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AustralianSuper: Beginning to invest in sustainability performance

By Samantha Eyre (Net Balance) on April 21, 2011 at 12:47pm.
Content:

AustralianSuper is one of the largest industry superannuation funds in Australia. It currently has 1.5 million members, over 125,000 contributing employers and more than $32billion under management.

This report has been written in response to AustralianSuper members', employers' and employees' increasing interest in AustralianSuper’s corporate citizenship and sustainability. This report follows the Global Reporting Initiatives guidelines and AustralianSuper have self-declared their application to a level C.

AustralianSuper concisely reports on material issues relating to their members, investments and employees in 32 pages. These issues are noted as the “highest priority issues commonly mentioned by both our stakeholders and the industry”. Addressing high materiality issues is an advanced methodology for a first sustainability report, however more information could have been provided on how the company’s stakeholders were identified and prioritised, and how material issues were prioritised. The inclusion of the criteria used to assess material issues would also be helpful in understanding the company’s material issues.

The report begins with a short Q&A session with the Chief Executive, and although this inclusion shows that there is awareness of ESG issues at a senior level, this interview fails to add any significant value to the report. This could have been used as an opportunity to ask some hard questions and gain insight into what sustainability means to AustralianSuper and the company’s future. On the whole, this report fails to tell readers what the company hopes to achieve through a sustainable development agenda.

The first section covered is Members – satisfaction, awards, engagement and advice. At times this section can read like a marketing tool, promoting what AustralianSuper can do for its members financially and the products and services available, rather than dealing with concerns that members may have. There is also a paragraph detailing a tool developed by AustralianSuper to help members measure their financial readiness for retirement (Retirement Readiness Indicator (RRI)) – although this may be useful for members, the value of this information in the sustainability report is questionable. It is not until the Investment section that the reason for this inclusion is revealed. AustralianSuper believe that information regarding superannuation funds should be presented to members in clear language; the RRI is part of its goal to improve member literacy in relation to their options and increase engagement with their retirement outcomes. Future reports should seek to draw connections between the separate sections of the report in order to present a holistic picture.

A sustainability report should present all the challenges and risks faced by the company and the planned responses to those challenges rather than simply focusing on the positive. In terms of dealing with the less positive side of member concerns, the Chief Executive raises the issue of legislative uncertainty and market instability. A material issue resulting from this for stakeholders is how changes to legislation may affect superannuation. Likely superannuation policy and regulatory reforms include a potential ban on commissions for superannuation and investment products, and a stepped increase in the Superannuation Guarantee contribution to 12% - none of this is discussed in the report.

Reporting the outcomes of programs and initiatives is important to demonstrate that the company is progressing towards declared objectives but also listening and responding to stakeholder concerns. AustralianSuper believes member satisfaction is key to its success and conducts regular surveys on this topic, but no areas for improvement or actions taken to ensure member satisfaction have been reported.

One key omission from this report is the financial or economic performance of AustralianSuper. A summary of the company’s financial performance could be included to give members a synopsis of how the company is performing. Alternatively, AustralianSuper could provide links to publicly available financial and other benchmarking information to demonstrate how they are performing against industry peers and how they plan to remain/become the leading superannuation fund in Australia.

The Investments section starts to demonstrate AustralianSuper’s sustainability credentials. There are well defined investment principles and strategies which take ESG issues into consideration and focus on long-term opportunities. The company clearly demonstrates the governance structure that drives investments, risk management and how investment decisions are made. Currently, there is a staff sustainability committee but considering AustralianSuper’s stated commitments to sustainability it would be good to see evidence of buy-in from the senior level through the creation of a Board Sustainability Committee. This would allow AustralianSuper to demonstrate how sustainability issues are identified, addressed, monitored and addressed throughout the company.

The third section of the report discusses Employees and it is clear that this section is aligned more to the Global Reporting Initiative G3 Guidelines than any other. There are disclosures on management approach, employee turnover, composition of governance bodies and discussion of training and up-skilling of employees. AustralianSuper paints itself as an excellent employer with workforce and gender diversity policies and programs aimed at attraction and retention of quality people. The evidence is in its favour with a very low turnover and 100% of women who took parental leave in the reporting period returning to work at AustralianSuper.

The only metrics included in this report are found in the Employees section. AustralianSuper should set and disclose its performance metrics, objectives and targets for all material ESG issues. Without these stakeholders are unable to track performance over time.


Communication:

Finding the report on the AustralianSuper website was a minor challenge initially. There is no sustainability section on the company website, rather all publications are found in the Tools & Forms tab. Creating a sustainability section on the AustralianSuper website would be useful and would aid the company’s mission to be responsive to stakeholders by providing timely, accessible and material information.

This is a concise and easy to navigate report and very readable. 32 pages is a robust report length and it is recommended that when reporting in future years, the report length is kept by continuing to refine its material issues and content for disclosure.

The report is well presented, with good but limited use of diagrams. Also commendable are the links to external sources for more information available on the company website e.g. policies and voting decisions.


Credibility:

Overall, this report provides a very high level summary and lacks information that can be analysed independent of the discussion provided. AustralianSuper are very forthcoming in that this is its first report and a learning platform, from which it is hoped they can build.

A level of balance is certainly lacking in the presentation of information in this report. The message of this report is very clearly that AustralianSuper is working to get the best returns for its members but a countermeasure to this goal would be a section detailing the legislative uncertainty and market instability that the company faces and what the potential future may look like for members and what it may mean for their investments.


Recommendations:

It is recognised that this was AustralianSuper’s first report and was very much a learning tool and the following recommendations are offered for future reports.
1)    It is recommended that more in-depth stakeholder engagement is carried out in future years in order to address member issues and identify a wider range of stakeholders beyond members and employees.
2)    Australian Super should also aim for more disclosures of management approach in order to give a more holistic view of the company and its operations.
3)    The only metrics provided throughout the report are related to employment – diversity and turnover. It is recommended that performance on all material ESG issues is quantified and reported. Quantification of performance allows for comparability of data over time and the demonstration of trends in performance.
4)    AustralianSuper should seek to draw connections between the separate sections of its report in order to present a holistic picture of performance and demonstrate ties between information. A report structure modelled on material issues rather than stakeholder groups may help to integrate information and make the report easily navigable for stakeholders.

Samantha Eyre is a Project Consultant at Net Balance, a sustainability advisory services firm with offices in Melbourne, Sydney, Brisbane and London. www.netbalance.com