Responsible investment

One major benefit of belonging to an industry super fund, apart from the historically superior investment returns over the long term, is knowing that the Trustee has a good understanding of the values and aspirations of your work sector. This fact rings true with the NGS Super Board of Directors who are have been deeply involved in education and share common values with members in terms of environment, fair labour practices, sustainability and responsible investment.

In terms of ethical investment, NGS Super is a signatory to the United Nations Principles for Responsible Investment which means that the Fund integrates environmental, social and governance considerations into its investment decision-making when selecting investment managers and when exercising rights as shareholders. In carrying out its fiduciary duty to members, the expectation of the Investment Committee is that socially responsible investment decisions will deliver improved long-term returns to investors; this view is soundly based in a large body of investment research.

The NGS Super Trustee has recently considered the question of refugee detention centres and decided to sell its holdings in Transfield, a company which holds the Government contract for the management of offshore detention centres. The divestment from Transfield was made after due consideration of the investment return expected from this company as well as the morally questionable practices exhibited at certain detention centres regarding the treatment of refugees and their children. The Trustee considered that they funds invested in Transfield would be better placed with an alternative investment.

A collateral benefit of the divestment is that it sends a strong message that members of NGS Super will not be supporting the current manner of operation of these offshore detention centres as an ethical position. Your money is not supporting Transfield! Instead, it’s invested in a similar company with better long term economic prospects.

It can be seen from the above that the NGS Super Board assesses investments through a number of lenses, the first of which is always investment criteria: will the investment contribute to better retirement outcomes? If that box cannot be ticked, the investment cannot be made. Pleasingly, there are emerging opportunities where sound investment principles converge with responsible social and environment outcomes, and an example of this was when the NGS Super Board chose to invest in a NSW Social Benefit Bond which finances the uniting of foster children with their families. In short this Bond is a partnership between the NSW Government, UnitingCare, a Fund Manager and investors, which works with parents who have had their children removed from their care or whose children are at risk of removal, to create safe family environments. Investors provide capital to UnitingCare which assists families through UnitingCare’s Newpin program to reunite children with their parents, and the NSW government provides incentives for success which underpin the programme’s revenues (and therefore the yield on the Bond).

As an investment proposition the Social Benefit Bond is a winner with an 8.9% return to private investors this year. This year the programme successfully restored 66 children in out-of-home care with their families while investors received strong financial returns from the State Government according to the audited results. This seven-year program is expected to provide further long-term beneficial financial outcomes and remove some of the future risk for children placed in foster care. UnitingCare’s Children, Young People and Families Director, Claerwen Little said, “These positive results show that many families, given the right type of support, can provide safe and loving homes for their children”. Strong financial outcomes and social benefits are not antithetical! It is worth noting that more Social Benefit Bonds are coming onto the Australian market as this type of partnership with governments can increase the speed of social change while providing solid returns for investors.

The NGS Super Trustee has also considered the environmental damage caused by coal and the potential effects of carbon emissions. Again, the idea that smart socially responsible investing will provide better long-term results was the starting point for this discussion. The Board then decided that before any investment may be made in a vehicle generating more than 30% of its revenues from coal, the matter should be referred to the whole Board for consideration and debate. This decision aligns with a 2013 Trustee decision to divest from tobacco companies, and find alternative investments that will deliver equivalent or better returns.

The NGS Super Board of Directors knows and represents its constituency and will invest members’ superannuation responsibly for growth, appropriately taking into account social and environmental issues.

The NGS Super Board of Directors, Management and Staff would like to wish all IEU members a Happy Christmas and a safe and prosperous 2016!

(Important information: The information in this article is general information only and does not take into account your objectives, financial situation or needs. Beforemaking a financial decision, please assess the appropriateness of the informationto your individual circumstances, read the Product Disclosure Statement for anyproduct you may be thinking of acquiring and consider seeking personal advice.Past performance is not a reliable indicator of future performance.)
Bernard O'Connor
NGS Super