@GRIAusConf_Plenary: Linking Sustainability To Strategy, Corporate Governance and Risk - Michael Dundon
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@GRIAusConf_Plenary: Linking Sustainability To Strategy, Corporate Governance and Risk - Michael Dundon
- 1. Linking Sustainability To Strategy, Corporate Governance and Risk – the role of materiality . Chair: Stella Whittaker, Senior Executive Sustainability and Climate Change, Manidis Roberts; Vice-Chair, GRI Stakeholder Council . Michael Dundon, Chief Executive Officer, Vic Super Shane Lucas, Group Head of Sustainable Development, ANZ Alex Malley, Chief Executive Officer, CPA Australia
- 2. Sustainability reporting Michael Dundon Chief Executive Officer VicSuper GRI Conference on Sustainability and integrated Reporting Melbourne Convention & Exhibition Centre Tuesday 27 March 2012 VicSuper Pty Ltd ABN 69 087 619 412 AFSL 237333 RSE L0000468 is the Trustee of VicSuper Fund R1000580
- 3. Sustainability and VicSuper Investing to Encouraging achieve best new possible long investment term returns ideas and Helping people innovation to meet their Helping people income needs to meet their in later life income needs Using in later life resources while Influencing minimising actions of our impact government and on natural business ecosystems 3
- 4. Our sustainability journey Investment review 2010/11 Stakeholder engagement Created low carbon super ‘Member Report’ and ‘Sustainability Report’ combined as 2009 Performance Report Actively participating in ongoing collaboration and communication International Co’s –engagement on governance risks 2007 Measured VicSuper Fund’s carbon footprint UN PRI Signatory VicSuper Pty Ltd - Offset climate impact 2006 Australian Co’s - engagement on governance risks Lead role in Performance Reporting 2004 - Introduced GRI Reporting VicSuper’s Central Operating Principle - Sustainability 2001 Invested in sustainability leaders 4
- 5. Board Sustainability Committee Opportunity identification Goals and targets FROGS Focused Recruits Of Global Sustainability Employee champions Education/induction Central Operating Principle To create value for VicSuper stakeholders by building a sustainable superfund through the integration of economic, social and environmental considerations into all VicSuper’s decision support systems 5
- 6. How we utilise sustainability Driving Business Strategy – Key differentiator in a crowded market – Ecommerce – Long term investors – Direct investments Corporate Governance – Regnan, ACSI, Hermes, Shareholder influence Managing Risk 6
- 7. Next steps Integrate – Decision making – Stakeholder input – Report content More direct investment – Community focus More proactive influence 7 - Fund Managers
Editor's Notes
- About VicSuper (as at 30 December 2011) public offer superannuation fund Nearly $9 billion in assets under management over 250,000 members 200 staff advice centres in Melbourne, Geelong, Bendigo, Traralgon and Blackburn commitment to education and advice sustainability is our central operating principle More than 12% of our members are employed in the Education sector I joined VicSuper as CEO only 8 months ago but I have been watching VicSuper’s progress as a sustainability leader for a number of years. Credit for our development must go to my team and to my predecessor Bob Welch.
- Our vision is “ to help people meet their income needs in later life” Our sustainability approach is directly linked to our business objectives and therefore our success Investing for the long term: With the current high levels of volatility in investment markets now is the time to ensure we invest for the long term! Encouraging new investment ideas and innovation: With the ageing population and a desire for certainty post the GFC post retirement products that provide certainty in income streams are in demand Influencing Govt and business: Disclosure, transparency and understanding governance risks are critical to successful investing Super as an industry is going through significant change on transparency - post Cooper review Using resources whilst minimising the impact: Within our own operations utilising Ecommerce and considering opportunities to minimise impacts has been a significant focus Investment opportunities in carbon aware, water and other commodities such as timber
- 2001: - Adopted sustainability principles: Made sustainability VicSuper’s central operating principle: our core philosophy that informs our decision-making Began investing in sustainability leaders: Began investing in Australian and international companies which are best positioned to manage risk and seize emerging opportunities 2004: Reporting VicSuper’s performance: Published the world’s first sustainability report ‘in accordance’ with the GRI for a superannuation or pension fund. We have since been awarded numerous times (by the Australian Centre for Chartered Accountants ) for our reporting, and are slowly seeing the superannuation industry follow. 2006:Encouraging global action: Became a signatory to the United Nation’s Principles for Responsible Investment Regnan: VicSuper, in conjunction with ARIA, BT Financial Group and Vanguard, initiated the formation of, and is a founding owner of Regnan, a governance, research and company engagement service provider that is dedicated to long-term investment risk management Reducing VicSuper’s impact: Implemented a carbon management plan for VicSuper’s operations. We have reduced our operational emissions by over 25% in four years. 2007: Hermes: In 2007/08 we began to use Hermes Equity Ownership Services to engage international companies on their governance risks and opportunities. 2008: Measuring VicSuper’s carbon footprint: Reported the estimated carbon footprint for listed equities on annual member statements 2009: Creating low carbon super: Seeded an international equities fund that seeks to achieve an index return for half the carbon exposure Ongoing collaboration and communication: Through IGCC and other avenues, we continue to actively play a role in encouraging policy action on climate change. W e need long-term certainty in climate change policy, including a price on carbon, to allow institutional investors to consider investments in climate solutions with confidence. A sustainable global economy requires all actors to use their influence and play a positive leadership role.
- Our leadership in Sustainability commenced with us defining our central operating principle………… Our FROGS team have helped us embed sustainability across the business and are always re-energising me to keep Sustainability top of mind. As our approach has evolved over the last few years we are now establishing a Sustainability Committee to help us identify opportunities and provide goals and targets for the Board to endorse. Personally from a Leadership perspective its great to have such a strong overall theme or operating principle to help me govern and manage our business. Across our business our staff all embrace the sustainability theme and it provides numerous opportunities for us to participate in community programs, practice safer environmental practices eg recycling, and to talk proactively with our members about long term investing .
- Sustainability has been a very successful key differentiator for our Fund, particularly as there are more than 183 public offer funds in Australia of which 56 are also industry funds. We are using sustainability principles to drive our business strategy in the areas of Ecommerce,(encouraging online interactions) in tailoring our investment strategies and our member education around risk appetites and the benefits of being long term investors. In a very practical sense we have invested in a “Carbon Aware Fund, a “Equity sustainability fund” and a rural environmental and water regeneration project in rural Victoria. We anticipate further community investment going forward We promote best practice Governance through our membership of various organisations and use our voting and influencing to improve these standards. Our fund managers are required to demonstrate their ESG credentials to us before we engage them and our investment considerations include carbon risk and other ESG factors more broadly. ‘ Materiality’ is how we make sure we’re focusing and reporting on the right things At the end of the day, our actions must lead back to benefits for members. For us, ‘materiality’ is a test that can help us to ensure that our reporting and the way we work, delivers value for members by focusing our energy and resources in the right areas. How do you work out which of the competing issues most deserve resources and time? How do you maintain focus and clarity, when there are so many different messages that you can deliver? For us, materiality is about working out what is important to VicSuper and its stakeholders. ‘ Making sense’ is one of our company values. In order to provide useful information to our members and other stakeholders, we need to know what is important to them. We have use materiality tests and to get a sense of this and it is increasingly contributing to the content and structure of our reports. Our first reports were very comprehensive. Our focus was on being transparent and they contain a lot of information. But not all information is equally important. Reporting is really a reflection of where an organisation is at. We can’t report in an integrated way if we don’t function that way. The two can’t be separated and, in reality, many of the processes that we use to ensure good reporting, are the same for good management. These include: Clarifying our strategic approach, key risks and approach to Fund governance Better data and information management Trend analysis Measurement of outputs and outcomes Engaging and involving our stakeholders
- Next steps for us will include: Continuing to improve our systems and processes to help integrate sustainability into all major decisions. We will continue to integrate the ideas and input of our stakeholders – our members the unions, employers and Government all will have greater input into our sustainability approach – more active engagement!! For the report itself, this will mean: less content up-front and a more focused approach – centred around our material issues - with deeper content available for those that want it a better understanding of stakeholder needs and continuous improvement in our approach to getting their input ensuring a ‘whole of business approach’ to communication and reporting - rather than relying on the one report to do everything for us encouraging others in the sector and beyond to continue to improve Potentially more direct investment provided the business case makes sense, perhaps with a stronger community focus, or infrastructure focus More proactive approach to fund managers and their mandates – ensuring ESG a key component of their strategy Stakeholder engagement