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Mercy Super’s Socially Responsible investment option takes specific account of the ethical, social and environmental considerations adopted by the managers who invest on our behalf. Aside from these considerations, the restructured option follows the same investment philosophy and approach as Mercy Super’s other pre-mixed investment options.

The targeted return objective set for each option determines the strategic allocation of underlying assets required to achieve that objective. We design an allocation that has the highest chance of achieving the targeted  investment outcomes within the appropriate risk criteria – balancing the risk vs. return objectives.

In restructuring the Socially Responsible option, we researched various investment managers to select those that could provide appropriate underlying investment products that reflect the desired investment style and characteristics. This included:

  • Transparency – being able to actively demonstrate their approach to taking into account the social, environmental and ethical considerations of their investments
  • Investment approach – for this option we were looking for index / passive investment managers to deliver a lower cost option for members.

Underlying investment managers

Consistent with our broader multi-sector / multi-manager approach to selecting specialist investment managers to support our investment options, the following investment managers and products have been selected to underpin the asset class allocations for the Socially Responsible investment option:

Asset class Investment manager product
Australian Equities Dimensional Australian Sustainability Trust
International Equities State Street Climate ESG International Equity Fund
Australian Fixed Interest Blackrock iShares ESG Wholesale Australian Bond Index Fund
International Fixed Interest Blackrock iShares ESG Overseas Bond Index Fund
Cash QIC Cash Fund and QIC Enhanced Cash Fund

This blend of managers and products includes some existing investments that already support the asset class investments behind Mercy Super’s other investment options as well as some new investments that better suit the desired index / passive socially responsible investment approach we were looking for as the foundation for the Socially Responsible option.

As index / passive styled investments typically carry lower investment management fees, the restructured option has a significantly lower investment fee than previously applied.

Estimated Investment fee – Socially Responsible investment option
From 1 July 2021 Previously
0.339% 1.334%

Australian Equities – Dimensional Australian Sustainability Trust

The investment supporting the Australian equities holdings for this option is the Australian Sustainability Trust managed by Dimensional Fund Advisors (DFA Australia Limited).

It’s objective is to provide long-term capital growth through exposure to a diversified portfolio of securities listed in Australia with increased emphasis on higher expected return securities, adjusted to take into account certain environmental and sustainability impact and social considerations.

When choosing securities, this investment considers carbon and other greenhouse emissions, or potential emissions, land use, biodiversity, involvement in toxic spills or releases, operational waste, water use, tobacco, child labour, alcohol, adult entertainment, gambling, factory farming activities, palm oil, personal firearms, manufacture of cluster munitions and landmines and manufacture and maintenance of nuclear weapon systems among other factors. In particular, it may exclude shares in companies that the investment manager considers to have high carbon or greenhouse gas emissions or reserves that may produce those emissions.

Relative to the S&P/ASX 300 Index, this investment is estimated to have a 50.1% lower exposure to greenhouse gas emissions intensity1.

The top 10 assets held by this investment at 30 June 2021 were:

Commonwealth Bank of Australia 5.29%
CSL Ltd 3.82%
National Australia Bank Ltd 3.78%
Westpac Banking Corp 3.03%
Fortescue Metals Group Ltd 2.73%
Macquarie Group Ltd 2.09%
Telstra Corp Ltd 2.01%
Goodman Group 1.94%
Brambles Ltd 1.65%
Sonic Healthcare Ltd 1.56%

International Equities – State Street Climate ESG International Equity Fund

The investment supporting the International equities holdings for this option is a portfolio held within the Climate ESG International Equity Fund managed by State Street Global Advisors.

It’s objective is to provide long-term capital growth and income in line with the MSCI World ex-Australia Index, subject to delivering on Climate and Environmental, Social and Governance (ESG).

This investment provides global equity exposure while targeting the following specific climate metrics relative to the index:

  • Reduce carbon emission intensity by 70%
  • Reduce exposure to fossil fuel reserves by 90%
  • Reduce exposure to brown revenues by 90%
  • Increase exposure to green reserves by 300%

It also provides an increased exposure to companies that the investment manager considers as having a higher responsibility factor rating and are better prepared for the impact of climate change. It specifically excludes companies that are involved in activities relating to controversial weapons, nuclear weapons, thermal coal, tobacco, severe environmental, social or governance controversies and violations of the UN Global Compact.

The top 10 assets held by this investment at 30 June 2021 were:

Apple Inc 4.11%
Microsoft Corp 3.81%
Amazon.Com Inc 2.72%
Alphabet Inc-Cl C 1.51%
Facebook Inc-Class A 1.50%
Alphabet Inc-Cl A 1.26%
Tesla Inc 1.12%
Kinder Morgan Inc 1.05%
American Water Works Co Inc 0.99%
Cisco Systems Inc 0.99%

Australian Fixed Interest – Blackrock iShares ESG Wholesale Australian Bond Index Fund

The investment supporting the Australian fixed interest holdings for this option is a portfolio held within the iShares ESG Wholesale Australian Bond Index Fund managed by BlackRock Investment Management (Australia) Limited. This is an investment that was already in place supporting the current Australian fixed interest asset class investments for our other pre-mixed investment options.

The Fund aims to match the performance of a customised Bloomberg Barclays MSCI Australian Socially Responsible (SRI) and ESG-weighted Index before fees.

The top 10 assets held by this investment at 30 June 2021 were bonds issued to:

Commonwealth of Australia 55.6%
Queensland Treasury Corporation 7.4%
New South Wales Treasury Corporation 6.3%
Treasury Corporation Of Victoria 5.6%
Western Australian Treasury Corporation 3.2%
South Australian Government Financing Authority 1.7%
Landwirtschaftliche Rentenbank 1.2%
European Investment Bank 1.2%
KFW 1.2%
International Finance Corp 1.1%

International Fixed Interest – Blackrock iShares ESG Overseas Bond Index Fund

The investment supporting the International fixed interest holdings for this option is a portfolio held within the iShares ESG Overseas Bond Index Fund managed by BlackRock Investment Management (Australia) Limited. This is an investment that was already in place supporting the current International fixed interest asset class investments for our other pre-mixed investment options.

The Fund aims to match the performance of a customised Bloomberg Barclays MSCI Global Aggregate SRI Select ex-Fossil Fuels Index (Australian dollar hedged) before fees, less interest, withholding taxes and the cost of currency hedging.

The top 10 assets held by this investment at 30 June 2021 were bonds issued to:

United States Treasury 16.3%
Government of Japan 12.9%
Peoples Republic of China (Government) 3.4%
Republic of Italy 3.2%
Republic of France 2.9%
United Kingdom of Great Britain and Northern Ireland (Government) 2.7%
Federal National Mortgage Association 2.3%
Federal Republic of Germany 2.2%
Kingdom of Spain 1.7%
Republic of Korea 1.2%

Note: 1 Dimensional Australian Sustainability Trust Sustainability Report as at 30 June 2021 – https://au.dimensional.com/funds/australian-sustainability-trust

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