Usually between 1 and 2 per cent of the portfolio is shorted to hedge against ESG risk. Robertson says the policy has worked well in the past. He cites a recent example where the fund shorted News Corp because of long-running concerns over its corporate governance structures – this was ahead of the phone-hacking scandal. While the shorting strategy can create short-term pain, LGS calculates that over the last five years the policy has added 14 basis points to returns. LGS has bolstered its ESG capabilities, recently appointing Bill Hartnett as its sustainability manager. Robertson says Hartnett is looking to increase engagement activities, including muscling up LGS’s approach on executive pay and remuneration. “We never quite got the idea that a recommendation would go out from ACSI about rejecting a remuneration report, but the chairman of the remuneration committee would be up for re-election as a director and we would vote for them,” Robertson says.
“Now we will vote against him or her.” Robertson, who is secretary of the Development and Environmental Professionals’ Association – a union representing NSW local government workers – says superannuation funds need to push harder if they want genuine change around how companies manage potential ESG risks. “Being a union official, I realise that the time for asking nicely runs out and you either go away or you try and nail them,” he says. “Sometimes, merely asking doesn’t work, and you have to see if you have other options.” Robertson is scathing in his assessment of some of his fellow union trustees who sit on the boards of industry funds across the country. “It [a board position] is often treated like a sinecure for a reward for service to the movement and you sit on that board and don’t have to do very much, and it’s not going to be a challenging experience for you,” he says. “It is something where you can just pad the ball down the wicket for a while and just take a fee.”
During his time at the fund, LGS has not been shy of a stoush. Robertson was a vocal critic of alleged backroom moves to merge Energy Industries Superannuation Scheme (EISS) with Local Government Super under the previous Labor State Government. “It was a classic marriage where someone went with two-thirds of the assets and only a third of the control, and no pre-nup,” he says when describing this period in the fund’s history. “In terms of an arranged marriage there wasn’t much compatibility.” The fund’s management arrangements with FuturePlus still have three years of a four-year agreement to run. But Robertson says FuturePlus is “on notice” and that any future decision on extending the management arrangement will be made on “market considerations rather than mates’ rates”. Robertson is also a strong advocate for the fund taking a position on the carbon tax, saying that as an investor it would engage with companies that became part of an armada of business interests lining up to oppose the policy. “Think about all of these strange federations of businesses that are setting up to fight the carbon tax: industry funds and all Australians are shareholders in those companies involved,” he says.