Hesta Super leads pack in making ESG pay
AsianInvestor’s second annual Institutional Excellence Awards were introduced to highlight best practice, with awards handed out in 16 institutions collectively managing $3.5 trillion.
Australia's Hesta Industry Super Fund won the award for socially responsible investing for its committed and systematic analysis of every asset through an environmental, social and governance (ESG) lens.
The winners were announced on October 30 and received their awards at an exclusive ceremony and dinner on December 2 at The South Beach hotel in Singapore.
We thank all those who contributed their thoughts to these awards. The full list of write-ups appears in the December issue of AsianInvestor magazine, and more details of our decision-making process can be found here.
Socially responsible investing:
Hesta Industry Super Fund
Responsible investing isn’t a sideline for Hesta. The A$32 billion ($23 billion) superannuation fund applies an ESG lens to every asset in its portfolio.
Chief investment officer Rob Fowler and his team use a mix of positive and negative screens and active engagement with company boards to improve corporate governance practices. Rather than being guided by a set of ethical values, Fowler focuses on risk and asks whether an investment’s ESG risks have been factored into the price.
In August this year Hesta put this rule to work when it sold a 3.5% stake in contractor Transfield Services on claims that the company was in breach of international human rights laws at the offshore refugee detention centres that it runs. The fund concluded that these breaches would, over time, weaken the company’s share price and that this was not in the financial interests of Hesta’s members. It instructed its three external fund managers to sell.
Moves such as this are always greeted with positive feedback from Hesta’s 800,000 members. Over the years they have been supportive of exclusions in tobacco and uranium and, more recently, new thermal coal mines.
The decision to exclude new coal ventures was a controversial one given Australia’s reliance on fossil fuel exports, but Hesta cited research showing that virtually all new mines would have costs of production significantly above lowest-cost quartile and that these risks were unlikely to be compensated for in the price.
One of Hesta’s more popular opt-in choice funds is a A$400 million Eco Pool which follows its own stringent screening methodology. The Eco Pool has returned 10.82% annually over the past five years versus 8.78% for Hesta’s default fund.
Hesta also allocated A$30 million to a discretionary fund managed by Social Ventures Australia that will buy into housing projects and social impact bonds. This was the largest commitment by a super fund to the impact investment market, and the hope is that others will follow. These are bold moves supported by an ESG policy that doesn’t throw financial analysis out of the window.
2015 winners already unveiled:
Institutional category
Reserves manager: Monetary Authority of Singapore
Insurance company (general account): Ping An Life
Public pension fund: Bureau of Labor Funds
Private pension fund 2015: Jardine Matheson
Endowment: National University of Singapore
Markets category
Australia/New Zealand: the Future Fund
Mainland China: China Life Insurance
Hong Kong/Taiwan: Cathay Life Insurance
Japan: Government Pension Investment Fund
Southeast Asia: Government Pension Fund (Thailand)
Expertise category