With JANA, the University has explored which metrics will be most relevant going forward. For this analysis, JANA (with their data provider Sustainalytics) estimated the University’s emissions from investments using the ‘Enterprise Value Including Cash’ (EVIC)* method, which measures the University’s share of a company’s emissions proportional to the University’s investment in the company’s total value. This method aligns with the guidance from the Paris Aligned Net Zero Investment Framework and the Task Force on Climate- related Financial Disclosures (TCFD), enabling us to assess the implications of investment decisions over time.

This 2022 data sets a baseline, enabling us to better understand the carbon impact of the University’s Investment Portfolio. Overall, the analysis shows that total combined carbon emissions from investments are below the total benchmark. Australian Equities have higher carbon emissions and carbon intensity than the Australian Equities benchmark (ASX 300 Index) due to the selection choices of underlying fund managers to preference the Australian Materials, Industrials and Energy sectors at this time. International Equities have lower carbon emissions and carbon intensity than the International Equities benchmark (MSCI ACWI Index) due to the selection choices of underlying fund managers to hold less of the International Energy sector at this time.

Carbon emission levels are important for understanding the scale of the problem and prioritising actions to reduce emissions over time. However used in isolation, they are a blunt tool that does not take into account whether the underlying business have committed to getting to zero emissions and reduce emissions in line with feasible sector decarbonisation pathways. The data can also be volatile so focus should be on the overall trend rather than any one year’s data.

JANA has assessed the University’s underlying fund managers on their ability to incorporate ESG considerations into their investment analysis, and in turn each manager is held to account to consistently meet a high standard and continuously improve on their processes. In addition, JANA is currently undertaking a research project to assess the net zero credentials of underlying fund managers, and their action towards supporting the economy wide transition to net zero emissions. The combination of these data points will allow us to determine where the University should focus engagement efforts and actions to support the Sustainability Plan goals in 2023 and beyond.

Reporting from JANA shows that the University’s equity investments are distributed across a wide range of sectors. Some of these sectors are traditionally relatively low carbon emissions, for example the financials, health care and IT sectors. Others, such as the materials, energy and utilities sectors, are more carbon intensive.

*Note: Emissions from investments are measured using ‘Enterprise Value Including Cash’ (EVIC) allowing measurement of an investor’s share of emissions proportional to its exposure to the investee’s total value. EVIC is defined as the sum of the market capitalisation of ordinary shares at fiscal year end, the market capitalisation of preferred shares at fiscal year-end, and the book values of total debt and minorities’ interests. No deductions of cash or cash equivalents are made to avoid the possibility of negative enterprise values.

The Sustainable Investment Framework (SIF), developed in 2017, outlines key criteria for integrating global climate change risk into the University’s investment decision making. During 2022, the focus was on the successful transition of the University’s investments to JANA. In 2023, the University will review and update the SIF to ensure alignment with the Sustainability Plan 2030.

The SIF outlines the University’s commitment to responsible investment stewardship and active ownership, which extends to appointed investment managers. In 2022, relevant active ownership activities undertaken by JANA included:

• Assigning Environmental Social and Governance (ESG) assessment ratings to all invested and active strategies in each asset class.

• Examining how each of the investment managers to which they have outsourced their investment activities is demonstrating active ownership. These underlying fund managers undertake activities including proxy analysis, use of proxy voting research services and direct engagement with companies to ensure that they demonstrate best practice.

• Developing a net zero assessment framework to determine the credentials of all active fund manager strategies in each asset class, and their action towards supporting the economy wide transition to net zero emissions. This is a key facet that will support us in the active ownership of our carbon exposures. Formalising their in-house Proxy Voting Policy to vote on material* and contentious^ resolutions included in annual and extraordinary meetings for Australian listed companies.

• Questioning investment managers on how they factor Modern Slavery risk into their operations and investment processes.

• Membership of several groups, including United Nations Principles for Responsible Investment (UNPRI), Responsible Investment Association of Australasia (RIAA), Australian Sustainable Finance Institute (ASFI) and Investor Group on Climate Change (IGCC).

The University became a signatory to the Principles for Responsible Investment (PRI) in 2020 and reports its responsible investment activities annually to the PRI.

*Note: A material holding is where the holding is 5% or more in value of a single JANA Investment Trust.

^Note: A meeting may be considered contentious for various reasons, for example: the re-election of a director subject to recent scandal/media interest; or major shareholders publicly announcing protest votes.