Australian super fund Local Government Super (LGS) has achieved the number one ranking in the Asset Owners Disclosure Project (AODP) for the second time since 2012.
The AODP assesses how 500 of the world’s biggest investors, including pension funds, are managing the risks and opportunities associated with climate change. It then ranks them according to how they mitigate climate change risk.
Speaking about the win, LGS Chief Executive Officer, Peter Lambert, said: “LGS is proud to be recognised as a global leader in managing environmental, social and governance (ESG) risks.
“We have always treated climate change as a significant investment risk for our members’ long-term retirement savings and we have introduced a number of strategies to address these risks. Our commitment is to secure long-term, sustainable returns for our members, and this ranking is a testament to our achievements.”
LGS has more than half of its total assets invested in responsible and low carbon investment strategies. LGS’ top ranking in the AODP was achieved as a result of its wide range of climate change related portfolio risk mitigation actions including:
- providing investment guidance to fund managers
- running a climate risk overlay on their core portfolio
- underweighting carbon intensive stocks and sectors
- using divestment and negative screens in carbon intensive sectors.
LGS also engages with industry groups, fund managers and companies to address climate change risks.
Mr Lambert highlighted LGS’ introduction of a high carbon screening approach in 2014 as one of the notable areas where LGS has amplified its ESG commitment.
“Last year LGS introduced a new investment restriction on high-carbon-sensitive industries. This ‘negative screen’ excludes the most vulnerable companies in sectors considered to be the most sensitive to the investment risks associated with climate change, including companies with more than 33 per cent of their business in coal mining, oil sands and coal-fired generators.
“By the end of 2014, LGS reduced its carbon footprint in international equities investments by up to 30%, while its ASX listed investments had a reduced footprint of 17%, relative to our industry benchmark. This is a result of intentional investment strategies that focus on meeting the required investment risk and return hurdles for our members.
“Building more sustainable investment portfolios also involves a commitment to ongoing transparency about the impact of these investments and active participation as asset owners, which is why LGS always reports on our climate change initiatives on our website.”
Mr Lambert concluded by saying that LGS is looking ahead to further developments in 2015.
“The AODP award proves that it is possible to achieve good returns and manage climate change risks at the same time. LGS will persist in setting and adhering to the highest standards for responsible investment.”
In 2013 LGS ranked second globally for its climate change disclosure and risk management practices, and maintained its AAA rating.
Source: Local Government Super
