2023 Sustainability Report
Responsible investments
Domain: Walking the talk in our operations
Aspiration to 2030: The University’s investment portfolio and strategies support our aspiration to be leaders for a sustainable future.
Progress against targets
| Target | Target status | Progress in 2023 |
|---|---|---|
| The University’s investment portfolio[1] will be included in our commitment to be climate positive by 2030. |  Not yet started |
|
| Enhanced transparent reporting of the University’s investment portfolio. |
In progress | In 2023, for the listed Australian Equities and International Equities components of the University’s Investment Portfolio, we are reporting on: The University is exploring ways to estimate the carbon emissions of the balance of the Investment Portfolio. |
The University’s Investment Portfolio for the most part is separate to our operational balance sheet and core activities. The investment model for financial assets is predominantly outsourced, consistent with our investment scale and focus on leadership and excellence in education, teaching, and research. The prudent and responsible investment of the University’s accumulated financial resources and funds donated to the University underpin the activities of the University to enable it to achieve its purpose.
The University’s Implemented Consultant, JANA, provides strategic investment advice to the University and implements most of the investment strategy on behalf of the University through external investment managers. The University’s strategic investment decisions are implemented by JANA primarily via investment in pooled investment trusts, hence the University does not make individual investment decisions on whether to buy or sell specific company holdings, nor undertake direct activity with respect to corporate actions.
The transition of the Investment Portfolio to JANA was completed at the end of 2022, with 2023 being the first full year of JANA as our Implemented Consultant. JANA has a long history of successfully providing investment consulting and investment management services in Australia and integrate sustainability considerations into investment decisions.
Responsible investment metrics
Summary
For 2023, the University is reporting on the same responsible investment metrics as were first reported in 2022. Reporting covers listed Australian Equities and International Equities for which reasonable data is available, yet noting that robust and consistent data remains an industry-wide challenge. This represents around half of the University’s longer-term investments. In addition, the University invests in other asset classes such as fixed interest, infrastructure, property, and private equity. Reporting on the carbon emissions of these asset classes will be included in future reports as methodologies and confidence in the underlying data improves.
The University highlights that drawing definitive conclusions from data today is difficult as methodologies are still evolving, and the underlying numbers are still highly variable. It may take several years to draw firm conclusions, however it is important to be actively involved in this journey and work with like-minded investors to advance practices.
Metrics
The metrics reported for 2023 align with 2022 reporting yet noting there are material data revisions experienced as methodologies and the company and data providers reporting evolves. JANA estimated (via external data providers) the University’s financed emissions using the ‘Enterprise Value Including Cash’ (EVIC)[4] 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 latest guidance from the Partnership for Carbon Accounting Financials (PCAF) and the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). It enables the University to actively monitor the financed carbon emissions of the Investment Portfolio and for JANA to use the information to actively engage investment managers on the emissions profile of their holdings.
We note there are a number of limitations with determining the financed emissions of investments, and with the EVIC method. These include movements in share prices impacting emissions attribution to equity and debt holders, data and methodology variability, and the adequacy of company disclosure. Additionally, emissions data is historical and therefore does not consider forward looking actions including net zero commitments and plans.
Key industry bodies, including those that the University and JANA are members of, are aware of these limitations and are continually working to review and enhance the methodologies in calculating financed carbon emissions.
Estimated carbon emissions and carbon intensity of the University’s listed Equity investments[5]
Equities investments as of 31 Dec 2023 | UoM financed carbon emissions | Benchmark financed carbon emissions | UoM Weighted Carbon intensity | Benchmark Weighted Carbon intensity |
|---|---|---|---|---|
Measurement units | tCO2-e | tCO2-e | tCO2-e / US$m invested | tCO2-e / US$m invested |
Australian Equities | 101,663 | 62,433 | 94 | 58 |
International Equities | 20,070 | 40,817 | 18 | 36 |
Total (Australian and International Equities) | 121,733 | 103,250 | 55 | 47 |
The University’s financed emissions have increased by 21% since 2022, with the financed carbon emissions of the listed Australian Equities asset class increasing by 24%. This increase is mainly due to a number of the investment managers establishing new positions or increasing their holdings in some higher emitting companies, predominantly to take advantage of the market dislocation in the prices of good quality companies. Our Implemented Consultant reviewed these new and increased positions from a net zero alignment perspective and were comfortable that the underlying investment managers had completed their responsible investment due diligence.
The University will continue to monitor the sustainability performance of our investments, such as reviewing the University’s carbon emissions annually to assess the actions of the underlying investment managers and individual investments. We recognise that a medium-to-longer-term overall trend is more meaningful than short term data, especially when considering forward-looking Paris-aligned commitments and source data variability.
Any trend analysis needs to be complemented with qualitative forward-looking analysis to provide a reasonable assessment. Our Implemented Consultant, JANA has developed a Net Zero Manager Assessment framework to evaluate investment managers’ net zero commitments and strategies, and the robustness of their actions towards net zero. The insights attained from these assessments inform JANA’s engagement and stewardship initiatives with the underlying investment managers, to elevate net zero ambition and implementation.
UoM Top 20 holdings by value as of 31 December 2023
| Stock Name | Sector | % of total listed equities (based on $ invested) |
|---|---|---|
BHP Group Limited | Materials | 4.6% |
CSL Limited | Health Care | 3.5% |
Microsoft Corporation | Information Technology | 2.4% |
Commonwealth Bank of Australia | Financials | 1.6% |
Australia and New Zealand Banking Group Limited | Financials | 1.6% |
National Australia Bank Limited | Financials | 1.3% |
Novo Nordisk A/S | Health Care | 1.3% |
Macquarie Group Limited | Financials | 1.3% |
Santos Limited | Energy | 1.2% |
Alphabet Inc. | Communication Services | 1.1% |
Visa Inc. Class A | Financials | 1.0% |
QBE Insurance Group Limited | Financials | 1.0% |
Seek Limited | Communication Services | 1.0% |
Thermo Fisher Scientific Inc. | Health Care | 1.0% |
Incitec Pivot Limited | Materials | 0.9% |
Goodman Group | Real Estate | 0.9% |
Linde plc | Materials | 0.9% |
ASML Holding NV | Information Technology | 0.9% |
Orica Limited | Materials | 0.8% |
Taiwan Semiconductor Manufacturing | Information Technology | 0.8% |
Top 20 | 29.0% | |
The top 20 holdings by size comprise 29.0% of the total listed equities asset classes (Australian and International Equities) and contribute 15.9% of UoM’s absolute financed emissions. There were eight new holdings in the top 20 holdings list for 2023.
Sector exposures and estimated carbon emissions
| Sector | % of total listed equities ($ invested) | Estimated UoM carbon exposure (tCO₂e) |
|---|---|---|
Financials | 19.3 | 261 |
Materials | 14.2 | 59,607 |
Health Care | 11.9 | 719 |
Information Technology | 10.6 | 1,485 |
Consumer Discretionary | 8.8 | 1,151 |
Industrials | 8.6 | 4,724 |
Consumer Staples | 5.9 | 2,443 |
Communication Services | 5.1 | 375 |
Energy | 4.5 | 13,822 |
Real Estate | 2.9 | 407 |
Utilities | 1.2 | 34,438 |
Reporting from JANA shows that the University’s holdings are distributed across a wide range of sectors, similar to 2022. 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. These are also sectors that are important to the energy transition and decarbonisation solutions.
Additional governance information
The University’s Sustainable Investment Framework (SIF) was reviewed in 2023, in consultation with JANA and other stakeholders. The Responsible Investment Guide (RIG) was then developed to replace the SIF from 2024. The new RIG will be released in the first half of 2024.
The University became a signatory to the Principles for Responsible Investment (PRI) in 2020 and reports its responsible investment activities regularly to the PRI.
Green bond
The University’s Green Bond, issued in 2022 under our Sustainability Financing Framework, was audited by DNV Business Assurance Pty Ltd for the period ending 31 December 2023. This review found that the University’s Green Bond instrument meets the criteria established in the Eligibility Assessment Protocol and is aligned with Green Bond Principles 2021.
FOOTNOTES
[1] This will include investments in the University’s Investment Portfolio for which the carbon footprint can reasonably measured or estimated.
[2] United Nations Principles for Responsible Investment (UNPRI)
[3] The Responsible Investment Guide (RIG) replaces the Sustainable Investment Framework (SIF) which was implemented under the previous Sustainability Plan 2017-2020
[4] Financed emissions 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.
[5] Notes:
- The emissions data is limited to what is reported by the underlying companies and what is estimated by JANA’s data providers (Sustainalytics and FactSet) and covers Scope 1 and Scope 2 emissions only.
- The benchmark for the listed Australian Equities asset class is the S&P/ASX 300 Index and the MSCI All Country World Index for the listed International Equities asset class. The benchmark financed emissions figures assume an investment equivalent $ amount in the index.
- Carbon emissions are in metric tonnes of CO2 equivalent (tCO2e).
Our sustainability strategy
At the University of Melbourne, our efforts in sustainability are guided by Sustainability Plan 2030 - a roadmap for sustainable delivery of our institutional strategy Advancing Melbourne.
Read more about how we are advancing sustainability at the University:
