Investing responsibly: our approach and our legal obligations

Updated 21 February 2025

This article looks at our approach to such issues of responsible investment within the context of our overall fiduciary duty to optimise returns on members’ funds. 

Our fiduciary responsibility

UniSaver is managed by a trustee company called UniSaver Limited. Managing the scheme is the company’s only role. The Board of UniSaver is made up of professional, member-elected and university-appointed directors. In discharging our duties, we are mindful that our primary legal responsibility is the stewardship of members’ funds in order to optimise long-term financial returns. This responsibility is set out in trust law, and the legal advice we have obtained confirms our duty to act always in members’ financial interests.

Responsible investment will mean different things to different people. For us, it means ensuring the prudent investment of members’ funds to help our membership achieve their financial goals. We consider environmental, social and governance (ESG) issues through the lens of this fiduciary duty.

How UniSaver funds are invested

With the exception of Cash, our investment options are diversified across a range of asset classes. We set the mix of assets in consultation with Russell Investments, our investment consultant and manager. The scheme’s assets are invested in funds operated by Russell Investments for each asset class (such as New Zealand fixed interest, Australasian equities and global listed property). Russell Investments selects the underlying securities in each of those funds.

Reducing the carbon intensity of our portfolio

The issue of climate change provides an example of how we view responsible investment through a financial lens. Climate change is a recognised issue and priority supported through legislation, policy settings and regulation. Internationally, the debate about reducing our reliance on fossil fuels is not so much the direction but the speed of travel. From an investment point of view, we need to navigate this transition in a way that supports the best financial outcomes for members. 

Some members want to see us divest from energy companies because “it’s the right thing to do”. We don’t have the latitude to exclude such companies on that basis. However, we do believe it makes financial sense to reduce the carbon intensity of our portfolio over time and to support the transition away from fossil fuels. In 2021, we took the decision to invest half the global shares portfolio in a fund with a particular emphasis on sustainability. This has reduced the carbon intensity of our portfolio substantially relative to benchmark portfolios (you can read more about this here). At the same time, we continue to invest in a broader universe of global shares, which provides benefits in terms of returns and diversification. In April 2025, we will introduce a new investment option called Growth (Lower Carbon) which targets further reductions in carbon exposure, an increase in exposure to renewable energy and the exclusion of companies with fossil fuel reserves or a significant involvement in fossil fuel activities. The new option will extend the range of choices available to members.

What other limits does the trustee place on what the portfolio invests in?

We set the broad framework that guides the decisions our investment manager makes on our behalf. These are set out in our statement of investment policy and objectives [PDF, 119 KB]. This document sets out the investment governance and management framework, philosophy, strategies and objective of the scheme in accordance with the Financial Markets Conduct Act 2013 and associated regulations. It includes the trustee’s responsible investment policy that, among other things, requires that our investment manager seeks to avoid investment in companies whose activities are materially contrary to the intent of New Zealand legislation. These activities include the production of tobacco products, cluster munitions, anti-personnel mines and nuclear explosive devices. 

Russell Investments has additional exclusions for its Sustainable Global Shares Fund in which we invest. These include securities involved in coal power generation, the mining of thermal coal, uranium mining and the manufacture and sale of assault weapons and small arms. Growth (Lower Carbon) will invest in the Russell Investments Sustainable Global Shares ex Fossil Fuels Fund which aims to reduce exposure to carbon emissions by 60%, and to achieve being ‘ex-fossil fuel’, by eliminating fossil fuel reserves exposure. In addition to the exclusions outlined here, we require our investment manager to incorporate ESG considerations into its investment process across the board.

The SIPO is necessarily a high-level document. It would be inappropriate for us to try to influence investment in or divestment from individual securities, countries or sectors (other than those covered by our specific exclusions outlined above). Investment management is outsourced to Russell Investments, a well-respected, global asset management company. UniSaver funds are invested in funds provided by Russell Investments, which is recognised as a Responsible Investment Leader by the Responsible Investment Association Australasia [external link].

How does Russell Investments assess ESG factors?

Russell Investments’ investment strategy is shaped by the following beliefs:

  • ESG factors impact security prices. These factors can vary by company, industry and region and their importance can vary through time.
  • A deep understanding of how ESG factors impact security prices is value-adding to a skilful investment process.
  • Embedding ESG considerations into a firm’s culture and processes improves the likelihood of prolonged and successful investing.
  • Active ownership of securities is an effective tool for improving investment outcomes.

The exclusion of securities from portfolios is one tool available to investment managers. However, divestment (exclusions) can introduce significant portfolio risk and research finds little correlation between divestment and share prices over the long term. Russell Investments believes that engagement has a greater likelihood of generating real-world change and increasing portfolio performance through improvements in ESG practices. Engagement is a central pillar of Russell Investments’ approach to active ownership, and as a significant shareholder, Russell Investments uses its influence and voting rights to improve governance practices. 

Russell Investments incorporates responsible investing into its investment manager evaluation process, portfolio management and advisory services. This process includes using the services of ESG and corporate governance research firm Sustainalytics, which rates the sustainability of listed companies based on their ESG performance and is used by 18 out of 20 of the world’s largest investment managers.

United Nations Global Compact Principles

In addition to abiding by international sanctions, Russell Investments utilises Sustainalytics to identify corporations that are aligned to the United Nations Global Compact (UNGC) principles. Sustainalytics’ Global Standards Screening is intended to capture severe, systemic and structural violations of international norms as enshrined by the UNGC principles. These principles aim to meet fundamental responsibilities in the areas of human rights, labour, environment and anti-corruption (read more here [external link]). 

Continued focus on responsible investment

We acknowledge that UniSaver’s portfolio at any time may include investments in organisations some members would prefer us not to hold. This is to be expected given a large and diverse membership. However, our investment consultant and manager does have robust processes in place to assess ESG metrics as part of its decision making, which includes alignment with UNGC principles and adherence to international sanctions. The trustee receives regular reporting on and takes an active interest in ESG measures as part of our oversight of the scheme. We will continue to ensure ESG considerations are integrated appropriately into investment management processes as part of discharging our fiduciary duty to members.