Environment Social Governance - ESG

Investing in the future

Our responsibility is to protect and enhance the value of our investments over the long-term, with the ultimate aim of providing sustainable income for our members in retirement. The application of our Environmental, Social and Governance (ESG) beliefs in investment decisions are a part of this. 

Our ESG beliefs

1. Stewardship

We believe, as stewards of the assets entrusted to us, that excellence in investment governance enables us to add value to our member retirement outcomes. We aim for best practice stewardship and active ownership.

2. Climate change

We believe that climate change is a systemic issue and presents financial risks and opportunities for investors. As such, the Trustee needs to manage implications for the Fund on behalf of our members.

3. Engagement and exclusion

We believe that ESG ‘engagement’ in order to change behaviour can enhance risk-adjusted returns over the long term. However, ‘exclusion’ of investments can be an appropriate tool in particular circumstances.

What does this mean?

ESG is an important part of fundamental stock research, and a significant amount of a company’s value comes from intangible drivers, such as corporate culture, corporate strategy, management quality, and other factors such as relationships with suppliers and customers. We can make better informed investment decisions through analysis of how companies manage financial and non-financial risks. Robust risk management contributes to a company’s earnings sustainability. This assessment is particularly important through due diligence prior to investment in a company or allocation to a fund manager

ESG factors we consider 

Consistent with our broader investment philosophy, ESG factors we consider tend to be of a medium to long-term nature, but may have an impact on the short-term earnings of a company. They can include:

• Corporate governance
• Intellectual capital management
• Executive remuneration
• Human rights
• Occupational health and safety and human capital practices
• Innovation
• Research and development
• Climate change
• Reputational risk
• Transparency and disclosure
• Environmental performance management
• The social impacts of corporate activity

Approach to share voting and engagement

• Exercising our right to vote is one of the most effective tools we have for holding boards to account and encouraging good governance. This applies to directly held assets and those managed on our behalf by external investment managers.
• Equip retains the ultimate right to direct the voting of shares as it sees fit, with the ultimate test being whether it is in the members’ best interests. The principles and procedures applied to voting are detailed in the Fund’s Investment Governance Framework and related documents. 
• We engage, where possible, with companies, policy makers and regulators to ensure that the concerns of asset owners and long-term investors are taken into consideration.