REsponsible investing

‍Our approach

Environmental, social, and governance (ESG) issues present risks and opportunities that have the potential to impact investment returns. We will consider ESG factors in our investment decision making where it is appropriate.

Our Responsible Investment Framework includes the assessment of Environmental, Social and Governance (ESG) considerations when selecting, retaining, or redeeming the investments of BUSSQ. Our broad investment objective is to maximise investment returns, after considering the risks associated with various types of investments. ESG considerations are one of several factors that form part of the risk assessment when appointing external investment managers or investment strategies.

We consider the overall cost, risk, and opportunity of a decision, against the benefits of the expected outcome.

ESG considerations include (but are not limited to) the consideration of climate change, human capital management and labour standards (including modern slavery in our supply chain), and governance practices (including transparent reporting) as part of this framework.

Some of our assets are invested in pooled funds and therefore, the responsible investment decision making is determined by the investment managers of those funds, with us advising our views and preferences where we consider this to be appropriate. We will otherwise rely on the managers to take ESG risks into account as they consider appropriate.

Appointing and monitoring investment managers

When appointing investment managers, we work with our investment advisor to assess the extent to which the manager integrates ESG issues into its decision-making processes. This forms one part of the overall suitability assessment of the investment manager.

Ongoing monitoring of our investment managers includes consideration of (but not limited to) investment performance, adherence to style/process, ESG integration and risk management. Any issues that arise, including significant changes or inaction on a manager’s behalf, may impact our overall assessment of that manager. This is formally assessed as part of our investment advisor’s overall annual review of investment managers with ESG considerations tabled for regular discussions with our investment managers. 

United Nations Sustainable Development Goals

We incorporate the United Nations (UN) Sustainable Development Goals (SDGs)¹ into our investment decision making process as part of our ESG considerations. The UN SDGs are global goals to provide a better quality of life and more sustainable future for everyone across the globe. They cover social and economic development issues such as poverty, health, education, climate change, gender equality, clean water and sanitation, affordable clean energy, urbanisation, and social justice.

We have selected the below UN SDGs for investments consideration as they align broadly to the building and construction industries.

More information on the UN SDGs can be found on the UNSDG website.

Our Annual Report – SDGs

We will report on the percentage of Fund assets positively impacting these SDGs within our Annual Report. These percentages are not used to assess new or existing investments. We have not set a specific target, and these percentages may increase or decrease over time. The percentages are reviewed annually as part of our investment strategy to determine if they align to our overall ESG objective.

The percentages are calculated by our investment advisor by reviewing the portfolio holdings from each investment manager of listed equities and individual underlying assets for real assets². In 2023/24 our advisor changed the methodology for mapping our capital allocation to our chosen SDGs. We now use the Robeco methodology as it is a more comprehensive rating scale that includes negative scoring for companies deemed to be negatively impacting an SDG. In 2023/24 the SDGs were calculated against approximately 76% of the total fund assets. These are mapped to the above SDGs and some investments are mapped to multiple goals. How the percentage is calculated may also change over time. 

Net zero and climate change

We consider that climate change may have a negative impact on the portfolio due to its impact on the environment and society. We believe it is appropriate to investigate and manage this risk in the portfolio. We incorporate climate change issues into investment processes and decision making, including:

• seeking to understand the impact of relevant climate change risks and opportunities prior to new investments and within each of the major asset classes;
• considering climate change risks and opportunities in the structure of the portfolio.

Whilst we have not yet developed a target and policy on net zero, we encourage our underlying investment managers to develop their own policies and action plans to move to net zero. Additionally, we have invested through the below investment managers with strategies that either tilt to resource efficiency, and/or lower carbon emissions or assist in the clean energy transition. These include:

• Investment in SDCL Green Energy Solutions Fund – an opportunistic infrastructure manager who specialises in bespoke energy solutions for business.
• Partnering with Osmosis Investment Management UK Limited who invests in resource efficient companies (energy, waste, and water).
• Investment in Montrusco Bolton Investments Inc for a global listed equity mandate that excludes fossil fuel investments.
• Investment in HarbourVest Stewardship Fund which invests in companies that have a positive impact in healthcare, education, community, environment/sustainability and inclusive finance. Their investment in utility scale solar projects directly links to affordable and clean energy (SDG 7).
  

In the 2021/22 Annual report and 2022 Annual Member Meeting minutes, there was some ambiguity on how we reported the approach of investment managers towards net zero. To clarify, we confirm that some of the Fund’s infrastructure, property, and agriculture investment managers have made progress with their focus on sustainability and outlined a roadmap to net zero by 2050. One of our agricultural investment managers (Macquarie) has made a 2040 commitment to net zero.

Investment exclusions

We prefer our investment managers to have a broad investment opportunity and only exclude investments in limited circumstances. Please see our Portfolio Holdings Disclosure for more information on all investments³.

Our current exclusions are:

• Investments in companies classified as being in the tobacco industry according to the Global Industry Classification Standard (GICs) – GICs code 302030 are not permitted. This does not exclude packaging, sales, or distribution⁴.
• Montrusco Bolton International’s ex Fossil Fuel mandate where the manager invests primarily in common shares of companies having no oil, natural gas, or coal reserves.

Active Ownership

Active Ownership refers to ownership where influence is exerted on investee companies. We undertake this through proxy voting on resolutions, and where appropriate, engaging indirectly through our external investment managers on their policies and practices, including ESG issues. The aim of this voting is to improve management and performance and enhance long term investment returns. For more information, see our proxy voting records.  

How can you find out more?

Responsible investing policy
Proxy Voting records
Portfolio Holdings disclosure

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<sup>1. sdgs.un.org/goals
2. Real assets include property, infrastructure, and agriculture. Our investment adviser uses a combination of NABERS as well as sector/sub-sector classifications in the percentage calculation for Property, and for infrastructure and agriculture this is a more qualitative/rules-based approach which is documented by the investment adviser to enable monitoring over time.
3 Oil, gas and coal are not generally excluded from our investments
4 Our pooled investments have explicit tobacco exclusion with the exception of Sands Capital that may not hold investments that manufacture tobacco products or derive more than 20% of their latest revenue from retails sales/ distribution of tobacco products, or supplying products essential to the tobacco industry (revenue is based on analysis of the financial statements of each company and sourced by MSCI).</sup>