The board of Local Government Super (LGS) has reaffirmed its commitment to ESG and is evolving its strategies to meet the challenges presented by this course of action.
The board reviewed its investment beliefs last week – an exercise it goes through every two years –with a board member saying ESG was prevalent in the discussions of how to achieve returns for members over the long-term.
“I’ve heard it strongly said at CMSF that we’ve got to get our heads back to thinking about super as long term. And that’s very hard when super is in the news every other day, and the laws seem to be changing, and the footing underneath us seems to be moving constantly. It’s an ever-changing environment. So how do we as directors plan for the long-term?” said Michelle Blicavs, director at LGS.
Blicavs, who will be speaking next week on the topic of the ESG challenge for trustees at the Australian Council of Superannuation Investors’ national conference, added one of the challenges the board has encountered was understanding how to implement its core value that ESG factors need to be considered in all decisions, not just investment ones.
“You have to take action as a director on where you want the future of your organisation to go. So the action we took was to appoint someone in a very senior position within the organisation,” Blicavs said.
This person was Bill Hartnett, who was appointed as the head of sustainability in 2010, reporting directly to the chief investment officer.
“We didn’t just outsource this to our fund managers and say to Jana ‘It’s all on you’; that’s not the right approach. You have to show those that you work with, externally and internally, [that] you are committed to this and put your money where your mouth is,” Blicavs said.
Blicavs is also proud of LGS’ Sustainable Australian Shares option that has returned 10.73 per cent since it was launched four years ago, adding this was evidence that an ESG investment overlay or approach did not mean sacrificing investment returns.
“It’s about making decisions in real time that will impact in five and 10 and 20 years in the future because, obviously, when it comes to carbon and climate change decisions these are long-term decisions, because we are not going to see the impacts of the decisions we make now on climate change for 20 years at least,” Blicavs said.
“My advice to other funds … is that you have to take leadership on it. We take an active ownership approach as well as ESG integration, so it’s not just about environmental factors; it is about active ownership of who we invest with and engaging with companies and proxy voting. That’s a key component.”