Review the ANU 2022 Socially Responsible Investment Report (focus on the first two pages, read the...

Transcribed Image Text:

Review the ANU 2022 Socially Responsible Investment Report (focus on the first two pages, read the rest of the report if you are interested), to answer the following questions: a) What is responsible investment? b) How much capital (money) does ANU have as an investor? c) Why do you think ANU holds this much capital? d) What are the ESG issues that ANU is most focussed on? e) In the lecture we discussed different forms of Responsible Investment (see Scholtens 2014) Explain, with reference to the report, which of these strategies you think ANU is adopting. f) Why might ANU stipulate excluding companies with 'no more than 20% of revenues from coal, gambling, tobacco or pornography' rather than excluding companies that invest in them altogether? g) What do you think about the approach of ANU to Responsible Investment? Provide some feedback on what you think they are doing well, and what you think they need to do better. [note: we may anonymously summarise some key points of student feedback from this question based on the tutorials, and provide it to the ANU Investment Office on their approach] ANU SOCIALLY RESPONSIBLE INVESTMENT (SRI) REPORT 2022 EXECUTIVE SUMMARY In 2022, the Long Term Investment Pool (LTIP) achieved a 44.97% lower carbon intensity than its composite benchmark. Although no Environmental, Social and Governance (ESG) targets have been set, LTIP had 14.14% ($181.50 million) invested in companies considered leaders in gender equality. This is in line with the SRI Policy's aim to positively promote investment in securities that support socially beneficial outcomes. BACKGROUND The Australian National University adopted a Socially Responsible Investment (SRI) Policy in July 2013. This policy contained clear ESG benchmarks, becoming at the time one of only a handful of Universities worldwide who use responsible investment to advance its objectives on social and sustainability issues. In October 2015, ANU Council approved the appointment of an external portfolio manager for its Domestic Equities portfolio. This step was undertaken to improve the management of its investments. ANU makes no decision itself about individual stock selection. However, the external manager is required to meet the following conditions: Exclude companies that derive more than 20% of revenues from coal, gambling, tobacco or pornography; hold a portfolio with 25% less carbon intensity than the S&P/ASX 200; and ensure that the portfolio demonstrates a 10% improvement in the overall ESG rating relative to the benchmark. In 2017, ANU took the added step of appointing three external managers for the University's Overseas Equity investments. ANU appointed Antipodes Partners, Magellan Asset Management Ltd and the Royal Bank of Canada Global Asset Management from a field of 58 managers. Under the arrangements, ANU makes no decisions on individual stock selection. The University, however, requires the external managers to ensure the investments meet its SRI Policy. Investments by the external managers must: Outperform the MSCI All Country World Index ex. Australia over a three-year time horizon; follow ESG-based sector exclusions, with no investment in companies which derive more than 20% of revenues from coal, gambling, tobacco or pornography; demonstrate the proactive incorporation of ESG concepts that are broadly in line with UN Sustainable Development Goals; and exhibit significantly lower carbon intensity than the benchmark. In 2018, ANU funded two external Alternative Investment managers to manage European Direct Loans and appointed a Fixed Income manager. The implementation of the SRI policy extended to both asset classes with the exclusions of companies who derive more than 20% of revenues from coal, gambling, tobacco or pornography. In 2019, the University decided to aggregate the carbon intensity of the entire LTIP as well as reporting on the carbon intensity of individual asset classes relative to the benchmark. Additionally, the University calculated the market value of LTIP assets exposed to climate change risk and the market value of investments in companies that are leaders in corporate gender equality. In 2020, the University funded an external cash manager. The implementation of the SRI policy extended to the cash asset class alongside the calculation and reporting of its carbon intensity. Furthermore, the Investment Office in collaboration with the SRI Working Group, developed an ESG 1 The carbon intensity target for Overseas Equity was revised in 2022. Integration Methodology which will be used in all future potential enhancements in the implementation of the SRI Policy. In 2021, ANU liquidated the Antipodes Partners portfolio and invested the proceeds into Metropolis Capital. For the first time, the University assessed both the Domestic and Overseas Equity portfolios alignment of greenhouse gas emissions with the Paris Agreement Goals. In 2022, by Council resolution following the February Finance Committee meeting, the University implemented a target of 75% less carbon intensity in the Overseas Equities portfolio relative to the MSCI ACWI ex. Australia benchmark in support of the University's net zero emission goal. In addition, the University increased its commitment to climate change reporting by reporting on the greenhouse gas intensity of the Equity portfolios twice yearly. The investment parameters have been imposed on all external managers in order to efficiently decrease the University's investment exposure to CO2 intensive industries without increasing the University's exposure to volatility in the capital markets. If this balance was not managed, it might adversely impact the University's financial stability, including its ability to meet obligations to pay superannuation liabilities. The change to the way the University manages its investments reflects a significant enhancement to the application of the SRI policy and puts the ANU in a leading position compared to its domestic peers. The implementation of quarterly ESG reviews of managers ensures the external asset managers adhere to the University's SRI policy and support the monthly mandate compliance checks conducted by the custodian and the University. The University aims to improve ESG reporting on an ongoing basis to provide greater transparency on ESG performance and the integration of ESG factors into the asset managers' investment process. At 31 December 2022, the University's Long Term Investment Pool (LTIP) amounted to $1.28 billion. Review the ANU 2022 Socially Responsible Investment Report (focus on the first two pages, read the rest of the report if you are interested), to answer the following questions: a) What is responsible investment? b) How much capital (money) does ANU have as an investor? c) Why do you think ANU holds this much capital? d) What are the ESG issues that ANU is most focussed on? e) In the lecture we discussed different forms of Responsible Investment (see Scholtens 2014) Explain, with reference to the report, which of these strategies you think ANU is adopting. f) Why might ANU stipulate excluding companies with 'no more than 20% of revenues from coal, gambling, tobacco or pornography' rather than excluding companies that invest in them altogether? g) What do you think about the approach of ANU to Responsible Investment? Provide some feedback on what you think they are doing well, and what you think they need to do better. [note: we may anonymously summarise some key points of student feedback from this question based on the tutorials, and provide it to the ANU Investment Office on their approach] ANU SOCIALLY RESPONSIBLE INVESTMENT (SRI) REPORT 2022 EXECUTIVE SUMMARY In 2022, the Long Term Investment Pool (LTIP) achieved a 44.97% lower carbon intensity than its composite benchmark. Although no Environmental, Social and Governance (ESG) targets have been set, LTIP had 14.14% ($181.50 million) invested in companies considered leaders in gender equality. This is in line with the SRI Policy's aim to positively promote investment in securities that support socially beneficial outcomes. BACKGROUND The Australian National University adopted a Socially Responsible Investment (SRI) Policy in July 2013. This policy contained clear ESG benchmarks, becoming at the time one of only a handful of Universities worldwide who use responsible investment to advance its objectives on social and sustainability issues. In October 2015, ANU Council approved the appointment of an external portfolio manager for its Domestic Equities portfolio. This step was undertaken to improve the management of its investments. ANU makes no decision itself about individual stock selection. However, the external manager is required to meet the following conditions: Exclude companies that derive more than 20% of revenues from coal, gambling, tobacco or pornography; hold a portfolio with 25% less carbon intensity than the S&P/ASX 200; and ensure that the portfolio demonstrates a 10% improvement in the overall ESG rating relative to the benchmark. In 2017, ANU took the added step of appointing three external managers for the University's Overseas Equity investments. ANU appointed Antipodes Partners, Magellan Asset Management Ltd and the Royal Bank of Canada Global Asset Management from a field of 58 managers. Under the arrangements, ANU makes no decisions on individual stock selection. The University, however, requires the external managers to ensure the investments meet its SRI Policy. Investments by the external managers must: Outperform the MSCI All Country World Index ex. Australia over a three-year time horizon; follow ESG-based sector exclusions, with no investment in companies which derive more than 20% of revenues from coal, gambling, tobacco or pornography; demonstrate the proactive incorporation of ESG concepts that are broadly in line with UN Sustainable Development Goals; and exhibit significantly lower carbon intensity than the benchmark. In 2018, ANU funded two external Alternative Investment managers to manage European Direct Loans and appointed a Fixed Income manager. The implementation of the SRI policy extended to both asset classes with the exclusions of companies who derive more than 20% of revenues from coal, gambling, tobacco or pornography. In 2019, the University decided to aggregate the carbon intensity of the entire LTIP as well as reporting on the carbon intensity of individual asset classes relative to the benchmark. Additionally, the University calculated the market value of LTIP assets exposed to climate change risk and the market value of investments in companies that are leaders in corporate gender equality. In 2020, the University funded an external cash manager. The implementation of the SRI policy extended to the cash asset class alongside the calculation and reporting of its carbon intensity. Furthermore, the Investment Office in collaboration with the SRI Working Group, developed an ESG 1 The carbon intensity target for Overseas Equity was revised in 2022. Integration Methodology which will be used in all future potential enhancements in the implementation of the SRI Policy. In 2021, ANU liquidated the Antipodes Partners portfolio and invested the proceeds into Metropolis Capital. For the first time, the University assessed both the Domestic and Overseas Equity portfolios alignment of greenhouse gas emissions with the Paris Agreement Goals. In 2022, by Council resolution following the February Finance Committee meeting, the University implemented a target of 75% less carbon intensity in the Overseas Equities portfolio relative to the MSCI ACWI ex. Australia benchmark in support of the University's net zero emission goal. In addition, the University increased its commitment to climate change reporting by reporting on the greenhouse gas intensity of the Equity portfolios twice yearly. The investment parameters have been imposed on all external managers in order to efficiently decrease the University's investment exposure to CO2 intensive industries without increasing the University's exposure to volatility in the capital markets. If this balance was not managed, it might adversely impact the University's financial stability, including its ability to meet obligations to pay superannuation liabilities. The change to the way the University manages its investments reflects a significant enhancement to the application of the SRI policy and puts the ANU in a leading position compared to its domestic peers. The implementation of quarterly ESG reviews of managers ensures the external asset managers adhere to the University's SRI policy and support the monthly mandate compliance checks conducted by the custodian and the University. The University aims to improve ESG reporting on an ongoing basis to provide greater transparency on ESG performance and the integration of ESG factors into the asset managers' investment process. At 31 December 2022, the University's Long Term Investment Pool (LTIP) amounted to $1.28 billion.

Answer rating: 100% (QA)

ANU Socially Responsible Investment Report SRI Review Based on the first two pages of the ANU 2022 SRI Report heres what we can glean a Responsible in... View the full answer