Download Investment Options and Risk

Investment Options
and Risk
Issued 1 March 2013
The information in this document forms part of the Product Disclosure
Statement for the Public Sector Superannuation accumulation plan (PSSap),
fifth edition, issued on 1 March 2013.
The decisions you make now about your super can
help you reach your retirement goals. Take the time
to understand your options, taking your personal
objectives, financial situation and needs into
account. For example, you should consider:
>> the amount of time your money will be invested
before you need it for retirement
>> the level of investment performance that you
are expecting
>> the level of risk and fluctuation in the value of
your investment that you can tolerate.
Assets that make up
the investment
We pool your super with that of other members in
a pooled super trust and invest it according to the
investment options you choose. If you do not choose
an investment option, we will invest your money in
our default option, Trustee Choice.
The corporate asset category comprises Australian
shares, international shares, private equity
(investment in a company not listed on the
stock exchange) and corporate credit investments.
These investments can earn a real return by
financing corporations through public and private
equity and debt markets.
In the PSSap, you can mix and match your options
in a number of different ways. You can invest in
one or more of our four pre-mixed investment
options—Conservative, Balanced, Trustee Choice,
and Aggressive.
Please note that the Balanced and Trustee Choice
options will be merged in the future. Members will be
provided with further details when that occurs.
You can also create your own portfolio using the four
options above and the following seven individual
asset class options—Cash, Government bonds,
Property, Australian shares, International shares,
International shares (unhedged) and Sustainable.
You can combine the two categories any way you
want. You can invest the contributions already made
to your PSSap super account in one or more options,
and then invest future contributions in a different
selection of available options. The choice is yours.
An asset class is a category of similar financial assets.
The following is a general description of asset classes
that make up the pre-mixed and individual asset
class options.
Corporate asset
Australian shares
Investing in Australian shares means you are investing
in companies listed on the Australian Securities
Exchange. The return on your share investments is
your part of the companies’ profits which is paid
to shareholders in the form of dividends, and any
capital gains or losses from share price fluctuations.
Australian companies are exposed to both local
and global market fluctuations and as the companies’
fortunes fluctuate, so will the value of any shares.
Share prices are affected by market forces and are
considered to be one of the more risky investments,
but over the longer term may offer relatively
higher returns.
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Any financial product advice in this document is general advice only and has been prepared without taking account of your personal objectives, financial situation or
needs. Before acting on any such general advice, you should consider the appropriateness of the advice, having regard to your own objectives, financial situation or needs.
You may wish to consult a licensed financial advisor.
Commonwealth Superannuation Corporation (CSC) ABN: 48 882 817 243 AFSL: 238069 RSEL: L0001397
Trustee of the Public Sector Superannuation accumulation plan (PSSap) ABN: 65 127 917 725 RSE: R1004601
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International shares
Cash
Investing in international shares is like investing
in Australian shares except that the companies are
selected from those listed on international stock
markets rather than the Australian stock market.
In addition to being exposed to global stock market
fluctuations, investment returns can also be
influenced by currency movements. Foreign currency
exposure is managed through hedging against
Australian dollars. The level of hedging is determined
by CSC and may vary from time to time.
The cash asset class invests in cash (deposits with a
bank), Australian-dollar-denominated money market
securities (such as bank bills and promissory notes)
that are issued or guaranteed by a government,
bank or corporate entity. These securities must have
a minimum credit rating of A1 (or its floating rate
equivalent) for short-term securities and a minimum
credit rating of A- for long-term securities. Standard
& Poor’s (or the equivalent from Moody’s or Fitch if
no Standard & Poor’s rating is available) determine
these ratings. Interest rate futures, swaps and
re-purchase agreements are also investible securities
in this sector.
Corporate Credit
Investing in corporate credit means your money
is lent to corporate organisations wishing to raise
capital. Generally in return, you receive a fixed rate
of interest, until the bond matures and the amount
invested is repayable. CSC invests in Australian and
international corporate credit. This is generally
considered a moderate risk investment as the
predominant exposure is to credit risk (that is the
risk that a borrower cannot or will not honour its
exisiting obligations) and interest rate risk.
Real asset
The real asset category comprises property and
infrastructure investments. These investments earn a
real return by financing the building, maintenance,
management and trading of real assets, accessed
through public and private equity and debt markets.
Property
Property includes investments in established
buildings and properties, for example shopping
centres, or buildings under construction. We also
invest money in trusts and property companies,
which means we pool your money together with
that of other investors, in order to have the scale
to purchase a share of very large properties.
The investment returns on property come from
rent and changes to property values over time.
Our property portfolio generally has lower returns
than Australian shares as its risk profile is
more moderate.
Infastructure
Infrastructure includes investments in essential
public works facilities and services in Australia and
overseas, for example, toll roads, airports, schools,
water systems and power supply. We also invest
money in trusts and infrastructure companies,
which means we pool your money together with
that of other investors, in order to have the scale to
purchase a share of very large infastructures.
Sovereign asset
The sovereign asset catergory comprises government
bonds and cash investments. These investments
earn a real return by financing sovereigns and banks,
through the holding of governement bonds and
Australian cash, respectively.
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Government bonds
Investing in government bonds basically means
your money is lent to governments wishing to raise
capital. Generally in return, you receive a fixed rate
of interest, until the bond matures and the amount
invested is repayable. CSC invests in both Australian
and international government bonds (such as
inflation-linked and nominal, government and semigovernment bonds issued by developed and emerging
markets). This is generally considered a moderate
risk investment as the predominant exposure
is to soveriegn credit risk (that is the risk that a
government cannot or will not honour its existing
obligations) and interest rate risk.
Alternative strategies
The alternative strategies category comprises
investments not included in the traditional asset
classes listed above. Examples include investments
in hedge funds and multi-asset diversified funds.
These investments can have differing levels of risk
depending on the actual strategy employed.
Sustainable
Sustainable option is the only option investing
in the sustainable asset class. Investing in the
sustainable asset class/option means you are
investing in companies that lead their industry peers
in terms of sustainable business practice (‘Australian
Sustainable Leaders’). The option seeks to capture the
performance of Australia’s Sustainable Leaders with
a well-diversified portfolio that has expected risk
and total return characteristics similar to the broader
Australian share market (as represented by the S&P/
ASX 200 Index). The portfolio holds securities
included in the Australian Sustainable Asset
Management (SAM) Sustainability Index (the AuSSI).
SAM selects approximately 70 stocks for inclusion in
the AuSSI from a universe of 200 of Australia’s largest
listed companies. Most of these companies have a
primary listing on the Australian Securities Exchange
(ASX). This universe may also include other selected
stocks that are well traded, with adequate liquidity
on the ASX and have a significant part of their
business operations in Australia.
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Pre-mixed
investment options
Target asset allocations
Investment
Our four pre-mixed investment options invest
in various asset classes, offering diversified options
with varying levels of risks. We monitor market
movements for you, rebalancing individual asset
classes within the allocations.
Corporate
assets
Australian and
international
shares, private
equity and
corporate credit
62%
Real assets
Private and
public property,
infastructure and
other real assets
15%
Sovereign
assets
Government
bonds and cash
9%
Alternative
strategies
Multi-asset
strategies
14%
Conservative (will be renamed
Income Focused)
Objective
To outperform the Consumer Price Index (CPI) by
2% per annum over the medium to long-term.
Risk profile and investor suitability
The conservative option is considered low to medium
risk (band three). It may be suitable for those who
prefer to take less risk and/or need to access their
super in the near future. The minimum suggested
timeframe for holding this option is five years.
Target asset allocations
Investment
Target
Target
Trustee Choice—
the default option
Your super will be invested in this option if you do
not choose an alternative investment option.
Objective
To outperform the Consumer Price Index (CPI) by
3.5% per annum over the medium- to long-term.
Australian and
international
shares, private
equity and
corporate credit
20%
Real assets
Private and
public property,
infastructure and
other real assets
25%
Sovereign
assets
Government
bonds and cash
45%
This option is considered medium- to high-risk
(band five). It may be suitable for those prepared to
take more risk in exchange for potentially higher
returns on their investment over the medium- to
long-term, and who are comfortable with
moderate- to high-levels of volatility and periods
of negative return. The minimum suggested
timeframe for holding this option is ten years.
Alternative
strategies
Multi-asset
strategies
10%
Target asset allocations
Corporate
assets
Risk profile and investor suitability
Balanced option
Investment
Corporate
assets
Australian and
international
shares, private
equity and
corporate credit
62%
Real assets
Private and
public property,
infastructure and
other real assets
15%
Sovereign
assets
Government
bonds and cash
9%
Alternative
strategies
Multi-asset
strategies
14%
Please note that the Balanced and Trustee Choice
options will be merged in the future. Members will
be provided with further details when that occurs.
Objective
To outperform the Consumer Price Index (CPI) by
3.5% per annum over the medium- to long-term.
Risk profile and investor suitability
This option is considered medium-to high-risk
(band five). It may be suitable for those prepared to
take more risk in exchange for potentially higher
returns on their investment over the medium-to
long-term, and who are comfortable with moderateto high- levels of volatility and periods of negative
return. The minimum suggested timeframe for
holding this option is ten years.
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Target
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Aggressive
Cash
Objective
Objective
To outperform the Consumer Price Index (CPI) by
4.5% per annum over the medium- to long-term.
Before the payment of tax, to match the return from
the UBS Australian Bank Bill Index.
Risk profile and investor suitability
Risk profile and investor suitability
This option is considered high risk (band six).
It may be suitable for those prepared to take more
risk in exchange for potentially higher returns on
their investment over the long-term, and who are
comfortable with higher levels of volatility and
periods of negative return. The minimum suggested
timeframe for holding this option is fifteen years.
This option is considered very low risk (band one).
It may be suitable for those who prefer to take less
risk and/or need to access their super in the near
future. The minimum suggested timeframe for
holding this option is one year.
Target asset allocations
Objective
Investment
Target
Australian and
international
shares, private
equity and
corporate credit
71%
Real assets
Private and
public property,
infastructure and
other real assets
17%
Sovereign
assets
Government
bonds and cash
2%
Alternative
strategies
Multi-asset
strategies
10%
Corporate
assets
Before the payment of tax, to at least match the
performance of the UBS Australian Government
Bond index.
Risk profile and investor suitability
Asset allocation and risk
Investments in each asset class can vary within a
target asset allocation range. For further information
see Pre-mixed options target asset allocation
on page 7.
Investment options are described using risk bands
and labels based on the estimated number of
negative returns over a 20-year period. For further
information see Risk band and label on page 6.
Individual
investment options
You can create your own portfolio using individual
asset class options, invest in one asset class option or
combine the individual and pre-mixed options—the
choice is yours. You should note that when creating
your own portfolio, market movements may take
your individual asset class proportions away from
the point at which you started. If this happens, your
fees and risk level may change and you will need to
decide if you want to rebalance them.
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Government bonds
This option is considered medium-risk (band four).
It may be suitable for those who are comfortable with
moderate- levels of volatility and periods of negative
return, and/or need to access their super in the near
future. The minimum suggested timeframe
for holding this option is five years.
Property
Objective
Before the payment of tax, to outperform the
Consumer Price Index (CPI) by 5% per annum over
the medium to long-term.
Risk profile and investor suitability
This option is considered medium-risk (band four).
It may be suitable for those who are comfortable with
moderate-levels of volatility and periods of negative
return. The minimum suggested timeframe for
holding this option is seven years.
Australian shares
Objective
Before the payment of tax, to at least match the
performance of the ASX 300 Accumulation Index.
Risk profile and investor suitability
This option is considered very high risk (band
seven). It may be suitable for those prepared to
take higher risk in exchange for potentially higher
returns on their investment over the long-term, and
are comfortable with high levels of volatility and
periods of negative returns. The minimum suggested
timeframe for holding this option is fifteen years.
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International shares
Objective
Before the payment of tax, to at least match the
return of the MSCI All Country World (excluding
Australia) Index with net dividends reinvested and a
currency hedging ratio determined by the Trustee.
risk in exchange for potentially higher returnson
their investment over the long-term, and who are
comfortable with high levels of volatility and periods
of negative returns. As investments are not hedged
to the Australian dollar, this option is fully exposed
to foreign exchange movement. The minimum
suggested timeframe for holding this option is
fifteen years.
Risk profile and investor suitability
This option is considered very high risk (band seven).
It may be suitable for those prepared to
Sustainable
take higher risk in exchange for potentially higher
return on their investment over the long-term, and
are comfortable with high levels of volatility and
periods of negative returns. This option will usually
be less exposed to currency fluctuations than the
International shares (unhedged) option, although
a portion of your investment will still be subject to
currency risk. The minimum suggested timeframe
for holding this option is fifteen years.
Objective
International shares (unhedged)
Objective
Before the payment of tax, to at least match the
return of the MSCI All Country World (excluding
Australia) Index with net dividends reinvested.
Risk profile and investor suitability
This option is considered very high risk (band seven).
It may be suitable for those prepared to take higher
The Sustainable option is passively managed
and represents a well-diversified portfolio that
has expected risk and total return characteristics
similar to the broader Australian share market
(as represented by the S&P/ASX 200 Index).*
Risk profile and investor suitability
This option is considered very high risk (band
seven). It may be suitable for those prepared to
take higher risk in exchange for potentially higher
returns on their investment over the long-term, and
are comfortable with high levels of volatility and
periods of negative returns. The minimum suggested
timeframe for holding this option is fifteen years.
* You should be aware that CSC’s Sustainable option
returns may deviate from SSgA’s underlying returns
due to members investing in and out of the option
and CSC’s costs associated with administering
this option.
Significant risks
Super, like any investment, has risks. Significant risks include:
Risk
Description
Inflation
Inflation may exceed the return on investment.
Asset investment risk
Individual assets we buy can (and do) fall in value for many reasons, such as changes in the internal
operations or management of a fund or company we invest in, or in its business environment.
Market risk
Economic, technological, political or legal conditions, and even market sentiment, can (and do)
change, and this can affect the value of the investments in the fund.
Interest rate risk
Changes in interest rates can have a positive or negative impact directly or indirectly on investment
value or returns.
Currency risk
We invest in other countries and if their currencies change in value relative to the Australian dollar,
the value of the investment can change.
Derivatives risk
We may use derivatives to reduce risk or gain exposure to investment markets when we think it
appropriate. Risks associated with these derivatives include the value of the derivative failing to
move in line with the underlying asset, market or index, and counterparty risk—the risk that the
other party to the derivative contract cannot meet its obligations under the contract.
Fund risk
Risks particular to the fund include that it could cease operation, fraud against CSC could occur,
Board restructure and our investment professionals could change.
Insurance risk
Death, total and permanent disability (TPD) cover and income protection are obtained from a third
party. There are risks that your insurance cover will not meet your individual needs. You should
read the PSSap Product Disclosure Statement and the Insurance and your PSSap super booklet
available on our website to ensure that the insurance offered through PSSap is appropriate for you.
Super laws
Changes are frequently made to superannuation law and may affect your investment and
your ability to access it. For example, under the existing law, your super benefit may be split by
agreement or by court order with your spouse if you and your spouse permanently separate.
Changes to tax
Changes can occur to taxes on investments or super generally, which may affect the value of your
investment or benefit.
Liquidity risk
Assets that we invest in can become difficult to trade under certain market conditions.
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Risk management
Risk can be managed and even minimised, but
cannot be eliminated. No matter how skilled the
investment manager, or how strong performance has
been in the past, there is always a chance you could
receive less than you invested.
Ways we manage risk include:
>> diversification across asset classes, individual
assets, investment styles and investment managers
>> continuous research and analysis including
environmental, social and governance (ESG) analysis
>> understanding the inherent risks of any particular
type of investment
>> systematic compliance and fraud control
programs, and
>> continuous monitoring of market performance,
investment manager performance and
relevant legislation.
Our investment governance focuses on managing risk
and is driven by our primary investment objective which
is to maximise long-term real returns while minimising
short-term risks. Professional investment managers
(within agreed investment parameters) make day-to-day
investment decisions which are regularly reviewed.
We use a number of governance advisory services
to support our proxy votes in the Australian and
international companies in which we invest.
The extent to which labour
standards or environmental,
social or ethical considerations
into account
We actively monitor environmental, social and
corporate governance (ESG) practices and exposures
as part of investment risk management processes
in accordance with the ESG policy. We research,
engage and work collaboratively with a diverse group
of investment managers, advisors and shareholder
groups to influence companies to adopt good
ESG practices, bringing about change by working
collaboratively rather than by simple divestment.
We believe that poor management of ESG issues
can lead to financial risk as well as a decline in the
long-term value of investments. We also embrace
our proxy voting responsibilities, where possible,
voting on all matters brought to shareholders by the
companies in which we invest.
We are a signatory to the UN Principles for
Responsible Investment—a framework for global
best practice in responsible investment and includes
commitments to address ESG issues in the policies
and practices of investors. We are a member of the
Investor Group on Climate Change Australia/New
Zealand and an investor signatory to the Carbon
Disclosure Project. These collaborative industry
initiatives address the business and shareholder
value implications of climate change.
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We are also a founding investor in Regnan, which
provides governance research and engagement
services to CSC and its other institutional investors
and clients. Regnan focuses on a constructive
engagement process that aims to reduce portfolio
risk exposures, including those relating to
environmental risk.
We offer an investment option, called Sustainable,
which takes labour standards, environmental, social
or ethical considerations into account when buying,
holding or selling shares, refer to Taking labour
standards and environmental, social and ethical
considerations in the Sustainable option into
account on page 8.
Risk band and label
The risk band and label use a standard risk measure
based on industry guidance to allow members to
compare investment options that are expected to
deliver a similar number of negative annual returns
over any 20-year period.
The standard risk measure is not a complete assessment
of all forms of investment risk, for instance it does not
detail what the size of a negative return could be or the
potential for a positive return to be less than a member
may require to meet their objectives. Further, it does
not take into account the impact of administration fees
and tax on the likelihood of a negative return.
Members should still ensure they are comfortable
with the risks and potential losses associated with
their chosen investment option/s.
The table below demonstrates the estimated number
of negative annual returns over a 20-year period
applied to determine the risk band and label.
Risk Band
Risk Label
Estimated number
of negative annual
returns over a
20-year period
1
Very low
Less than 0.5
2
Low
0.5 to less than 1
3
Low to medium
1 to less than 2
4
Medium
2 to less than 3
5
Medium to high
3 to less than 4
6
High
4 to less than 6
7
Very high
6 or greater
For more information on the methodology applied
to calculate the standard risk measure, go to
www.pssap.gov.au.
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Pre-mixed options target
asset allocation
We monitor market movements for you, rebalancing
individual asset classes within the following target
asset allocations range.
Investment Conservative Balanced Trustee Aggressive
Choice
Corporate
assets
0-40%
Real assets
0-35%
5-25%
5-25%
0-50%
10-100%
5-65%
5-65%
0-35%
Alternative
strategies
0-70%
0-30%
0 -30%
0-70%
Foreign
currency
hedge ratio
0-100%
0-100% 0-100%
0-100%
Soverign
assets
30-75% 30-75%
20-95%
Target exposures to private assests (private equity,
private debt and real assets) are limited to around
25% of the fund, with a rebalancing range of ± 10%
around that target. Target asset allocation ranges
show, on average, the allocations the investment
option is expected to hold over the long-term. These
allocations can be changed, for example in periods of
extreme market conditions. This may affect the fees
you pay and notice may not be provided.
Keeping track of your investments
Once you have made your choice, you also need to
keep an eye on your investments, particularly if you
have created your own portfolio using individual
asset class options. Market movements may take
your individual asset class proportions away from
the point at which you started. As this happens,
your fees and risk level may change and you will
need to decide if you want to rebalance them.
We rebalance the individual asset class allocations
in the pre-mixed options regularly.
Switching between strategies
You can switch to a different investment strategy
any time:
>> login to your PSSap Member Online account,
or
>> send us an Investment choice form. This form
is available on our website or you can call us on
1300 725 171 for us to email or post you a copy.
It doesn’t cost you anything to make your first
investment choice, if you do so within 30 days of
joining the PSSap. You also have two free switches
each financial year and further switches cost $20 each.
If you decide to change your investment strategy
for future contributions, and you do not switch the
investment strategy for your existing super account,
then we consider this as a first choice and switch fees
will not apply.
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You will receive written confirmation when we have
processed your investment switch. We aim to process
your transaction within five business days after we
validate your request.
How the PSSap performs and
putting investment performance
into perspective
Performance information can be found at
www.pssap.gov.au. Super is a long-term investment
and past performance is no indication of future
performance—investment markets are volatile, and
it is not possible to predict when they will go up or
down or how quickly this will happen.
How your PSSap super is valued
We value your interest in the PSSap in units. We use
contributions made to the PSSap and other amounts
transferred in to buy units in the investment
option(s) you choose.
We keep a record of all units you hold. You can estimate
the balance of your super account on any business day
by multiplying the number of units you hold in each
investment option by the relevant ‘sell’ unit price. Unit
prices fluctuate in line with investment performance—
which may be either positive or negative. We generally
publish unit prices on our website each business day.
We generally deduct fees, expenses, management
costs and taxes before we calculate the unit price.
Where fees are payable directly from your PSSap
super account—for example, insurance premiums
and switching fees—units are sold to the extent
required for payment.
How we calculate unit prices
The unit price for an investment option reflects
the total value of assets in the investment option
(less fees not deducted directly from your PSSap
super account, expenses and taxes), divided by the
number of all units issued in the investment option.
The costs associated with the purchase or sale of
fund investments are reflected in the unit price for
the relevant investment option through a buy-sell
spread. For further information, refer to the Fees and
other costs booklet available at www.pssap.gov.au.
Generally we base our calculation of the value
of assets in each investment option on the latest
available market value at the end of each business
day. Using these values, we will generally calculate
the unit price for a given business day on the next
business day. For example, we will generally calculate
the unit price for 1 September (if a business day) and
make it available on 2 September (if a business day).
If we are unable to determine a unit price for a
business day on the following business day due to an
unforeseeable event, such as a trading suspension in
relevant markets, we will take all reasonable steps to
recommence unit pricing as soon as possible.
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Changes to options
You should note that we can add or remove an option
and change investment options. We will contact
you if you are invested in an option we are about to
cancel. If we are unable to contact you, or you do not
nominate a new investment option, we will switch
any funds you have in the investment option we are
closing to our default option, Trustee Choice.
Taking labour standards and
environmental, social and ethical
considerations in the Sustainable
option into account
The sustainable option invests in the SSgA Australian
SAM Sustainability Index Trust (ARSN 098 283 446),
for which State Street Global Advisors, Australia Services
Limited (ABN 16 108 671 441, AFSL 274900) is the
Responsible Entity. SSgA has consented to being named
in this document which forms part of the PDS and to
including information about the SSgA Australian SAM
Sustainability Index Trust in this document in the form
and context in which it is included. At the date of this
document, that consent has not been withdrawn.
The SSgA Australian SAM Sustainability Index
Trust invests in securities of companies that are
included in the Australian SAM Sustainability Index
(the AuSSI). The AuSSI is an index of companies
which SAM considers to lead their industry peers in
Australia in terms of sustainable business practice—
Australian Sustainable Leaders.
SAM is a Swiss-based company, established in 1995
and recognised as a global leader in the field of
sustainability research. SAM has consented to being
named in this document which forms part of the
PDS and to including the information about them in
this document in the form and context in which it is
included. At the date of this document, that consent
has not been withdrawn.
How the AuSSI works
SAM selects approximately 70 stocks for inclusion
in the AuSSI from a selection universe of 200 of
Australia’s largest listed companies, and 21 industry
clusters covering the Australian economy. Most
of these companies have a primary listing on the
Australian Securities Exchange (ASX). This selection
universe may also include other selected stocks
that are well traded, with adequate liquidity on the
ASX and have a significant part of their business
operations in Australia.
The process used by SAM to select companies for the
AuSSI is the Corporate Sustainability Assessment.
This is a proprietary methodology designed to score
companies in terms of corporate sustainability with
a special focus on ranking stocks within industry
sectors. SAM conducts continuing research of
economic, environmental and social developments
to define criteria and weightings to assess and rate
companies in terms of corporate sustainability.
SAM identifies corporate sustainability criteria
through the assessment of economic, environmental
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and social driving forces and trends. The criteria
include both general and industry specific criteria,
and cover the economic, environmental and
social/labour dimensions outlined below.
Economic
Economic criteria not only reflect the financial
robustness, strategic planning processes and
governance of a company, but also how a company
adapts to changing market demands, sustainability
trends and macro-economic driving forces.
These criteria measure a company’s ability to make
use of the economic benefits from sustainability
opportunities and risks.
Environmental
Environmental criteria cover the environmental
management and performance of a company.
These criteria measure a company’s efforts to reduce
and avoid environmental pollution.
Social/labour
Social criteria cover both internal (employee relations
and labour practices) and external (stakeholder and
community relations) aspects. Social criteria are
based on worldwide minimum standards and best
practices, and also take into account the manner
in which companies deal with human rights
issues internally, in their supply chain and in the
communities in which they operate.
SAM carries out the Corporate Sustainability
Assessment by asking the top 200 ASX listed
companies (excluding investment companies) by
market capitalisation to complete a questionnaire
relating to the AuSSI criteria, and provide supporting
documentation. Forty to 50 companies complete
the questionnaire each year.The remaining top 200
ASX listed companies that do not participate in the
questionnaire are assessed by SAM using publicly
available information and data. This assessment
is outsourced to an independent research firm,
Evalueserve based in India. The outsourcing however
involves comprehensive guidelines and supervision
provided by SAM.
Example of Corporate Sustainability
Assessment Weightings
Industry
specific
criteria
57%
General
criteria
43%
33%
33%
33%
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Measuring performance against defined criteria*
Economic Dimension
> Corporate Governance
> Code of Conduct, Compliance
> Risk & Crisis Management
> Customer Relationship Management
> Innovation Management
Environmental Dimension
> Environmental Management System
> Environmental Performance
> Climate Strategy
> Product Stewardship
>Biodiversity
Social Dimension
> Human Capital Development
> Talent Attraction & Retention
> Occupational health & Safety
> Stakeholder Engagement
> Social Reporting
* Only key criteria are indicated: other factors
may be taken into account. Dimensional weights
can substantially differentiate from 33% based on
aggregated criteria weights.
Investment by SSgA
SAM analysts assess companies in the universe in
terms of their sustainability performance. A defined
set of criteria and weightings is used to assess the
opportunities and risks deriving from economic,
environmental and social developments for the
eligible companies. Based on these assessments,
companies are ranked within their industry group
and selected for the Australian SAM Sustainability
Index, if they are among the sustainability leaders
in their field. A major source of information is the
SAM questionnaire which is completed by companies
participating in the annual review.
Further sources include company and third-party
documents. The final step of the assessment involves
media and stakeholder analysis. This involves SAM
analysts reviewing final assessments and scores to
determine if they are fair and accurate given more
recent developments and news.
Portfolio construction
SSgA uses securities in the AuSSI to create a portfolio
with characteristics (industry weights and asset
size distribution) similar to those of the broader
Australian equity market (as represented by the S&P/
ASX 200 Index). The fund will hold most, but not
necessarily all of the shares in the AuSSI.
SSgA uses securities in the AuSSI to create a portfolio
with characteristics (industry weight and asset
size distribution) similar to those of the broader
Australian equity market (as represented by the S&P/
ASX 200 Index). The sustainable option invests in
this fund. SSgA does not independently monitor
or review the securities in the SSgA Australia SAM
Sustainability Index Trust for compliance with the
social, environmental and labour criteria outlined
above, but relies on the inclusion by SAM of a
security in the AuSSI to indicate that SAM has made
this assessment. SAM updates the AuSSI on an annual
basis. If a company is removed from the AuSSI, SSgA
will consider on a case-by-case basis whether to
dispose of that security and the time for doing so.
Sustainable investment policy—
stock selection
The portfolio holds securities included in the
Australian SAM Sustainability Index (the AuSSI).
SAM selects approximately 70 stocks for inclusion in
the AuSSI from a universe of 200 of Australia’s largest
listed companies, and 21 industry clusters covering
the Australian economy. Most of these companies
have a primary listing on the Australian Securities
Exchange (ASX). This universe may also include
other selected stocks that are well traded, with
adequate liquidity on the ASX and have a significant
part of their business operations in Australia.
email
phone
fax
post
[email protected]
1300 725 171
1300 364 144
web
overseas callers
www.pssap.gov.au
+61 2 4298 6030
PSSap
Locked Bag 9300
Wollongong BC NSW 2500
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