Australia’s Future Fund ups engagement and ESG integration

€49.2bn sovereign fund develops ownership rights approach

The Australian Government Future Fund, the (€49.2bn) state investor, is planning more extensive direct engagement with investee firms – on top of taking greater account of environmental, social and governance (ESG) risks in its portfolio.

The fund, an independently managed investment fund into which the Australian Government deposits its budget surplus, says its approach to the exercise of ownership rights “will be further developed in the coming year”.

It states in its new 2009/10 annual report that “this will include more extensive engagement directly with investee entities to understand and clarify resolutions being put to shareholders and improve communication regarding material governance issues”.

And it will continue to identify and integrate “material environmental, social and governance risks and opportunities into the design and implementation of the portfolio”.The fund, set up in 2006, has corporate governance is enshrined in its mandate from the government.
Since September 2009, the Fund’s voting on domestic equities has been directly managed, rather than delegated to a third party – “with a view to delivering more focused and consistent consideration of resolutions”.
In total it voted against company boards at 13% of resolutions during the report period.
The Future Fund Management Agency has appointed an investment specialist to oversee ownership rights and to consider the integration of ESG into the portfolio.

In September it was announced that Paul Costello would be stepping down from his role as General Manager of the Future Fund Management Agency. Costello, the former chief executive of the New Zealand Superannuation Fund, was pivotal to the formation of the fund – he was its first employee in November 2006.