Responsible Investment at Rest

Responsible investment at Rest

What is responsible investment?

Responsible investment is the consideration of environmental, social and governance (ESG) factors in the investment process. It helps us manage risk, maximise investment opportunities and contribute to a more sustainable future for our members.

Responsible investment is also sometimes referred to as ethical, sustainable or socially responsible investment.

Part of this process involves identifying the ESG factors that are most likely to influence your returns. This helps us take important steps towards protecting the long-term value of your super.

Responsible investment can help our members achieve their personal best retirement income, while also contributing to a more sustainable future.

Examples of ESG factors

Environmental

Climate change
Greenhouse gas emissions/carbon emissions
Energy efficiency
Waste management
Pollution to land, air and water
Water availability

Social

Modern slavery
Human rights
Indigenous rights
Workforce e.g. fair pay, health and safety, wellbeing
Diversity and equal opportunities

Governance

Corporate governance e.g. culture, conduct and accountability
Board diversity and composition
Executive remuneration

Our members’ views on responsible investment

We surveyed¹ Rest members to better understand their thoughts on responsible investment.

4 out of 5

Rest members said they believed that super funds have a responsibility towards society when it comes to investing.

Our members ranked low fees, high returns and responsible, sustainable and ethical investing as the top three most important features of their super fund.

84%

of members want Rest to target industries or companies that are responsible and have good investment performance.

75%

of Rest members expect their super to invest responsibly without impacting return on investment.

¹Research conducted by Lonergan Research via focus groups in July 2019 (of 25 Rest members) and online survey in Sept-Oct 2019 (of 2,030 Rest members) aged 18-29, 30-54 and aged 55+.

Our approach to responsible investment

The insights from our research helped create our responsible investment approach which is supported by the series of fund and asset class level initiatives below.

Integrating ESG into our investment decisions

We take important steps to make sure ESG factors are considered across all our investment decisions. This includes both the assets we invest in and the investment managers we work with.

When we research, select, appoint and monitor investment managers, we look at how well they’ve embedded ESG considerations into their processes. We also consider how they manage existing and evolving ESG factors like climate change and workforce issues (eg carbon footprint, exposure to stranded assets, fair pay, and gender equality).

Funds we invest in

Our property investments in the GPT and QIC funds are great examples of ESG integration in action. Both funds have committed to achieving net zero carbon emissions.

GPT

Rest is invested in the GPT Wholesale Office Fund (GWOF), which owns 18 buildings in Sydney, Melbourne and Brisbane. Achieving the highest level of energy efficiency in these buildings is a big focus for GPT. Their initiatives have reduced operational costs, carbon emissions and contributed towards energy savings of over $10 million in 2019.

In 2018 GPT announced plans to achieve net zero carbon emissions for GWOF by the end of 2020. They’ll do this through further energy reductions, on-site renewable energy generation and the purchase of renewable energy. In December 2019, the first two buildings achieved Carbon Neutral Certification under NABERS and Climate Active (in alignment with the international Greenhouse Gas Protocol).

QIC

Rest is an investor in the QIC Shopping Centre Fund (QSCF), which includes investments in shopping centres across the Australian Capital Territory, New South Wales, Queensland, Victoria and Western Australia. In June 2020, QIC announced their commitment to achieving net zero carbon emissions for core Australian retail assets by 2028 (including the assets in QSCF).

This will be achieved by delivering a range of carbon-reducing initiatives, including one of Australia’s largest rooftop solar projects, the reduction of energy consumption and by making smart investments in current and emerging technologies.

For more information on how ESG factors are integrated into Rest’s direct property assets, see Rest’s Property Investments page.

A spotlight on climate change

We recognise that a company’s approach to climate change has the potential to influence long-term investment performance – and the value of your retirement savings.

Our responsible investment approach encourages investment managers and the companies we invest in to consider both the financial risks and opportunities related to climate change.

Read our Climate Change Position Statement.

Advocating for positive change

Our industry collaborations help promote good ESG practices by increasing awareness and education on ESG issues. They also help us engage with companies and government to positively influence ESG performance and policy.

The PRI works to understand the investment implications of ESG factors and supports investors in incorporating them into investment and ownership decisions.

Our membership with ACSI helps Rest manage ESG issues to protect our members’ investments. We sit on both the ACSI Board and the Member Council.

The IGCC aims to encourage government policies and investment practices that address the risks and opportunities of climate change for the ultimate benefit of investment beneficiaries.

RIAA provides a strong voice on ESG issues for members and is dedicated to ensuring capital is aligned with achieving a healthy society, environment and economy.

Rest is a collaborator in the Australian Sustainable Finance Initiative (ASFI). ASFI has brought together over 130 individuals from more than 80 organisations across all parts of financial services (as well as academia, civil society and government) to create a sustainable finance roadmap for Australia.

GRESBˆ is the leading ESG benchmark for real estate and infrastructure investments across the world. Rest uses GRESB data and analytical tools to manage ESG risks, capitalise on opportunities and engage with investment managers.

The Tobacco Free Portfolios badge reflects our commitment to exclude investment in companies that are directly involved in the manufacture of tobacco.

^ GRESB® is a trademark owned by GRESB BV. All trademarks used in this document are used with the relevant trademark owners consent.

Contributing to a sustainable future

Negative Screening

We use negative screening to exclude certain industry sectors or companies from your investment portfolio. The negative screening we currently apply to our investments include:

Tobacco

Investing in tobacco companies presents both investment and reputational risk.

We also found from International Labour Organisation research, that child labour is rampant in tobacco growing communities². So we made the decision to screen out tobacco manufacturers and achieved the Tobacco Free Portfolios supporter badge.

To learn more about the benefits of going tobacco-free, please see the Tobacco Free Portfolios website.

² ‘Why sign the pledge?’, accessed 1 October 2020, from UNEPFI, https://www.unepfi.org/psi/tobacco-free-finance-pledge/

Controversial Weapons

We also made the decision to screen out companies directly involved in the production of controversial weapons.

While there is no official global definition of controversial weapons, for Rest, it includes:

cluster bombs
landmines
chemical and biological weapons
depleted uranium weapons.

Sustainability themed investments

Our sustainability themed investments can combine strong long-term returns for our members with specific ESG outcomes (ie. through the use of renewables or the reduction of emissions).

Providing clean energy for Western Australians

Rest owns the Collgar Wind Farm in Western Australia. We’re the only Australian superannuation fund that directly owns and manages a 100% interest in such a large-scale renewable energy project in the country.

Collgar Wind Farm generates over 25% of Western Australia’s wholesale renewable electricity generation, displacing roughly 450,000 tonnes of carbon dioxide emissions per year. The annual generation of Collgar Wind Farm is enough to power around 130,000 Western Australian homes for a year.

Find out more

Wind Projects in North America

In December 2012, Rest acquired an interest in Capistrano Wind Partners (“Capistrano”).

Capistrano is a partnership established to own and operate utility scale wind projects in North America. Capistrano currently owns and operates over 400 MW of operating wind projects across Texas, Nebraska and Wyoming.

In 2019, electricity generated at Capistrano avoided over 900,000 tonnes of carbon dioxide emissions, equivalent to taking more than 200,000 cars off the road for one year³.

Using technology to lower carbon emissions

In 2019, Rest acquired an interest in Long Beach Container Terminal (LBCT), alongside Macquarie Infrastructure Partners.

LBCT, located in Long Beach, California, is one of the greenest port terminals in the world. They use electricity to power their major plant, including the cranes which lift the containers to and from the ships, the guided vehicles which transport the containers around the terminal, and the large auto stacking cranes which load/unload containers from trucking companies. Traditionally this equipment has been powered by diesel fuel, which emits diesel particles into the atmosphere. By converting major plants to electric power, LBCT avoids these emissions.

Find out more

For more information about how ESG is incorporated into Rest’s infrastructure assets, see our Infrastructure Investments page.

³Based on US power electricity generation and resulting CO2 emissions by fuel (2018)

Actively managing our investments

There are two ways we can influence the companies we invest in on ESG matters – through engagement and share voting.

Engagement

The way we engage with the companies we invest in can be different depending on the type of asset.

For all listed equities, engagement is done via our investment managers. For Australian equities, we engage through a dedicated ESG service provider, the Australian Council of Superannuation Investors (ACSI). Rest is also a collaborator in meetings ASCI arranges with investee companies. Over the course of 2019, ACSI engaged Australian companies on issues that included:

climate change
corporate governance e.g. culture, conduct and accountability
board diversity e.g. gender diversity
workforce e.g. wage underpayments and modern slavery

You can find more information about ACSI’s engagement activities on their Engagement Reports page.

Share voting

We require our equities investment managers to vote on all company resolutions, unless we instruct them differently. We also ask them to provide a copy of their proxy voting policies, their most recent ESG policies and reports on the current ESG issues they’re considering.

Some examples of the ESG issues investment managers vote on include:

director elections
remuneration
placements
auditor appointments
shareholder resolutions (i.e. those submitted by shareholders rather than being proposed by management).

For more information on our approach to voting, please read our Voting and Proxy Policy.

You can also see a summary of our investment manager’s voting decisions in our Rest Proxy Voting Behaviours report.

Sharing our progress

As a member of the Principles for Responsible Investment (PRI), we are strengthening our efforts to measure, monitor and report on responsible investment. This includes climate-related risks and opportunities.

We also support a number of UN Sustainable Development Goals (SDGs) through our property and infrastructure investments, proxy voting activities and our decision to exclude tobacco and controversial weapons.

We continue to look for more ways to contribute to the SDGs through our investments, and play a role in creating a better, more sustainable future for everyone.

For more information on our approach to ESG, please read our latest Annual Report.