The health and community services industry super fund, HESTA, is progressively putting its managers on notice that it is upping its focus on environmental, social and governance (ESG) issues.

Rob Fowler, HESTA’s investments and governance manager said because ESG investing was still quite an aspirational idea, not many managers were integrating analysis of ESG holistically into their investment processes. “At this point I’m communicating with our existing managers that this is where we are heading over the next five years. I would like to think they can appropriately evolve their investment thinking and processes so that we can continue to invest through them,” Fowler said. Fowler said not all the companies in an ESG portfolio need to be squeaky clean, as the ownership of shares in a company provides the opportunity for engagement to help convince them to improve their performance in these areas. He said it makes sense to consider ESG principles when making investment decisions, as it enhances the long-term sustainability of a business and reduces risk for the investor. Fowler said ESG issues would progressively become a core aspect of HESTA’s decision making over the next five years, and would be incorporated at the beginning of the manager selection process. Fowler said a small international equities mandate awarded last year to the UK’s Generation Asset Management, which boasts the latter-day climate change activist Al Gore as a director, was a step in this direction. HESTA, which has about $10 billion under management, is a member of the Investor Group on Climate Change and is in the process of becoming a signatory to the UN Principles for Responsible Investing.