The $13 billion La Trobe Financial has seven decades of operational history as a good steward of other peoples’ capital. Recently we sat down with their director of ESG & International Partnerships Caterina Nesci, to see how they were navigating the current economic turbulence and how they saw environmental, social and governance (ESG) issues improving their strategy and business direction.
“Most businesses today are paying increasing attention to environmental, social and governance factors when making decisions,” said Nesci, “and it feels as though that lens is reaching record levels. This makes entirely good sense and for good business practice in our key decisions. We live in a very turbulent world confronted by many challenges ranging from inequality, global warming, natural disasters like bushfires, droughts and floods, and of course the economic and social impacts still arising from the COVID pandemic.”
Nesci who has previously worked for international law firm Hogan Lovells in Hong Kong for two years and Norton Rose Fulbright for over a decade commented that there is an abundance of research confirming companies that are managed responsibly deliver better financial results over the long-term. Additionally, firms that adhere to environmental efficiency, social awareness and high governance standards are well positioned to withstand emerging risks and can capitalise better on new opportunities.
Since its inception in 1952, La Trobe Financial has never lost one cent of capital from its institutional mandates or pooled investment accounts. “We are very proud of this track record of performance, and we intend to keep this outstanding track record of performance intact moving forward”.
According to a survey by Australian Ethical and Investment Trends, which consulted 2,854 Australian retail investors and 321 financial advisers, 78 per cent of investors who consider ESG factors intend to invest based on ESG factors in the coming year.
The study identified that it was investors, not advisers, who predominantly initiate ESG investment decisions. When it came to choosing the right product provider, investors identified a company’s reputation as being the most important factor, entailing investment track record, distribution network, brand name recognition and its values.
Nesci says La Trobe Financial understands well that ESG is a key measure of the risk culture of a company. “If a company fails on governance, it will surely fail on social and environmental. It is also important to identify early, that ESG is also far more than simply a filter. ESG can also be, in our experience, a core measure of risk alongside financial risk and management risk. ESG principles for us at La Trobe Financial are integral to our day-to-day business. By practicing high standards of ESG policy and practice, we increase the financial performance of our business and satisfaction for our customers. ESG also engages and enriches the lives of our staff and their local communities, so it becomes a virtuous circle”.
Following a survey by Australian Ethical and Investment Trends, it was found that when investors consider where they wish to place their money:
• 78% intend to invest in products that are aligned on ESG factors.
• 46% consider corporate governance.
• 43% consider ethical beliefs.
• 55% instructed their advisers to invest their money on more ESG aligned products.
• 87% considered the company’s reputation as the most important factor and so the company’s brand and values are very important.
Further research conducted by the Griffith University found Australians are set to inherit an estimated $3.5 trillion over the next 20 years. This significant intergenerational wealth transfer will be important, if not critical for many generation X and Y investors who are very conscious of ESG when selecting whom they place their business with.
Nesci says that “ESG is not new to La Trobe Financial. La Trobe Financial was formed in 1952, on the basis of serving underserved customers and built on a philosophy of “others before self”. To this day, we live these principles like it’s our DNA.” Nesci adds, “in fact, ESG was a very natural extension of our foundational principles, and we had a long history of ESG commitments prior to it being known as ESG”.
To highlight this, La Trobe Financial has recently issued their Charitable Foundation annual report and made it public for the first time in 70 years, and an updated ESG Policy Statement. That report, shown to The Australian, shows that as early as 1968, the company was one of the very first to offer superannuation to female staff long before the mandate of the Hawke labour government.
The Charitable Foundation was formed in 1978 and its first philanthropic efforts were junior school scholarships for customers’ children. During a period of international expansion in 2008, the company also launched the La Trobe Financial Academy and ran an in-house educational placement program focused on building a long-term relationship with our Asian professional financial services colleagues, and to date, the Academy has over 187 alumni graduates.
The Foundation also serves as a platform to empower their employees to make a difference through its Community Involvement Program where employees are actively engaged with people in need in the broader community through volunteer projects and mentoring – and what they call their “Staff Lend-a Hand” days.
“All La Trobe Financial employees are given the opportunity to take two days a year, on full pay, to work and provide assistance to their chosen charity or community ventures. By doing so, La Trobe Financial believes they strengthen our community by investing both financial and intellectual capital in key partners including the Epworth Hospital, Lifeline, Australian Red Cross, Salvation Army and Society of Women Leaders.
"An example of one charity for which our staff have volunteered their time over many years is the Salvation Army's Project 614 – Lighthouse Café. At Project 614 – many are homeless, suffering a mental illness or alcohol dependency, just to name a few of the issues here. Our staff have opened their hearts in catering for these people by serving them a meal, a coffee or simply showing they care through their friendly service – it’s very confronting but rewarding.
"These experiences give staff an incredible sense of achievement from their work and the feeling that they have made a difference. By immersing themselves into the community to help those less fortunate, its employees have built a deeper appreciation of the role that La Trobe Financial plays in the community. With over 460 staff deployed, this is a significant contribution of free work hours provided by the business to the community” Nesci added.
The Foundation also provides aid to various healthcare, educational, cultural and sporting initiatives. Since inception, it has donated over $17 million back to the Australian community. In the last 12 months, the Foundation has stepped up its charitable donations to various organisations in response to a series of natural disasters that have affected Australia. Through the work of the Foundation, it is also committed to investing in the advancement and wellbeing of the broader community and Australians from all walks of life.
Looking forward, La Trobe Financial has planned a number of projects for future implementation under each of the E, S and G swim lanes of their ESG Framework. For commitments under “E” they have in place a project to be paperless in all customer dealings. La Trobe Financial is looking to reduce landfill and become more environmentally friendly. For example, they are already purchasing sustainable, marketing materials and are aiming to have all key customer engagement paperless by 2023.
The world is moving to net zero and La Trobe Financial believes that their clients are best served by being at the forefront of that transition. As a business, they have therefore committed to net zero emissions by 2030 and have already appointed a carbon consultant to assess its carbon footprint with the objective to implement a reduction plan by the end of the year.
La Trobe Financial believes that its sustainability objectives will:
• contribute to better outcomes for the planet and for its investors;
• be achieved in relation to its emissions commitment by 2030; and
• achieve the highest levels of reporting and transparency.
Nesci added that wherever possible, “we will look to reduce and offset the environmental impact of our operations through the implementation of long-term strategies, carbon reduction or offset strategies”.
“Our Asset Management division has been exploring opportunities to provide green and social mortgages to our borrowing customers and to our investors as both become more environmentally and socially conscious. Our goal by the end of 2023 is to be able to offer our 55,000 retail investors an opportunity to invest in environmental, social and sustainable green mortgages via our award-winning Credit Fund in addition to offering a green or social bond to our growing RMBS investor base – so watch this space,” said Nesci.
As La Trobe Financial continues with its ESG implementation journey, they are committed to becoming accredited with the Responsible Investment Association of Australasia (RIAA). They are also assessing a number of United Nations Sustainable Development Goals and will formalise same once they have completed their assessment later this year. They have B-Corp Certification on the agenda and will be committing to this assessment early in the 2023 calendar year.
“These are just a few of the many organisations across the globe that we will partner with and support on efforts aimed at encouraging greater transparency, standardisation and reporting material ESG factors alongside financial information. We regularly report these efforts via our website and to our board through our ESG framework."
At the end of the day, it is this approach to doing business and the firm principles they adhere to, that will ensure the future success for the business as it continues with its journey to place “others before self”. Nesci added, “La Trobe Financial has been committed to supporting our investors, borrowers, community and the Australian economy since its inception almost 70 years ago. Our ESG policy is another example of how “others before self’ is engrained in the DNA of our company”.
Nesci concludes “Since inception, we have funded over $36 billion of investment mandates for more than 205,000 customers. When we apply a base line economic multiplier effect of 2.8 times – we have contributed around $100 billion to the Australian economy. That’s something we are all very proud of.”
When investors hear the word microcaps, most immediately think about speculative, tiny companies. However, in the global space, microcaps of...