Our Sustainable Balanced option

You can choose to invest all or part of your super into our Sustainable Balanced option (SBO). Similar to our other pre-mixed investment options, the SBO invests across a variety of asset classes and integrates financially material environmental, social and governance (ESG) factors into the investment decision-making process in line with our Responsible Investing approach¹. It maintains a similar strategic asset allocation to growth and defensive assets as the Balanced option.

In addition, the SBO’s main point of difference (compared with our other pre-mixed options) is that its Australian and overseas listed shares asset classes have a more explicit focus on environmental and social matters. This is targeted through applying negative screening criteria (to aim to exclude investments in certain listed companies, where their involvement in, or revenue from, certain business activities meets specific thresholds for exclusion) and our external investment managers considering positive environmental and social themes when selecting certain investments, as described below.

Each external investment manager within the Australian and overseas listed shares asset classes applies its unique strategies and expertise when choosing listed shares for its portfolio within the SBO. External investment managers integrate ESG factors into their investment decision-making using their own processes and objectives – ultimately supporting CareSuper’s approach to responsible investing.

Approach to investments in pooled funds

When the SBO invests with an external investment manager within the Australian and overseas listed shares asset classes through a separate mandate, we ensure the relevant agreement articulates the investment exclusions that the manager is required to apply, based on our negative screening criteria. However, when the SBO invests in a pooled fund managed by an external investment manager, there is no separate mandate through which we can require that manager to exclude certain investments based on our negative screening criteria. When the SBO invests in a pooled fund, we advise the external investment manager of our negative screening criteria.

In the event that an external investment manager of a pooled fund invests in a listed company and that investment does not meet our negative screening criteria, we require the external investment manager to inform us of the purchase and provide an explanation for it. CareSuper will then decide whether or not to divest the holding in the pooled fund, based on what we consider to be in members’ best financial interests.

Approach to derivatives

CareSuper may invest in derivatives (such as futures and swaps) where we believe that the use of derivatives is in members' best financial interests. Derivatives are financial contracts, set between two or more parties, that derive their value from an underlying asset (which may include company shares). CareSuper does not apply negative screens to derivatives.

Listed share negative screening criteria

Within its Australian and overseas listed shares asset classes, the SBO aims, through the application of negative screening criteria, to exclude investments in certain listed companies where their involvement in, or revenue from, certain business activities meets specific thresholds for exclusion. However, for clarity, investments are permitted in companies whose involvement in or revenue from these business activities does not meet the relevant threshold for exclusion. Additionally, CareSuper's negative screening criteria are not applied to investments in a pooled fund or to derivatives, as described above.

The CareSuper investment team creates a list of companies that meet the threshold for exclusion under our negative screening criteria ("excluded companies list"), and updates it every six months, as described in the explanatory notes below. Following these updates, we inform our external investment managers within the Australian and overseas listed shares asset classes which listed shares are required to be excluded from new and existing investments in listed companies. The SBO’s listed shares investments are periodically monitored by our custodian to seek to ensure holdings in companies meet our negative screening criteria. As noted above, CareSuper's negative screening criteria are not applied to investments in a pooled fund or to derivatives.

However, circumstances may arise from time to time which result in a holding in a company not meeting our negative screening criteria (for example, if a company’s business activities change over time, in between the six-monthly points of time at which our excluded companies list is updated, or due to data accessibility or accuracy issues or external service provider errors as described in the explanatory notes below). We require all of the SBO’s external investment managers within the Australian and overseas listed shares asset classes to notify us if they become aware that their portfolio holds investments in listed companies that do not meet our negative screening criteria, based on our excluded companies list. If this occurs, we require our external investment managers to divest the relevant listed shares from the SBO as soon as practicable after the identifying the issue (typically within three weeks, considering liquidity constraints).

What makes the SBO different from other options?

Reminder – the SBO applies negative screening criteria only to the Australian and overseas listed shares asset classes. This means we cannot rule out any indirect exposure to restricted business activities through investments in a pooled fund or derivatives, or exposure in other asset classes, such as unlisted asset classes.

LISTED SHARES NEGATIVE SCREENING CRITERIA

Through the application of these negative screening criteria, we aim to exclude from the SBO investments in certain listed companies, where their involvement in, or revenue from, certain business activities (called 'restricted activities' in the table below) meets the stated thresholds for exclusion. Please read the important explanatory notes below to aid your understanding of our negative screening criteria and how they are applied.

FOR INVESTMENTS IN OVERSEAS AND AUSTRALIAN LISTED SHARES (EXCLUDING POOLED FUNDS), THE FOLLOWING NEGATIVE SCREENING CRITERIA^1,2,4 APPLY

Restricted activity	Description	Threshold for exclusion³
Tobacco manufacture	Companies classified in the Global Industry Classification Standard (GICS) as belonging to the sub-industry “Tobacco”, which it defines as manufacturers of cigarettes and other tobacco products.	Companies classified in GICS as belonging to the sub-industry “Tobacco”, which it defines as manufacturers of cigarettes and other tobacco products.
Civilian firearms manufacture	Companies that manufacture firearms and small arms ammunitions for civilian markets.	Companies involved in the stated activities, based on the most recent year of financial reporting from MSCI ESG Research.
Controversial weapons (sales and production)	Companies directly involved in manufacturing or selling cluster munitions, landmines, biological/chemical weapons, depleted uranium weapons, blinding laser weapons, incendiary weapons, and/or non-detectable fragments. Companies directly involved in the production of nuclear weapons or services provided for such products.
Child Labour	Companies MSCI flags as having been the subject of alleged child labour controversies within their direct operations or supply chains in the past three years.⁵ Further information on MSCI’s process for identifying controversies is available in their methodology document.	Companies which are the subject of the stated allegations within the past three years, as identified by MSCI ESG Research.
Thermal coal production	Companies generating revenue directly from thermal coal mining (including lignite, bituminous, anthracite, and steam coal) and its sale to external parties. This screen does not flag revenue from metallurgical coal; coal mined for internal power generation (e.g. in the case of vertically integrated power producers); intra-company sales of mined thermal coal; and revenue from coal trading.	Greater than 10% revenue (reported or maximum estimated)⁶ in the most recent year of financial reporting from MSCI ESG Research.
Oil and gas – extraction, production, refining, distribution/retail, pipelines and transport, trading	Companies that generate combined revenue directly from: • Extraction and production • Refining • Distribution/retail • Pipelines and transport • Trading of conventional and unconventional oil and gas.
Power production from thermal coal, oil and gas	Companies that generate revenue from thermal coal, liquid fuel and natural gas-based power generation.
Power production from nuclear sources	Companies that generate revenue directly from nuclear-based power generation.	Greater than 30% revenue (reported or maximum estimated)⁶ in most recent year of financial reporting from MSCI ESG Research.
Palm oil – less than 80% RSPO-certified land	Companies that produce palm oil that have less than 80% of their land certified by Roundtable on Sustainable Palm Oil (RSPO).	Companies that meet the stated description in the most recent year of financial reporting from MSCI ESG Research.

FOR INVESTMENTS IN AUSTRALIAN-LISTED SHARES ONLY, THE FOLLOWING ADDITIONAL NEGATIVE SCREENING CRITERIA^1,2,4 APPLY

Restricted activity	Description	Threshold for exclusion³
Intensive animal farming²	Australian companies that directly produce products using methods involving intensive animal farming operations.	Greater than 10% revenue (reported or maximum estimated) in the most recent year of financial reporting as assessed by our external investment managers.
Animal testing (cosmetic)	Australian companies that directly produce cosmetic products that are tested on animals.
Live animal exports	Australian companies that directly engage in live animal export operations.
Gaming	Australian companies that operate gambling facilities such as casinos, racetracks, or other betting establishments.	Greater than 10% revenue (reported or maximum estimated)⁶ in the most recent year of financial reporting from MSCI ESG Research.
Pornography	Australian companies that produce adult entertainment materials.

Explanatory notes for the negative screening criteria set out in the tables above:

The list of negative screening criteria is subject to change. We will update our website to reflect any changes made. In the event of a materially adverse change, we will notify members in accordance with our disclosure obligations.
Implementation of negative screening criteria may be impacted by data accessibility or accuracy issues or external service provider errors, potentially resulting in inadvertent holdings in excluded investments.
We use ESG data from the MSCI Business Involvement Screening Research (“MSCI ESG Research”), using MSCI’s definitions, to identify excluded companies for all restricted activities, except for tobacco manufacture (which uses GICS' classification system to identify companies belonging to the sub-industry "Tobacco" (defined as manufacturers of cigarettes and other tobacco products)), and intensive animal farming, animal testing (cosmetic) and live animal exports (where excluded companies are identified by our external investment managers). The “most recent year of financial reporting from MSCI ESG Research” refers to the most recent year of financial reporting as recorded in MSCI ESG Research. Our list of companies that meet the thresholds for exclusion under our negative screening criteria is updated by the CareSuper investment team every six months, using data sourced from MSCI ESG Research, GICS (for the tobacco manufacture restricted activity) or, in the case of the intensive animal farming, animal testing (cosmetic) and live animal exports restricted activities, using information provided by our external investment managers.
Exclusions are implemented by our external investment managers and monitored by our custodian and the CareSuper investment team by comparing holdings against CareSuper’s current excluded companies list that is updated every six months.
When MSCI flags a company as ‘having been the subject of alleged child labour controversies’ it then monitors the extent to which the allegation has been addressed and/or resolved. The assessment of the controversy case status is based on the remedial action taken by involved entities, as reported in public sources. Concluded cases (for example, those resolved by through legal processes) are eventually assessed as ‘archived’ and removed from companies’ assessment and profiles. For further information on MSCI’s process, please see their MSCI ESG Controversies and Global Norms Methodology.
MSCI ESG Research’s revenue information is based on the most recently reported company data and is provided by MSCI for companies identified as being involved in the activities covered by the relevant business involvement screen. MSCI may use one of several approaches to determine revenue calculations, depending on the availability of information. Full details on MSCI’s approach to calculating revenue are available in MSCI’s Business Involvement Screening Research Methodology.

LISTED SHARES POSITIVE ENVIRONMENTAL AND SOCIAL THEMES

Our external investment managers for the SBO’s Australian and overseas listed shares asset classes consider positive environmental and social themes when selecting certain investments.

The external investment managers use their own methods (rather than taking the same approach) to review listed companies across a range of business activities. While the external investment managers’ processes and applications differ, examples of their methods to consider positive environmental themes in the investment selection process include:

Identification of qualitative positive environmental and social themes
External investment managers define positive environmental and social themes in their own way, using their own processes and ESG expertise. Using these definitions, external investment managers may then seek to identify companies that in their view can contribute to positive environmental and social themes. For example, when seeking to identify companies that can contribute to these positive themes, external investment managers may consider:
• business activities which actively address certain social and/or environmental themes, such as improvements in education, greenhouse gas emissions reduction, or healthcare; or
• companies which generate a certain proportion of revenue from products and/or services in areas such as renewable energy, efficient irrigation, or the circular economy.
Positive screening using ESG scores
An ‘ESG score’ is a measurement or evaluation of a company’s performance with respect to one or many ESG issues (such as energy and water efficiency, Board diversity, or employee health and safety metrics). These may be created by expert service providers or by external investment managers using an in-house framework.
If using ESG scores as a positive screening tool to consider positive environmental and social themes when selecting certain investments, our external investment managers may employ one or more of the following approaches:
• Select listed companies such that the external investment manager’s portfolio’s overall ESG score (that is, the weighted combination of ESG scores of all shares held) is higher than the ESG score of the market benchmark relevant to their investment strategy.
• Choose listed companies with an individual ESG score greater than the relevant benchmark’s average ESG score.
Measuring contribution to Sustainable Development Goals (SDGs)
The United Nations Sustainable Development Goals (SDGs) is a set of 17 goals aimed at addressing global challenges across a range of ESG-related matters. For more information on the SDGs, go to United Nation’s Sustainable Development Goals.
If using contribution to SDGs as a way to consider positive environmental or social themes when selecting certain investments, our external investment managers may employ one or more of the following approaches:
• Use information from a third party research provider to analyse the portfolio’s aggregate contribution to some or all of the SDGs.
• Use their own proprietary research to determine how much they consider an individual company contributes to some or all of the SDGs.
• Select companies that they assess to have a net positive alignment with one or more of the SDGs.
• Construct a portfolio that they assess to have a net positive alignment with one or more of the SDGs.

While managers may aim to identify certain investments they consider to be aligned with or contribute to positive environmental and social themes, this does not mean that every company held, and all components of a company’s underlying business activities, will be assessed for, or contribute towards, positive environmental and social themes. For example, an individual company could be considered by the investment manager to have a combination of favourable and less-favourable ESG attributes, but be assessed overall to align with or have a positive contribution from an ESG perspective to the manager’s objectives.

In order to construct a portfolio in members’ best financial interests, some external investment managers may choose to hold companies that they consider do not contribute individually to positive environmental and social themes, but do help to create a balanced portfolio which they assess as meeting their overall ESG goals. The extent to which positive environmental and social themes are incorporated into the external investment managers’ investment decisions can vary between each external investment manager, within the context of aiming to achieve their financial performance objectives.

In helping us to monitor how our external investment managers have considered positive environmental and social themes when selecting certain investments in listed companies for their portfolios, we periodically discuss with them and review portfolio information that may include manager reporting of the overall portfolio’s ESG characteristics. For more information on how we monitor our external investment managers, please refer to our Responsible Investing page.

With the oversight of our internal ESG team, we aim to ensure that the SBO’s investment portfolio aligns with our approach to responsible investing and achieves its financial performance objectives for our members.

Investment features of the Sustainable Balanced option

Explore the return objective, risk level and asset mix for our Sustainable Balanced option.

Find out more

CHOOSING THE RIGHT INVESTMENT OPTION FOR YOU

It’s important to make sure the Sustainable Balanced option is right for you before investing in this option. Consider the following questions first.

Do you want negative screening criteria to be applied by external investment managers for the Australian and overseas listed shares asset classes, and for the portfolio to have a more explicit focus on positive environmental and social themes compared with our other pre-mixed options?
The Sustainable Balanced option uses negative screening criteria to aim to exclude investments in certain listed companies from the portfolio (where their involvement in, or revenue from, certain business activities meets specific thresholds for exclusion). The negative screening criteria are not applied to investments in pooled funds or to derivatives. Are you comfortable that it may behave differently to the broader market at times?
Have you read all the relevant information about the SBO in the Product Disclosure Statements, including the option’s costs, risks and potential returns? Are you happy what you’ve learned suits your investing and personal goals?

If you’re still weighing up your choice, why not ask us for help? Access to financial advice on investment choice is part of your membership. Find out more.

Invest for a brighter future today

Already a member? To switch part or all of your super into the Sustainable Balanced option, log in to your MemberOnline account.

Switch now

Joining CareSuper

You can become a member in just a few minutes. Once you’re set up, choose your investment options in MemberOnline.

Join now