ESG: From risk to opportunity
Global Investment Insights
with Liza McDonald, Head of Responsible Investments, Aware Super
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Liza is the Head of Responsible Investments at Aware Super, with 20+ years’ experience in the superannuation sector. She is a specialist and a passionate advocate for responsible investments and sustainable finance.
As the Head of Responsible Investments, Liza has led the development and implementation of Aware Super’s responsible investment policies, the execution of the climate change strategy and she manages the ESG policy implementation of the fund, including manager and asset class ESG reviews.
Furthermore, Liza represents Aware Super (the Fund) on a number of working groups and committees, including:
Investors Against Slavery & Trafficking APAC (IAST-APAC)
ESG Research Australia
Australian Sustainable Finance Initiative (ASFI)
Responsible Investment Association Australasia (RIAA)
40:40 Vision
Australian Council of Superannuation Investors (ACSI), and
The UN convened Global Investors for Sustainable Development Alliance (GISD)
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We are in frequent dialogue with the companies we invest in to understand how they are planning to achieve net zero by 2050.
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Aware Super integrates ESG issues across its portfolio and, as part of this, climate change is an ongoing area of focus for Liza in her role, as it is for the whole fund.
“As stewards of more than AU$150 billion in members’ retirement savings, we are incredibly conscious of the risks and opportunities of climate change, both financial and physical. We are in frequent dialogue with the companies we invest in to understand how they are planning to achieve net zero by 2050, to encourage them to set nearer-term targets to achieve this and to monitor their progress.
Modern slavery, diversity, and culture and conduct are among the other ESG issues we are focused on.
At the moment, we are in the thick of the Australian AGM season, so corporate governance is a particular focal point. Much of my time, and that of my team, is being spent engaging with our fund managers, companies, our proxy advisors and research partners to understand key issues, determine our approach and consider our voting intentions, to ensure we use our ownership rights responsibly and appropriately”, Liza explained.
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Much of my time is spent engaging with our partners to understand key issues, determine our approach and consider our voting intentions to ensure we use our ownership rights responsibly.
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Further to this, Liza revealed that a key part of her team’s responsibilities is to remain atop of initiatives and policy changes across the ESG space occurring globally and to understand how they stand to impact their investments and what new risks and opportunities they present to the Fund.
Liza singled out the recent move by the UK to strengthen the Stewardship Code as one example. The Stewardship Code sets standards of stewardship for those who invest money on behalf of pensioners and savers – and, another example is the European Union’s move to update regulations and taxonomies in relation to green investments and sustainable finance.
“Our approach to responsible ownership will naturally evolve with these initiatives and policy changes. The challenge for us, and it’s one we are very well equipped for, is to monitor and act on such developments so that the decisions we make are consistent with our industry leading ambition.
In support of this, we participate in a number of industry collaborations. For example, we have joined the Australian Sustainable Finance Institute, which has developed a roadmap to help the finance industry support greater social, environmental and economic outcomes in Australia”, Liza explained.
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Seeing ESG issues finally move into the mainstream is a very exciting development.
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Liza has been an ESG practitioner for more than a decade, and she highlighted that seeing ESG issues finally move into the mainstream, both socially and, in particular, in asset management and across the corporate world more broadly, is a very exciting development.
“We are seeing wonderful momentum in areas such as innovation in renewable energy and sustainable technology, biodiversity, and the circular economy, with all the opportunities they present from an investment perspective.
We have always thought about ESG from a risk perspective, but we are now focusing far more on the opportunities – on ways we can both, do well for our members, and do good in the communities where they work, live, and retire.
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We have always thought about ESG from a risk perspective, but we are now focusing far more on the opportunities.
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There’s enormous scope for investors like Aware Super and our domestic and global peers to deliver strong, sustainable returns for members by supporting the transition to a low-carbon economy and investing in a way that is aligned with the UN’s Sustainable Development Goals (SDGs)”, Liza elaborated.
This said, Liza stressed that there are various structural factors that challenge her fund, as a long-term investor, to achieve better outcomes for its members. They are combating these by being active members of many collaborative groups who advocate on behalf of the Fund and its members to achieve positive and lasting change.
“The risks of climate change is of course one such issue, and our work with organisations such as the Investor Group on Climate Change and Climate Action 100+ is a great example of the collaborative approach we take”, Liza remarked.
She continued, “globally, regulation around climate change is moving in the right direction and ambitious action is being considered that would accelerate innovation and provide significant investment opportunities for funds like Aware Super. Policy certainty helps funds like us to invest with confidence, although it is only one part of our decision-making process.
Aware Super also represents Australia on the UN Global Investors for Sustainable Development Alliance, which aims to mobilise long-term finance and investment for sustainable development aligned to the SDGs.
We also believe strongly that diverse organisations are more successful in the long-term. Through our involvement in the 40:40 Vision initiative, we are advocating for gender diversity at the board and executive level in ASX 200 companies. Our advocacy on these and other issues, like modern slavery and culture and conduct, is all underpinned by the need to influence positive change to deliver the best returns for our members.”
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Our advocacy on issues, like modern slavery, is all underpinned by the need to influence positive change to deliver the best returns for our members.
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“Ultimately, we are here to safeguard and grow our members’ super savings and help them to feel confident and comfortable in their retirement. That’s both an honour and an incredible responsibility, and as such, there are many things that keep me up at night”, Liza emphasised.
“I am constantly asking myself what more my team and I could be doing in our roles to help the Fund deliver strong, sustainable long-term returns for our members, and whether there are any issues we have not yet thought about – any risks or opportunities we should be acting on.
Add to that, the other dynamics in the super sector – the growth of the industry, increasing consolidation, member choice and changing expectations among members about how they want their money invested, to name just a few – and there’s no shortage of issues and challenges to both motivate and inspire me in my role every day”, Liza concluded.
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We believe strongly that diverse organisations are more successful in the long-term.
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Disclaimer
The views expressed in this publication are solely those of the individual and do not reflect those of their employer organisation.
All information contained within this publication is general advice only, as the knowledge levels and needs of all individual and corporate investors vary greatly this publication should not be used solely as a decision-making tool, further opinions and information should be sought before making an investment decision. It is the recommendation of Global Investment Institute (GII) that you seek the opinions of a fee-for-service, independent investment adviser before making any investment decision.
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