IFM Investors has been appointed by industry super fund First Super to manage a new indexed international equities strategy which prioritises companies with strong ESG practices.
First Super said that it had worked with IFM to develop a strategy that takes into account ESG risk and screens out companies with high risk in labour rights, modern slavery, and supply chain.
According to the two firms, the strategy has been designed to provide exposure to a diversified portfolio of global (excluding Australia) publicly listed companies, with an aggregate overweight to companies that have demonstrated a commitment to effectively manage labour risk.
The super fund and global fund manager explained that, by prioritising companies with sound labour practices and screening out companies with poor records, the portfolio seeks to generate long-term returns while managing social factors risk.
Labour rights were highlighted as an important issue for First Super’s members, as they are largely employed in the furniture and joinery, the pulp and paper, and the timber industries.
“The fund has a responsibility as a steward of members’ capital to invest in a prudent manner, and also in a socially responsible manner,” commented First Super chief executive officer Bill Watson.
“This strategy demonstrates that you can achieve both of those things, and contrary to a lot of criticism about ESG, not give up returns.”
The strategy also incorporates meaningful governance factors, with both firms pointing out that poor corporate governance can increase the risk of labour rights violations.
Factors considered include strength of frameworks around labour, human capital management and governance, and recent involvement in severe labour rights.
“Social issues, like labour rights, are important and have the potential to impact economic returns. We were thrilled to work with First Super to develop this strategy that aims to support companies that take care of their workers and meet First Super’s required risk/return characteristics,” said IFM Investors executive director Laurence Irlicht.
“This is one of a number of customised ESG portfolios we have created with investors, that aims to provide meaningful ESG tilts within clients’ active risk budgets.”
First Super and IFM confirmed that the strategy will be regularly reviewed and adjusted to ensure the portfolio continues to reflect companies’ labour and governance practices.
