Part 3 - How good we used to be
- Details
- Published: Thursday, 27 February 2025 09:30
Al Gore was Vice President of the US to President Bill Clinton from 1993 to 2001. He missed becoming President in 2000, defeated by George W Bush, despite winning the popular vote. He had been aware of the risks in climate change from the 1970s, became an environmental campaigner and in 2006 released a film, “An Inconvenient Truth” which opened the eyes of the world to the risks and our destiny unless something is done.
When he came to Australia in 2012, he wanted to meet with LGSS representatives involved in investment. Our reputation preceded us, but the significant work done by LGSS on climate change began, relatively innocently, in 1999. The board had been operating for two years, and that year considered a report I’d written “Development of an Ethical Investment Policy” and resolved that the Chief Investment Officer and I should develop recommendations on ethical investment for further consideration by the Board.
The resolution acknowledged that since our inception in July 1997 tobacco share ownership had been discussed regularly by the Board. It had been a running sore for both State Super and First State (where our members’ money was before LGSS was established) with constant pressure from doctors and nurses in the membership that it compromised the integrity of their superannuation.
That report is now a significant historical document and part of our legacy. Restrictions on tobacco have been in place continuously for 25 years and coincidentally, was the only investment area LGSS was able to satisfactorily defend in the ASIC prosecution.
Our members, with a health and environmental focus, didn’t want to own tobacco shares either and the Board resolved “to divest itself of all tobacco shares” (noting the minimal investment risk) and that the CIO and I “continue to develop ethical investment options for recommendations to the Board.”
The Board embraced the concept, it took time to implement to ensure there was no disadvantage and get moving, and this was the history:
2000 The First Australian fund to exclude tobacco stocks.
2001 Board approved the Fund’s first responsible investment policy, examining the fund’s portfolio from a social responsibility perspective. Companies involved in gambling, armaments, nuclear or uranium mining or poor mining practices, questionable work-place practices, and corporate governance activities, old-growth logging. Transparent process allowed gains and losses to be calculated to ensure the fund was not disadvantaged.
2007 Analysis of all investments to identify risks to income if not properly pricing carbon and assets and Local Government Property Fund created as a separate entity to enhance sustainability performance to strengthen long-term assets.
2007 Demonstrated investment screening benefited the Board by $7 million.
2008 Asset Owners Disclosure Project trialed locally for three years, LGSS ranked number one each year, although only the top 10 funds were acknowledged, to protect the failures.
2009 Comprehensive sustainability policy, one of the first superannuation/pension funds to focus on climate change risk.
2010 Awarded Sustainable Super Fund of the Year.
2011 Won SuperRatings Infinity Award for the fund “most committed to addressing its environmental and ethical responsibilities”, subsequently awarded in 2012, 2014, 2015, 2016 and 2017, and acknowledged as a finalist in 2013 and 2018.
2011 First ever shareholder vote on climate change (Woodside petroleum), supported by LGSS and three other funds.
2012 Asset Owners Disclosure Project goes international and reviews 500 institutional investors with around A$40 trillion in funds under management for sustainable investment practices and disclosure of climate change risk. LGSS was ranked number one in the world in the initial international survey, and ranked either number one or number two globally until the last survey conducted in 2017. Ranked number one in 2012, 2014, 2015 and 2017, and ranked number two in 2013 and 2014. These were our greatest achievements. Mind you, lunch with Al Gore, at a table of 10 in a private meeting room for four LGSS representatives that year and a couple of other funds, at his invitation, was very special.
2012 Green Globe Awards for climate change leadership and energy award.
2013 Money Magazine Best Green Super Fund, also awarded in 2013, 2015, 2016, 2017 and 2018, and NSW Government Green Globe Awards for climate change leadership and energy award.
2017 Directly held property portfolio wins 5-star Green Star Rating, first portfolio to achieve the rating in Australia. In the final Asset Owners Disclosure Project survey, LGSS was the top-rated fund in the world again and VicSuper was 34th - the fifth Australian Fund - down 13 positions from the year before.
2018 Property portfolio receives five-star rating from the Global Real Estate Sustainability Benchmark assessment, first in Australia.
2019 First certified carbon neutral property portfolio in Australia.
Over that time the Chief Investment Officer and team knew exactly what stock was being held and were able to guarantee that. Systems had been put in place right from the start, but particularly after the appointment of the incomparable Bill Hartnett as Head of Responsible Investment from 2010 to 2019, that meant any breach of the screening could be detected and remedied. His systems were flawless, he constantly oversaw fund managers’ decisions and any likely impact on our prohibited stocks. And acted immediately if there were a breach.
No one knows, or is admitting, how those systems failed. Somehow, something went wrong.
A reputation and a legacy destroyed.