Environmental, Social and Governance (ESG)

VFMC seeks to integrate ESG considerations across our investment activities, encompassing four key areas of work:

• Active ownership – VFMC actively monitors and engages with investee companies and external fund managers across all asset classes. This enables VFMC to promote positive change in ESG practices across its portfolio and in real-world outcomes;
• ESG integration – VFMC systematically integrates financially material ESG factors into VFMC’s ‘whole of portfolio’ approach to investing across and within all asset classes. This includes managing ESG related investment risks and opportunities, integrating investment governance processes and delivering decision-useful data and insights;
• Major ESG projects – VFMC undertakes ESG-related projects to support and enhance our investment stewardship activities. This includes ongoing improvements to systems and capabilities, as well as thematic areas such as modern slavery and climate risk management; and
• Collaboration and information sharing– VFMC collaborates with other investors to foster best practices across the market and address shared systemic risks more effectively. This includes sharing information with our clients, peers, and key industry groups to strengthen market practice as a whole.

The policies below provide further detail on the key aspects of our Investment Stewardship program. Additional policies, frameworks and reports are also made available to VFMC clients.

• VFMC Investment Stewardship Policy;
• Proxy Voting Policy; and
• Modern Slavery Policy.

These policies are available on the Policies & Documentation page.

Active ownership enables VFMC to safeguard shareholder value in investee companies, funds and assets – including a strong focus on corporate governance, risk management, and broader ESG practices. VFMC’s active ownership activities focus on:

• Proactively engaging with investee companies and funds on a range of ESG related risks, opportunities and priorities; and
• Exercising voting rights at listed company Annual and Extraordinary General Meetings.

As a shareholder in listed companies, our voting rights are a key tool used to exercise ownership rights. Key voting matters include:

• Electing company directors, who represent the interests and priorities of shareholders;
• Executive remuneration, calibrated to key performance indicators and shareholder objectives;
• Shareholder resolutions, covering thematics such as climate risk management and human rights obligations; and
• Various other matters, including capital management, audit and financials.

A Proxy Voting Report is published annually and made available to VFMC clients.

VFMC manages ESG risks primarily through its active ownership approach – including proxy voting and engagement – and therefore, generally avoids exclusions. However, in certain circumstances, after comprehensive assessment of the economic, legal and fiduciary requirements, and risk and return issues associated with the investment, VFMC may decide to apply an investment exclusion.

VFMC has exclusions in place for tobacco manufacturers, cluster munitions producers, and thermal coal mining and power generation, as detailed in the VFMC Investment Stewardship Policy.

To maintain an effective investment stewardship approach, VFMC regularly shares knowledge and collaborates with industry peers. We also work with investment managers, investee companies and other institutional investors on issues we believe mitigate risks, support long-term value creation, and advance positive environmental, social and governance outcomes.

Examples of VFMC’s industry collaborations include:

• UN-supported Principles for Responsible Investment: VFMC has been a signatory since June 2007;
• Australian Council of Superannuation Investors: VFMC is a member and holds roles in the Member Council and various working groups; and
• Investor Group on Climate Change (IGCC): VFMC is a member, collaborating with Australian and New Zealand institutional investors focused on the impact of climate change on investments.

VFMC believes the impacts and effects of climate change pose financially material physical and transition risk to investment markets. This holds widespread implications to business and asset operations and to the wider economy, including human wellbeing, ecological health and societal resilience.

VFMC maintains the following commitments:

• Research and monitor financially material physical and transition climate risks across assets, companies, and whole-of-portfolio context;
• Target net zero portfolio greenhouse gas emissions across addressable asset classes by 2050, consistent with The Paris Agreement to limit global warming to well below 2°C above pre-industrial levels;
• Undertake engagement with investee companies and funds on their decarbonisation efforts and transition pathways; and
• Support opportunities in climate‑positive investments that have the potential to deliver strong financial returns and support the global transition towards net‑zero emissions.

The VFMC Climate Action Plan sets out the applicable asset classes, emissions scopes and methodological approach that underpin our pathway towards net zero portfolio emissions. This is reviewed regularly and made available to VFMC clients, alongside our annual TCFD‑aligned portfolio reporting.