YOUR INVESTMENT REPORT
Welcome to your quarterly report from the Active Super Investments Team.
In this edition, we’re excited to deliver Active Super’s first-ever Impact Report, demonstrating how our investments are making a difference in the world. We share our new net-zero modelling tool that will accelerate our path to net zero. Plus, we shine a light on some of our most profitable investments from last year, including one fund manager that delivered returns of 50.5 percent*, Impax Asset Management.
If you’d like to know more about any aspect of our investing, please let us know so we can include it in future editions.
*Past performance is not a reliable indicator of future performance.
Active Super publishes inaugural Impact Report
It’s easy to see how your Active Super investments are performing financially. But how do you know what impact they’re having on the world? Now, our first-ever Impact Report lets you see how the actions, decisions and policies behind our investment choices are helping to make a difference, while still securing your financial future. The Impact Report will be published each year alongside our annual report. It outlines key areas of focus for Active Super including climate change, diversity, good governance and social considerations. It also highlights the different ways we assess risk, measure success and continue to prove our commitment to investing for the greater good.Read more
Active Super passes performance test
The last financial year saw Active Super deliver record returns for High Growth of over 23 percent. So we were delighted to have passed APRA’s inaugural performance test while also being ranked among the best-performing funds over seven years by the new ATO Comparison Tool, with returns of 9.46 percent*. (Assumes a 30-year-old with a $50,000 balance)
High performance, high impact investing
For a long time, people believed that responsible investments could not deliver strong returns. But in the 2020/21 financial year, Active Super achieved some of its best returns in the 24-history of the fund, with some stand-out investments that also happen to be sustainable.
The Attunga Power and Enviro Fund for example, delivered 14.6 percent returns in the 12 months to June 30. Investing primarily in the power market and related derivative products, it focusses mainly on the Australian National Electricity Market (ETC and OTC) but with a mandate that includes C02 emissions, weather, gas, water and other energy and environmental-related markets.
Actis Energy IV also performed well. This fund develops renewable energy projects, such as solar farms and wind farms, in locations where there is shortage of electricity like parts of Africa, South America and India. It has provided a 13.8 percent annualised return over a three-year period.
The jewel in the Active Super investment crown last year, however, was Impax Asset Management, who delivered returns of 50.5 percent in the 12 months to 30 June.
Chief Investment Officer, Craig Turnbull, says that while Impax is one of our smallest investments (just $136 million), over seven years it has delivered 17.1 percent returns, the best return of any of our fund managers.
“Impax believes that the ‘next’ economy is the sustainable economy and seeks out investments that will help us face the challenges of the future,” says Craig. Examples include high-return companies such as Generac (back-up power generation for extreme climate situations), Nibe (no-carbon heat pumps) and Xinyi Solar (leading solar panel producer).
“The Impax team are experts at identifying the business opportunities that are coming from the need to be sustainable. It’s giving us exposure to small, high-return companies that we don’t get with other fund managers.”
For more details about our high performing responsible investments, see page 48 of the Impact Report.
BHP exits oil and gas
As an Active Super member, sometimes you might question why we invest in companies that might not seem to fit with our responsible investment philosophy and we’re often asked about BHP. The recent announcement by BHP of its exit from oil and gas demonstrates that there’s often more to a company than meets the eye.
Many people are surprised to learn, for example, that BHP is leading the way in the transition to net zero. The company is part of Climate Action 100+, an investor-led initiative representing 615 investors (including Active Super) pushing the world’s largest corporate greenhouse gas emitters to take necessary action on climate change.
In line with commitments made to Climate Active 100+, BHP has set short, medium and long-term targets to reduce its emissions. The company’s decision to exit oil and gas is in line with their transition plans. Even remuneration for BHP’s executive team is directly linked to the company’s climate change performance.
The $181bn company owns one of the world’s largest copper mines. It earns the majority of its profits from producing iron ore and copper and plans to accelerate its shift towards these raw materials used in electricity infrastructure.*
Only about 12 percent of BHP’s revenues come from fossil fuels, and last year the company promised to sell of its remaining coalmines by next year as part of its plans to ready itself for a low-carbon future.*
First super fund to apply net zero lens to whole portfolio
Active Super has a new tool in its push to achieve net zero by at least 2050 – modelling developed by our Responsible Investments team that shows how our trajectory towards Net Zero 2050 might be accelerated - or delayed - depending on different variables.
The modelling uses investment data from all asset classes, including fixed income, making us the first super fund to examine its whole portfolio through a net zero lens. Right now, it shows that in all asset classes we are some way off achieving net zero by 2050.
For example, in our Australian equities portfolio, we’ve identified that only 27 percent of companies have carbon emission targets. This is too low and the graph below shows that we will be in shortfall if we don’t take further action.
How the modelling can help
The good news is that this data allows us to accurately plan and cost Active Super’s transition to net zero based on different scenarios.
It also allows us to engage robustly with different fund managers, investee companies and industry groups to get the commitments we seek. For example, we’re already seeing fund managers start to sell out of high emitting securities and sectors, effectively decarbonising our portfolios. However, the modelling shows that there is scope to achieve so much more.
Take the Active Super fixed income portfolio, for example. For the safety and security of our members’ returns, a large portion of our fixed income investment portfolio is in Australian Government bonds, and it accounts for a large proportion of our emissions. Now that the Australian Government is going to pledge to net zero emissions by 2050, this should accelerate our progress considerably.
We’re excited about the impact this information will have on where and how we invest and as we shape the future of our portfolio.
Active Super named ‘Leader in Responsible Investment’
Active Super has been included as a Responsible Investment Leader by the Responsible Investment Association Australasia (RIAA) in its annual Responsible Investment Benchmark Report.