VicSuper has launched a Socially Conscious investment option, which invests in companies based on a custom index tailored to take into account action on climate change and on social issues like human rights and labour rights.
VicSuper has offered an Equity Growth Sustainability option since 2001, but recently, the $17 billion fund relaunched it as the Socially Conscious investment option. The changes to the option were spurred by survey of members in which 87% of respondents said they believe socially responsible investing is important.
“We undertook a number of surveys over probably six to eight months, and we went out to our employer base as well and interviewed a number of key employers to find out their key insights into what they think their employee base would be interested in and why an option like this is important to members as well,” said Kirsten Simpson, manager of corporate responsibility at VicSuper.
The survey of employers and members showed that both stakeholder groups were interested in investing with regards to social and environmental issues, Simpson said.
The Socially Conscious investment option invests in companies sourced from a bespoke index designed for VicSuper that combines the MSCI Global Fossil Fuels Exclusion Index, the MSCI Global Socially Responsible Index and an additional fossil fuel direct activity screen. The other asset classes in the option integrate an environment, social and governance (ESG) approach. The Socially Conscious investment option has been certified by the Responsible Investment Association of Australia as a socially responsible investment option, VicSuper said.
“The asset allocation went from a high growth option to a balanced option, and essentially the reason we did that was based on member feedback as well,” Simpson said. “When we look at our membership base, our average age is in the mid-40s. We’ve got quite a bubble of members coming through to retirement. High growth tends to suit a younger membership base, whereas a balanced option opens it up to more members.”
When asked about the Socially Conscious option, 84% of surveyed VicSuper members indicated that they would consider moving some or all their investments to it. Since launching the Socially Conscious option internally, $100 million of new assets have rolled into the option, Simpson said.
The Socially Conscious option has exclusions applied to its equity portion, Simpson said.
“Across other asset classes, VicSuper uses ESG integration,” she said. “So the Socially Conscious option has the same asset as the rest of the fund – renewables are in there, for example. There are investments in there that have sustainability benefits, but they sit within the whole fund anyway.”
According to VicSuper, the Socially Conscious option has three features:
- take action on climate change by not investing in companies that hold fossil fuel reserves used for energy purposes or whose principal business revenue is derived from direct fossil fuel activities;
- minimise social harm by not investing in companies that are materially involved in activities that potentially cause social harm, for example tobacco production, alcohol, gambling, military weapons, civilian firearms, pornography and genetically modified organisms;
- protect human rights, labour rights and the environment by not investing in companies that have been involved in severe incidents and/or controversies, or have been found to not be adhering to widely accepted global conventions.
“Most people don’t realise that they can make a real difference through their super,” Simpson said. “VicSuper has had a long term commitment to sustainability issues, and now with our Socially Conscious option, our members can invest in alignment with their social and environmental values and not pay any extra to do it. The most recent Morningstar research shows that funds that are labelled “ESG” or “ethical” are generally more expensive than non-ESG funds.”