Responsible
Investment Report
1 January 2011 to 30 June 2011
Table of contents 1. ACTIVE OWNERSHIP ............................................................................................................ 3 1.1 PROXY VOTING (Q1 – Q2 2011) ........................................................................................... 3 Australia ............................................................................................................................................ 3 Global (UK, Europe and US) ............................................................................................................... 4 Asia .................................................................................................................................................... 4 1.2 PROXY VOTING GUIDELINES REVIEW .................................................................................. 5 1.3 COMPANY ENGAGEMENT .................................................................................................... 5 2. OTHER ESG ACTIVITIES ........................................................................................................ 6 ESG Research Australia (ESG RA) Awards .......................................................................................... 6 Conferences and ESG briefings .......................................................................................................... 6 Presentations ..................................................................................................................................... 6 ESG and our fund managers .............................................................................................................. 6 Our property portfolio ....................................................................................................................... 7 Responsible Investment Report 2 1. Active ownership UniSuper is committed to being an active shareholder and as such, we engage in dialogue with the companies we are invested in and we exercise our proxy votes. 1.1
Proxy Voting (Q1 – Q2 2011) As part of its commitment to being an active shareholder, UniSuper has exercised its proxy votes since 2004. In terms of how the Fund’s proxy voting process operates, UniSuper’s specialist proxy voting advisors provide ‘how to vote’ recommendations to UniSuper and UniSuper’s fund managers. All UniSuper Australian fund managers must vote ‘FOR’ or ‘AGAINST’ and are not entitled to ‘ABSTAIN’ unless there is a conflict of interest. Votes are generally cast in accordance with the Australian Council of Superannuation Investors (ACSI) Corporate Governance Guidelines (www.acsi.org.au), which have been adopted by UniSuper. However, all voting recommendations are considered internally and assessed on a case by case basis and the voting advice is not just mechanically followed. UniSuper also retains the rights to specifically instruct its fund managers how to vote. UniSuper also obtains specialist voting advice on international corporate governance best practice in ex‐Australian markets from Pension Investment Research Consultants (PIRC), who vote on behalf of UniSuper’s international fund managers. Over the Q1 – Q2 2011 period, UniSuper voted on 11,333 ESG related resolutions which were put forward by companies in the S&P/ASX 200 (Australia), FTSE 350 (UK), FTSE Eurofirst 300 (EU), S&P 500 (US) and various Asian companies. Australia UniSuper voted on 178 corporate governance resolutions put forward by companies in the ASX/S&P 200. A summary of results is set out below: ASX 200 Number % Number of corporate governance related resolutions 178 Voted FOR 174 98 4 2 Voted AGAINST Over the mini proxy season of 2011, UniSuper did not vote AGAINST many resolutions put to company annual general meetings. However, we did in particular, we vote against a number of resolutions lodged by shareholders. The resolutions that we voted AGAINST were regarding: •
the remuneration report at Austar Communications; •
the appointment of Stephen Mayne to the Board of Santos; •
the appointment of Stephen Mayne to the Board of Rio Tinto; and •
a call by The Climate Advocacy Fund to require Woodside to disclose certain climate change related information which was of a commercially sensitive nature. The most frequent FOR votes lodged by UniSuper pertained to the election of directors and executive remuneration. Responsible Investment Report 3 Global (UK, Europe and US) UniSuper voted on 9602 corporate governance resolutions put forward by companies in the FTSE 350 (UK) and a summary of the results is set out below: FTSE 350 (UK), FTSE Eurofirst 300 and S&P 500 Number % Number of corporate governance related resolutions 9602 Voted FOR 7121 74 Voted AGAINST 2180 23 58 0.5 243 2.5 Voted WITHHOLD Voted ABSTAIN The companies that received the highest number of AGAINST votes included companies such as Monsanto, Johnson Controls Inc and Kazakhmys Plc. The type of resolutions that UniSuper voted AGAINST most frequently related to the approval of remuneration reports, other remuneration related matters, and the election of directors. We note that the higher percentage of AGAINST votes globally as compared to Australia relates to the fact that globally there are greater issues regarding director independence, separation of the CEO and Chairman roles and ongoing issues related to executive remuneration in the context of volatile markets and the tail end of the global financial crisis. Asia UniSuper voted on 1533 corporate governance resolutions put forward by companies across Asia over the first half of 2011. Asian Proxy Voting Number % Number of corporate governance related resolutions 1553 Voted FOR 1399 90 Voted AGAINST 154 10 The companies that received the highest number of AGAINST votes included Poly (Hong Kong) Investments Limited, Kingboard Laminates Holdings, Kerry Properties Ltd, Li & Fung Limited, PT Bank Mandiri (Persero), China Unicom (Hong Kong) Ltd, China Mengniu Dairy Co. The type of resolutions that UniSuper voted AGAINST most frequently included: •
the appointment of directors, •
remuneration related matters, and •
the re‐purchase of issued share capital. Responsible Investment Report 4 1.2
Proxy voting guidelines review In exercising its proxy votes, UniSuper obtains specialist proxy voting advice from ACSI. UniSuper does not blindly follow the proxy voting advice. Rather it is an input which helps inform the proxy voting decision making process. When ACSI prepares its proxy voting advice, it considers and applies the ACSI Governance Guidelines to the issues at hand. Every two years these guidelines are reviewed by a working group, and revised where appropriate, to ensure that they adapt and remain appropriate. The guidelines were reviewed this year and UniSuper participated on the working group. Some of the key changes included streamlining the guidelines where possible and seeking to ensure that they are flexible and can therefore also be applied to a range of circumstances, without being overly prescriptive. 1.3
Company engagement Since 2009, UniSuper has become more focused on directly conducting engagement activities itself. As such, over the first half of 2011 we continued to be active in engaging with the companies in which our members’ funds are invested. This is consistent with our belief that it is important to be an active shareholder that seeks to drive change and positively influence corporate behaviour through open dialogue. Over the six months to 30 June 2011 (in addition to ACSI’s engagement activities), UniSuper engaged with three companies from an ESG perspective as well as an executive and board search consultancy. The key issues engaged on included: •
general issues regarding corporate governance, •
board succession planning, •
environmental risk management; and •
occupational health and safety performance and risk management. To ensure that we continue to have access to companies, and that we can have open conversations, we ensure that the details of all such engagement remains private and confidential. In addition to this, over the last decade the Australian Council of Superannuation Investors has also engaged with a large number of companies on behalf of UniSuper and other Australian superannuation funds, and continues to do so. Responsible Investment Report 5 2. Other ESG activities Over the first half of 2011, UniSuper was involved in a range of ESG related activities, each of which is briefly described below. ESG Research Australia (ESG RA) Awards UniSuper is a member of ESG RA which is a collaborative initiative that has been established by Australian investors to encourage increased levels of ESG research by research brokers. UniSuper is represented on the ESG RA executive committee and also sits on the ESG RA awards judging panel. In 2011, the winners of the ESG Research Australia awards were Hamish Tadgell and Jien Goh of Goldman Sachs (for the Best Piece of ESG Research by an Individual Analyst or Team category) and Elaine Prior of Citi (for the Best ESG Broking Firm as Voted by Investment Managers category). The ESG research that was considered by the judging panel this year covered a broader range of issues than last year and went beyond having a main focus on climate change and other specific environmental issues to also address a range of the social and governance issues. Conferences and ESG briefings To ensure that we maintain current knowledge of ESG related matters, UniSuper seeks to ensure that staff attend a range of ESG related knowledge sharing forums. Some of the key events attended include: •
Deutsche Bank Presentation on Climate change •
Citi seminar on sustainable agriculture •
Commonwealth Bank briefing on mining company engagement with indigenous communities •
The annual ACSI conference which includes presentations and discussion on a range of ESG related issues Presentations In addition to attending conferences and briefings, UniSuper also seeks to share its knowledge and experiences regarding ESG issues and responsible investing. As such, over the first half of 2011 UniSuper made the following presentations: •
Association of Investor Relations Australasia half day seminar – UniSuper presented to a range of investor relations professionals on the role of institutional investors and how corporate governance issues are managed. •
Ernst & Young seminar on integrated sustainability reporting – UniSuper presented to a variety of Ernst & Young’s clients (from a range of companies in which UniSuper also holds stock in) on how investors use sustainability reporting and the emergence of integrated sustainability reporting. ESG and our fund managers We continue to work with our external fund managers on an ongoing basis to ensure that they are considering key ESG issues in their investment analysis. In particular, we not only raise ESG at our manager review meetings, we also ask our managers to provide us with their ESG analysis on specific issues on an ad hoc basis, so that we can test their thinking on particular issues. Responsible Investment Report 6 Our property portfolio We thought this would be a good opportunity to provide you with an update on our property portfolio. Based on the rated assets within UniSuper’s unlisted office property portfolio, we have calculated an average NABER scale energy rating of 4.2 stars and aim to reach a 4.5 star rating over the next two years – a rating we believe to be at market leading level. Despite rating systems for retail and industrial properties being in an earlier stage of development, a range of carbon‐friendly initiatives are also being introduced to reduce energy and water usage and boost waste recycling in many shopping centres UniSuper has investment exposure to. These initiatives include energy efficient lighting, rainwater harvesting, water flow restrictors, waste recycling and composting, upgrading plant equipment and air conditioning systems. Responsible Investment Report 7 Helpline 1800 331 685 Website www.unisuper.com.au Email [email protected] Facsimile (03) 9910 6141 Address UniSuper Level 35, 385 Bourke Street Melbourne 3000 Disclaimer The information in this publication is of a general informative nature and is not intended to be financial advice. Before making financial or investment decisions, you should consult a licensed adviser. You should read this information in conjunction with other disclosure documents the Trustee has prepared for members. Every care has been taken with the information provided in this publication. However, because of the complex nature of superannuation and taxation law and the frequent changes occurring, UniSuper Management reserves the right to correct any error or omission. If there is any discrepancy between this publication and the Trust Deed and Regulations, the Trust Deed and Regulations will be the final authority. Information in this publication regarding investment returns, administration charges, and benefit structures is current as at the date of publication, but may change in future. Issued by: UniSuper Management Pty Ltd ABN 91 006 961 799, Australian Financial Services Licence No. 235907. Level 35, 385 Bourke Street, Melbourne VIC 3000. Phone 1800 331 685. Fund: Trustee: Date: UniSuper ABN 91 385 943 850 UniSuper Limited, ABN 54 00 027 121 December 2011 Proxy Voting