October 2020 investment update

26 October 2020

Local Government Super (LGS) is committed to a genuine responsible investment strategy and this guides all our investment decisions right across our $12 billion portfolio, including Australian and international shares, property, infrastructure, private equity, fixed interest and absolute return assets.

 
We actively seek out investments that have a positive impact on the community and the environment. This update provides an insight into the diversity of our investments and some of the recent developments across our portfolio.

The aim of our strategy is to earn long-term sustainable returns and maximise retirement incomes to create a better future for our members.

Visit our performance pages for details of our latest investment returns.

Outstanding results in responsible investment survey

The Principles of Responsible Investment (PRI) is the world’s leading independent body on responsible investment and LGS is one of 3,000 signatories with total collective funds under management of over US$100 trillion.

All signatories subscribe to the PRI principles, namely, to consider the environmental, social and governance (ESG) impact of every one of our investment decisions so we can minimise the long-term risks and deliver the sustainable investment returns for our members.

Each year, signatories complete a comprehensive survey covering aspects such as strategy and governance, ESG integration within each asset class and in our active ownership activities.

We are pleased to report that our 2020 results were outstanding, scoring the highest rating of A+ in all but one category. These scores reflect our commitment to global best practice when managing our members’ retirement savings.

Proportion of FUMModule name2020
score
2019
score
Median score
  Strategy and governance A+ A+ A
Selection, appointment and monitoring of external fund managers
10-50% Listed Shares A+ A+ A
<10% Fixed Income – Sovereigns, Supranational and Agencies (SSA) A+ A B
<10% Fixed Income – Corporate Financial A+ A A
<10% Fixed Income – Corporate Non-Financial A+ A A
<10% Fixed Income – Securitised A+ A A
<10% Private Equity A+ B A
<10% Property A A A
<10% Infrastructure A+ B A
Active ownership modules
<10% Listed Shares – Incorporation A+ E A
<10% Listed Shares – Active Ownership A+ A+ B
<10% Property A+ A+ B

Committed to property net zero carbon emissions by 2030

As a signatory to the World Green Building Council’s global Net Zero Carbon Buildings Commitment, LGS has undertaken to achieve net zero operating carbon emissions across our direct property portfolio by 2030, as well as advocating for all buildings to be net zero by 2050.

We are well on the way to meeting this commitment with a 26% reduction in emissions across our NABERS rated portfolio over the course of the year.  Our shopping centre, Bridge Plaza, in Batemans Bay has now received carbon neutral certification, bringing the total number of  properties certified by NABERS under Climate Active to seven.

 

Local Government Property Fund (LGPF) outperforms the benchmark over 12 months

Performance to 30 September 2020

 1 Month3 Months1 Year2 Years3 Years5 Years
 LGPF -0.48% 0.39% 2.73% 7.12% 10.98% 15.23%
 Benchmark* 0.15% 0.63% -2.88% 1.95% 5.12% 8.04%
 Excess return -0.63% -0.24% 5.61% 5.17% 5.86% 7.19%

Source: J.P. Morgan Custody Report / * Mercer/IPD Australian Property Pooled Fund Index

Alternative investments providing positive impact and stable returns

Alternative investments include private equity, debt and infrastructure. These investments often have a positive impact on the environment and the community, and they are also more insulated from the market, earning more stable long-term returns for members.

Private equity generating clean energy and jobs

One of our international fund managers, Actis, consistently delivers the double of significant positive impact as well as competitive investment returns. By developing a method to measure the environmental impact of their investments, they contribute directly to the Sustainable Development Goals.

One of their investments, Ostro in India, is generating clean energy and job creation with tangible results:

  • 1 gigawatt of clean energy
  • Powering one million homes
  • Avoiding 1.2 million tonnes of CO2

The investment predominantly meets:

Tap/click - image
Tap/click on each tile for more information.
1
No poverty
Sustainable Goals - image
End poverty in all its forms everywhere.
7
Affordable & clean energy
Sustainable Goals - image
Ensure access to affordable, reliable, sustainable and modern energy for all.
8
Decent work & economic growth
Sustainable Goals - image
Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

UK care homes provide good growth opportunities

Opportunistic alternatives are generally investments that provide the potential for good long-term growth and one of these investments is the UK care home owner and operator, Country Court Care (CCC).

CCC focuses on elderly nursing, residential and domiciliary care. The company has a strong reputation for the quality of its care and for turning around care homes in need of improvement. The operator has also had strict outbreak control policies and as a result, occupancy rates have been stable throughout the COVID-19 crisis.

A key priority for CCC is to reduce the group’s carbon footprint. This is achieved by using electric cars for drivers, improving energy efficiency at existing properties and implementing new environmental specifications at new-build care homes.

The investment predominantly meets:

SDG03

United Nations Sustainable Development Goal 3
Good Health and Well-Being

Infrastructure fund delivers strong long-term income

Defensive alternatives provide investors with good long-term income and LGS has recently doubled its investment in the AMP Community Infrastructure Fund that owns assets such as water, schools, stadiums and hospitals.

The fund increased its investment to South East Queensland Schools PPP (Public Private Partnerships) Project to almost 100%. It involves the design, construction and maintenance of six new primary schools and one new high school in the Sunshine Coast, Western Corridor, the Gold Coast and Redlands regions.

The investment predominantly meets:

SDG04

United Nations Sustainable Development Goal 3
Quality Education

 
Private equity and alternative investments earning solid returns over 3 and 5 years

Performance to 30 September 2020

 1 Year2 Years3 Years5 Years
Private Equity -3.31% 1.73% 7.49% 9.53%
Opportunistic Alternatives 1.15% 2.85% 4.36% 5.72%
Defensive Alternatives 1.87% 6.60% 7.33% 10.92%

Source: JP Morgan Custody Report

goals

United Nations Sustainable Development Goals (UNSDG’s) are a set of 17 aspirational goals developed by the United Nations to end poverty, protect the planet and ensure all people enjoy peace and prosperity.  The goals tackle areas including climate change, economic inequality, innovation and sustainable consumption.  LGS’ portfolio investments directly meet these goals and contribute to our impact footprint.

The information on this website is of a general nature only and does not take into account your personal objectives, situation or needs. You should consider obtaining professional financial, taxation and or legal advice tailored to your personal circumstances prior to making any financial decision.