Responsible investing

By taking an active, rather than passive, approach to managing your investments, we retain control and can act when necessary to ensure our funds meet, and continue to meet, our financial and non-financial criteria.

Our active approach gives us the opportunity to engage with individual companies and help them improve their activities and processes to meet responsible investment criteria, with the aim of improving returns. In our equity portfolios, we’re active in voting our investors’ shareholdings in line with our investment beliefs, providing us another way to positively influence their strategies.

Our goal is to deliver sustainable performance in a sustainable way. That means assessing investments against both financial and non-financial criteria.

Traditional investment approaches focus mainly on financial criteria such as balance sheet strength and future earnings forecasts. We take a wider perspective, which also takes environmental, social, and governance (ESG) factors into account. As these factors are some of the drivers of long-term investment risks and returns, we believe that including them in our assessment criteria will help us identify investments that can deliver more sustainable long-term performance – which is in the best long-term interests of both our investors and wider society.

ESG factors may include:

• Environmental: factors relating to pollution, hazardous waste, energy or resource usage, climate change, green technologies or water management.
• Social: factors relating to human rights, ethical or indigenous relationships, health and safety, diversity, social programs or charitable endeavours.
• Governance: factors such as bribery or corruption, transparency, board structure, executive compensation or voting procedures.
• Other potential non-financial criteria in our assessment including management strength and industry composition.

ANZ Investments recognises that climate change is an increasingly important issue for society. We also recognise that climate change poses a significant risk to investment returns. To ensure our portfolios are both resilient to the risks of climate change and positioned to identify the opportunities that arise from the transition to a lower-carbon world we have developed a targeted climate change framework.

Our framework incorporates analysis of climate change risks and opportunities into the way we research, select and manage investments. To do this we measure exposure to key risk factors, for instance carbon emissions and fossil fuel reserves, or a company’s strategy and competence in addressing any material risks.

An important part of our climate change framework is to actively reduce exposure to companies and/or industries with high carbon footprints and business models that are not sustainable in the long term. For example we may exclude a company from our portfolio, engage with them to encourage change or reduce our investment.

We are a signatory to the Principles for Responsible Investment (PRI), a United Nations-supported framework which provides aspirational global criteria for responsible investing.

As a signatory to the United Nations supported Principles for Responsible Investment, we are committed to these six principles which provide guidelines for institutions on incorporating environmental, social and governance factors into their investment processes:

1. Incorporating ESG issues into investment analysis and decision making processes.
2. Being active owners and incorporating ESG issues into our ownership policies and practices.
3. Seeking appropriate disclosure on ESG issues by the entities in which we invest.
4. Promoting acceptance and implementation of the principles within the investment industry.
5. Working together with other signatories to enhance our effectiveness in implementing the principles.
6. Reporting on our activities and progress towards implementing the principles.
   

We apply these principles to all of our managed investment schemes, discretionary investment management services, wholesale mandates, superannuation schemes and wholesale schemes that we manage. This includes investments that are managed by our external fund managers who we have appointed to manage the assets of some of our underlying funds.

We don’t invest in companies involved in certain activities that contravene our responsible investing criteria.

Our active investment management approach means we continually review our investments and prospective investments against both our financial and ESG criteria. These reviews consider some or all of the following:

• Global best practice.
• Our view on the expectations of our investors or clients.
• The impact of an exclusion on returns.
• The severity of any ESG related breaches or actions, or
• The likely success of an alternative course of action (for example, engagement).
• The severity of the failure to manage for climate change.

Depending on the results of our review, we might continue to hold, review on a periodic basis, divest, or exclude the company or industry as an investment.

It’s important to note that if we buy units in a fund that isn’t managed by us, our investment might be exposed to companies we would ordinarily exclude. This possibility is factored into our decision to buy any such units.