Hostplus considers investment governance as an area that is integral to the investment selection process. This section covers:
As a superannuation fund, Hostplus’ primary duties are to:
In order to meet these obligations and to protect and manage our investments for the long-term, we recognise the need to consider environmental, social and corporate governance (ESG) risks in our investment decision‑making processes.
Hostplus investment strategy also requires the fund to invest in a range of listed Australian and international shareholdings. Accordingly, Hostplus endeavours to exercise its entitlement to vote on all company-related matters.
By participating in proxy voting decisions Hostplus is positively contributing towards the accountability and integrity of companies, promoting a framework where companies can be managed in the best interests of its shareholders.
At Hostplus, we’re committed to acting as a responsible long-term investor. We also recognise our obligation to first and foremost maximise investment returns for our members - it’s a fiduciary requirement and responsibility we take very seriously.
As of 30 June 2015 we have close to one million members that work in hospitality, tourism, recreation and sport industries or who simply enjoy the attributes of Hostplus. Within this membership group there are different views as to what types of investments should be included or excluded from an investment portfolio. Our position is to invest on behalf of our members in a responsible way, while supporting the industries we represent. Industries that provide jobs for hundreds of thousands of Australians and help drive the national economy.
As part of our approach to Environmental, Social and Governance (ESG ) risks, Hostplus pursues an ‘active ownership program’ and engages with listed companies on ESG issues directly and collectively through Australian Council of Super Investors (ACSI). Hostplus is a foundation member of ACSI, which engages with companies on our behalf, to ensure that the interests of Hostplus members are well represented. It is Hostplus’ policy to vote the proxy rights associated with most of our Australian and International equities holdings and we are committed to publicly disclosing any ESG-related activities, including proxy voting records and examples of how ESG practices have been applied to our investments.
The latest record of Hostplus’ recent proxy voting activity is available below.
In addition, Hostplus is a signatory to the Principles for Responsible Investment (PRI). These principles establish a collective international framework for institutional investors to integrate ESG considerations into their investment decision-making. We believe that the PRI provides an important universal framework for signatories to work together, learn from each other and to provide a collective voice on ESG issues.
At Hostplus, we recognise that the impact of ESG risks, such as climate change, may influence the performance of the fund’s investments over time, so it’s important to consider climate change risks in our decision-making process in order to protect and manage our investments for the long-term.
That’s because we believe that entities that best manage ESG risks, impacts and opportunities are more financially sustainable in the long term and will deliver better long-term financial performance.
So the ESG performance of entities in which we invest is an important consideration when assessing their likelihood to deliver strong returns for our members.
Reducing the environmental footprint of our investments is also part of being a responsible long-term investor and is therefore in the best interests of our members. Companies that have sound ESG practices are likely to improve investment returns to their shareholders in the long term. Ensuring that companies we invest in operate with sound ESG practices is one way to reduce and control investment risk.
That’s why we conduct thorough analysis of these factors as part of our decision making process when considering a new investment.
Some examples of ESG factors we take into consideration include:
One of the main arguments being raised today by climate change advocacy organisations is that superannuation funds need to reduce, or eliminate, their investment in assets that generate high emissions because of the risk that their value may be affected by future changes in regulation or technological advances.
Although avoiding investment in these sorts of assets might seem like the most simple and appealing course of action, we do not believe that excluding a whole class of companies when we rely on them heavily for their products and services every day, represents a ‘silver bullet’ to the investment challenges posed by climate change.
Furthermore, reducing or eliminating investment in companies that produce fossil fuels may result in them reducing investment on essential research required to develop new technologies such as carbon capture and storage.
By retaining our ownership, we have the opportunity to engage with those companies to persuade them to improve their environmental practices while continuing to meet society’s energy needs.
So we welcome the broader public debate about climate change and the implications for investors, however as part of our fiduciary responsibility to members, we do not have a ‘blanket rule’ on high emission assets and as such, have some investment exposure to fossil fuels via investments made by the fund’s investment managers.
As you can imagine, there are thousands of companies listed on the Australian Stock Exchange and other stock exchanges around the world. Because of the enormity of the investment task, Hostplus has appointed a diverse range of over 30 professional investment managers, each focusing on a specific area of the global share market universe. We encourage our investment managers to consider the potential implications of climate change and other ESG factors before making investments on behalf of Hostplus.
There are various paths that investment managers can take when considering whether to invest in companies that have relatively poor ESG practices. One approach is ‘negative screening’, which prohibits investment in those companies that score poorly on ESG factors. Another approach is ‘positive screening’, which invests only in those companies that score highly on ESG factors.
The only example of ‘negative screening’ that is currently applied to Hostplus investments relates to companies that produce ‘cluster’ munitions. Due to destructive nature of these weapons and the fact that their use is banned by many countries around the world, Hostplus has a policy to ban cluster munition producers from its investment portfolio.
Importantly, we prefer a third approach of investing using a combination of financial and non-financial metrics and then engaging with companies where there are reservations about their ESG activities. In this way, as shareholders of companies, we have the opportunity to persuade them to improve their practices.
Overall, Hostplus is very mindful of its obligation to invest its members’ money in a responsible way. ESG considerations are a key part of our investment approach and we will look to further enhance and promote responsible investment practice to ensure we deliver long term sustainable returns to our members.
Hostplus’ Corporate Governance (Proxy Voting) Policy covers listed shares owned by Hostplus. These shares are Australian shares listed in the Australian Stock Exchange (ASX) and international shares contained in the MSCI World ex Australia Index.
To assist in the implementation and development of the Hostplus Corporate Governance framework, Hostplus is a member of the Australian Council of Superannuation Investors (“ACSI”).
For Australian shares, Hostplus reviews the recommendations provided by ACSI who analyses voting matters on behalf of its members. Hostplus usually votes in accordance with ACSI’s recommendations. Where ACSI provides an "abstain" recommendation Hostplus will vote based on considered advice from its fund managers.
For international shares, Hostplus adopts ACSI's International Voting Alert Guidelines. These guidelines currently include companies in the United States, Canada, United Kingdom and Continental Europe. Voting is conducted by a US-based company, Glass Lewis International, in line with ACSI's International Voting Policy.
For shares held by Hostplus ‘pooled fund managers, Hostplus relies on the fund managers to vote in the best interest of its members and Hostplus closely monitors the voting preference of these managers. All fund managers are expected to give due consideration to the corporate governance framework of each entity and country based on regulations established by their recognised exchanges.
In all cases, Hostplus is able to monitor and override any issues of ACSI, Glass Lewis or that of our fund managers.
Please refer to the information below for the latest record of Hostplus’ recent proxy voting activity.January to June 2016
We believe that innovative sustainable assets not only contribute to local communities and help to preserve the environment, they will also be profitable investments both now and in the future. Which means more money for our members to enjoy in their retirement. It’s a win/win!
Hostplus members are currently investing in a wide range of award-winning properties, developments, and organisations including:
Asia Square Towers (Singapore)
The Gauge 825 Bourke Street, Melbourne
313@Somerset Shopping Centre (Singapore)
800 Collins Street, Melbourne
420 George Street, Sydney
Darling Quarter urban regeneration precinct, Darling Harbour, Sydney
Caneland central redevelopment, Mackay, Queensland
Green Square North Tower, Fortitude Valley, Queensland
Green Square South Tower, Fortitude Valley, Queensland
500 Bourke St, Melbourne
UNSW Village, Sydney
Hamburg Airport (Germany)
South East Water (UK)
Freeport LNG (Texas, USA)
Darling Harbour Live
Our investment holdings
As the saying goes, it doesn't pay to put all your eggs in one basket. The same is true for investing.
The key to successfully managing risk is through diversification. Diversification means spreading your investments across a range of asset classes or types of investments so you have exposure to different markets. This can help to offset poor performance that may occur in any individual investment. For example, if one asset class is not performing well, another asset class may be experiencing better returns helping to offset the losses of the poorer performing asset.
Hostplus understands that markets can fluctuate, which is why we invest in a wide range of assets diversified between countries, industries and asset types.