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Australian super funds advised to see ESG as a competitive advantage

New guidance from financial services body Finsia

Australia’s A$1.3trn (€1trn) super funds industry has been advised to look at environmental, social and governance (ESG) factors as a “competitive advantage” by financial services body Finsia.

The advice comes in a new guide on implementing ESG published by the Financial Services Institute of Australasia.

The new guidelines also refer to the importance of incorporating ESG issues into selecting asset managers. “By explicitly incorporating the importance of ESG issues into the fund manager selection process, the value the asset owner places on it is powerfully and clearly signaled,” Finsia says.

“Prospective fund managers are therefore aware it is in their best interests to demonstrate a clear and well-designed process relating to ESG issues.”

Australia’s super funds represent the world’s fourth-largest private pension fund asset pool.The 20-page guidance is called “Implementing Environmental, Social and Governance Principles in Investment Decisions” and is available here.
“These guidelines outline the key issues to be considered before and during implementation,” said Finsia Chief Executive Russell Thomas.
Finsia says most funds, including signatories to the UN Principles for Responsible Investment, are struggling with either developing policies or with policy implementation.

Michael Dundon, chief executive of the $8.5bn VicSuper fund, has been instrumental in the guidelines. He was quoted as saying by the Australian Associated Press the fund would focus on renewable energy – and that it is avoiding funds or stocks with big carbon exposure.

“We see opportunities in wind and solar and other forms of technology that will deliver long-term returns,” he was quoted saying.