The financial risks of not acting fairly

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HESTA is working to protect your investments – and create a better future.

HESTA does not shy away from asking the tough questions of companies when it thinks they are not appropriately managing a risk that could impact members’ investment.

That is because you are effectively an owner of these companies through your super.

So, HESTA wants to make sure maximising your returns does not come at the cost of the environment or society. 

As a very long-term investor, HESTA knows that, if a company is not making profits fairly, then this will eventually damage its value and impact the broader wellbeing of fund members and the community.

Improving your investments and the way companies behave

When HESTA's investment experts identify a potential risk to a company, they meet with its board and management to see what action they are taking. 

Where appropriate steps are not being taken, HESTA can use share voting to push for change. 

“We’ve seen a lot of recent examples where poor corporate practices and culture have revealed clear financial risks to a company’s long-term value,” HESTA Head of Impact Mary Delahunty said.

“By using our influence as a shareholder, we can achieve improvements at that company but we can also send a strong signal to other companies that can improve corporate behaviour more broadly. 

“The aim is to achieve better long-term performance across your investments and encourage a fairer and more equitable society that benefits HESTA members and all Australians."

Taking a stand to protect Aboriginal heritage

A recent example is the action HESTA took when mining company Rio Tinto destroyed 46,000-year-old Aboriginal rock shelters at Juukan Gorge. 

HESTA immediately called for Rio’s board to address issues surrounding the company's treatment of traditional owners. HESTA also identified a much broader systemic risk in how mining and energy companies were working with Traditional Owners when it came to heritage protection.

HESTA released a Statement on Working with Indigenous Communities detailing its investor expectations around how companies manage risks associated with Indigenous heritage protection issues.

“As a result of the destruction of the Juukan Gorge caves, we’ve embarked on a direct engagement program with companies in the mining and energy sectors to ensure fair and sustainable outcomes for Indigenous communities. This not only helps protects priceless heritage, but also our members’ investments,” Ms Delahunty said.

HESTA is now working with others to push for Rio Tinto to conduct an independent review of all its agreements with traditional owners.

“We will continue our work to get Rio and, if necessary, other mining companies to improve their practices,” Ms Delahunty said.

"We want to ensure companies have respectful and sustainable long-term partnerships with Indigenous Communities and that agreements provide fair outcomes to all parties."

Financial risk when companies do not act fairly

HESTA expects the companies it invests in on members’ behalf to maintain a strong sense of fairness, particularly when it comes to their employees. 

Not doing so exposes companies to financial risk, which can detract from their long-term value.

Financial risks include lower employee engagement, an inability to attract and retain talent, and more broadly not meeting societies’ expectations. 

HESTA's investment experts assess whether a company is managing for these risks by looking at gender equality and diversity as indicators of fairness. 

There is a lot of evidence that companies with strong cultures that foster inclusion and diversity have better decision-making, which leads to stronger long-term performance. And this will have a positive impact on our members’ investments and their financial future.

In early October, HESTA launched 40:40 Vision: an investor-led initiative to achieve gender balance in executive leadership across Australia’s largest 200 listed companies. 

Already, investors representing more than $1 trillion in assets support our vision to achieve a target of at least 40 percent women, 40 percent men and 20 percent of any gender across the senior leadership of all ASX200 companies by 2030. 

HESTA believes targets like this are needed because progress towards more women in leadership has been so slow – just 30 ASX200 companies achieved gender balance (at least 40 percent women) in 2020.

If we do not act now, it will be another 80 years before we see equal representation of women and men at CEO level, and similarly in executive leadership, according to a 2019 study into gender equity.

Find out more about HESTA Impact.

HESTA is APHA's Diamond Sponsor.

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