ESG principle push targets Australian superannuation funds

The Financial Services Institute of Australasia issued guidelines to assist Australian superannuation funds in integrating environmental, social and governance principles in their investment decisions.

The “link between implementing ESG principles in investment decisions and financial performance is being recognized,” wrote Russell Thomas, CEO and managing director of the 16,000-member regional association, in a report.

“The acceptance of ESG principles by Australian superannuation funds is growing but most funds … are struggling with either developing policies or with policy implementation,” according to the report, “Implementing Environmental, Social & Governance Principles in Investment Decisions.”

A vital consideration “is building ESG principles into the fund manager appointment, evaluation and review processes,” the report said. “Clearly, ESG principles will not be the only factor in fund manager appointments; however, it should be included in the mix.”

The Australian superannuation funds had A$1.23 trillion (US$1.31 trillion) in assets as of June 30, 2010, the report said.

Jane Ambachtsheer, partner and global head of responsible investment at Mercer, wrote in an e-mail, “ESG factors … might hold the key to better long-term risk-return outcomes. The challenge now is how best to address ESG within actual investment decision-making and oversight. Guidelines like these from FINSIA are critical both in terms of providing guidance, as well as reinforcing the growing importance of these concepts from both a fiduciary and a practical perspective.”

The report is available at Financial Services Institute of Australasia's website.