Over time, our members have been telling us that it is important to them that their investments are managed in a sustainable and responsible way – and we couldn’t agree more. As part of our ongoing commitment to improving long-term member outcomes, our investments team has been working hard to more effectively align the investment process with members’ expectations.
You may be aware that one step we’ve taken to become a more responsible investor is the divestment of holdings in companies associated with the production of tobacco and controversial weapons – meaning we no longer hold investments or invest members’ funds into companies of this nature.
Why do we invest in some things but not others?
Tobacco production poses many environmental, social and economic risks, is a contributor to modern slavery and is a large employer of child labour – with an estimated 1.3 million children1 working in this sector. By the end of last year, we ensured our portfolios no longer invested in companies that produce tobacco and tobacco products.
Controversial weapons, which are at the extreme end of weapons manufacturing, can be defined as having the capacity to indiscriminately kill or disproportionately harm people relative to ‘normal’ military practices. They may kill civilians as well as military targets even after conflict has ended – thus their use is prohibited and breaches all global conventions on human rights. Our investment managers have had very little exposure to manufacturers of controversial weapons previously, but by the end of 2019, we no longer allowed them to invest in these companies.
How do we pick what we invest in?
While responsible investing involves more than simply applying a negative screen or excluding investment holdings, these measures still play an important role in the decision-making process. In short, when assessing an investment for exclusion, our team refers to the Responsible Investing Framework to help understand the nature of an investment, determine the possible risks it poses, and identify whether there are alternatives to exclusion. Decisions are not made lightly, and can also involve us engaging with investment managers to understand the possible impacts on portfolios.
Ultimately, our members’ best interests lie at the heart of our decision-making – so we must first ensure that the option they’re invested in remains adequately diversified, with investment objectives that can still be met to achieve long-term wealth creation and protection.
Want more information?
Environmental, social and governance considerations have become more important to our members than ever before – and understanding their needs is important to us.
We recently updated our website to include insights on our journey and approach to responsible investing, as well as our understanding of climate change and modern slavery. Please visit the website or contact our team for a better understanding of the responsible investment philosophy which is influenced by our members and which underpins the Colonial First State investment process.
1. UN International Labour Organisation 2011.