Cbus Super investment head Kristian Fok, said the complexity of implementing UN sustainable development goals has created a much deeper thinking about how to value assets.
Speaking at AIST’s annual superannuation investment conference in Hobart on Wednesday, Fok highlighted the practical issues faced by investment teams when trying to incorporate the SDGs across the spectrum of asset classes.
Cbus Super has long factored climate change into its investment decisions since many of its members work in industries and live in communities that are likely to be impacted by the transition to a low-carbon future. Following on from this specific strand of responsible investment, Fok said the fund has been looking at SDGs for three or four years as a lot of the goals resonated with the membership.
“We felt, back then, that this was the first framework that people with different frameworks were starting to coalesce around and we thought was very interesting,” Fok added.
“This is why looking SDG’s and the framework is an interesting challenge for us,” he said.
“One of the benefits of being challenged to look at investments with a lens on SDGs is not only do you have to think about the positive contributions, but also you need to be mindful of negative contributions to other SDGs or you’re not adding additionality,” he told delegates.
Fok reminded conference-goers that SDGs were not originally designed for asset owners. “So, we had this interesting, attractive and detailed framework but actually it was not designed for us.”
As a place to start, Fok decided to focus on a subset of themes – mostly because of the shortage of investable opportunities. “There are a number of the goals that are pretty hard to invest in so we thought rather than try and do the whole lot or attempt a mapping exercise that didn’t offer any extra additionally we would focus on a small subset.”
The fund chose to focus on: gender, clean energy, decent work and economic growth, industry innovation and infrastructure – plus alignment of membership a key part of which was climate action and investing in sustainable cities and communities.
On the surface, Fok told delegates, it all looked “nice”. But the CIO can admit in hindsight that it was a “pretty superficial” way of looking at SDGs.
Like some of his peers, Fok has found measuring impact difficult.
“It’s really important to back impact investing with strong quality data – that’s an area that is still developing,” he added.
“Certainly, measurement around climate is getting better since we have science-based targets.”
Fok told the audience that as a result of bringing direct investing teams into the process, Cbus Super has gone from mapping its portfolio according to the SDGs, to being more deliberate – especially with property investments.
“The property portfolio had a lever around climate change and energy efficiency so there is the asset itself and then there is how you operate the asset to get these interconnections,”he said
Cbus Super has also been very deliberate about a climate focused portfolio –it has launched a $0.5 billion portfolio for climate-change initiatives.
For its part, HESTA, has been on a responsible investment journey for nearly two decades and is also committed to SDGs.
An early mover in responsible investing and with plans for HESTA to be among the global leaders, the fund’s head of impact, Mary Delahunty noted the top pension funds speak a common language.
“SDG’s provide a common language for movement of capital and for policy settings and that is where they become very important,” she said at the conference.
“They talk a common language; they walk the talk and they set the agendas.”
HESTA is the first Australian super fund to be certified by the Federal Department of Environment and Energy as carbon neutral for emissions produced from its business operations.
In order to attain the certification, organisations need to adhere to criterion including calculating their carbon footprint, identifying opportunities to reduce emissions and offsetting remaining emissions by purchasing offset credits.
The fund said it purchased a limited number of certified offsets including savannah burning projects to support Aboriginal employment in the Northern Kimberly region of Western Australia and tree planting initiative in North-Western NSW and the Babinda rainforest.
According to Delahunty, achieving accreditation is an onerous process.
“For us, it was important since we wanted to focus peoples’ attention on their footprint and one way to say that was for us to to be accredited.
“No one else is doing an impact structure the way we are. Accreditation makes us turn our mind to the pillar of work we are doing so what we are doing internally matters.”