A small Australian industry fund, First Super, has placed its A$143m (€88.3m) investment with global fund manager Orbis Investment Advisory “on watch” to enforce its ESG concerns.
Melbourne-based First Super is threatening to drop Orbis as its investment manager because of the firm’s holding in US-based freight and logistics company, XPO Logistics.
Orbis is the largest institutional shareholder in XPO, holding approximately 23% of outstanding shares.
First Super chief executive officer Bill Watson confirmed the fund is reconsidering its long-standing investment with Orbis. First Super has been an investor in the A$3.1 billion Orbis Global Equity Fund since July 2010.
Watson said: “The fund has concerns that it is exposed to significant legal, regulatory and reputational risks in North America and Europe due to allegations of labour law and occupational health and safety violations at XPO.”
First Super recently met with Orbis investment personnel to review its stewardship record regarding XPO.
“XPO’s underperformance can arguably be attributed to its poor governance and labour practices,” said Watson. “It is an interesting case study to illustrate the proposition that firms who lag on ESG imperatives can often constitute a poor investment over the long term.”
In a statement Watson said: “Today’s announcement is an example of First Super’s active approach to ESG issues across its investment portfolio.
“The fund’s focus on ensuring its members attain and maintain a dignified retirement can only be achieved by ensuring that asset managers deliver on their environmental, social and governance obligations.”
He added that the scheme is seeking ”better responsiveness from Orbis around our legitimate returns-based concerns about XPO”.
Watson said First Super had raised concerns about XPO’s governance and Orbis voting against a shareholder resolution that would have split the role of XPO chair from ceo, a widely deemed corporate governance best practice.
Orbis also voted against shareholder proposals calling for sustainability reporting and policies to strengthen prevention of workplace sexual harassment, according to the First Super statement.
First Super has more than 45,000 members in the timber, pulp and paper, furniture and joinery industries. Its assets are worth more than A$3.43bn and distinguishes itself from other super funds with lower-than-average fees and no commissions. It is consistently ranked in the top quartile of super fund performance.