which will make it one of the largest Australian renewable energy projects directly owned by an Australian superannuation fund.

Rest’s Voting and Proxy Policy

Our Voting and Proxy Policy sets out how our voting and proxy rights, with respect to our investments, are managed. The guiding principle of our approach is that voting rights should be exercised and proxy votes should be cast in a manner that seeks to improve the long term investment performance of our investments.

SEE VOTING AND PROXY POLICY

SEE VOTING AND PROXY BEHAVIOURS

Climate Change Position Statement

Our take on climate change