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Eyre Peninsula. Tourism Australia, South Australian Tourism Commission.

Our SRI Option

Socially Responsible Investment option

The Socially Responsible Investment (SRI) option invests in line with socially responsible investment criteria established by Funds SA, which includes a focus on renewable energy and social infrastructure, restrictions on investments in areas of high negative social impact and a ‘best-in-class’ approach to target the best companies in each economic sector according to external ESG ratings. The SRI option is invested in a range of 57 – 87% growth assets such as listed equities, property, infrastructure, and private markets, with the balance in defensive assets such as cash and fixed interest.

Investment exclusions

The SR investment option seeks to avoid companies that have the potential to cause or contribute to social harm. It excludes certain industries or companies that engage in certain business activities from its universe of possible investments, making them uninvestable for this investment option.

Revenue and product involvement (i.e., manufacturing, supply, and distribution) thresholds apply in some cases so that companies with multiple business activities are not excluded for very low involvement. However, Funds SA maintains low revenue thresholds so these activities can generally be avoided.

Investment exclusions applied to the Australian and International Listed Equities portfolio only:

  • Tobacco
  • Gambling
  • Weapons and firearms
  • Adult Entertainment
  • Alcohol
  • Nuclear power
  • Genetically modified organisms
  • Aimal welfare
  • Fossil fuels

Targeting socially responsible investments

In addition to avoiding companies operating in areas of negative social impact, the SR investment option is focused on investments that contribute to solving large issues such as climate change, healthcare, education, and the provision of community and social infrastructure.

Whilst Funds SA has not adopted a formal scale for measuring the social contribution of these assets, it aligns investments with generally recognised socially responsible investing and environmental, social, and governance principles determined through its membership of industry bodies including the United Nations-supported Principles for Responsible Investment (UN PRI) and other sources.

  • Infrastructure investments within the SR investment option are focused on assets that support key community and social needs as well as renewable energy. This includes schools, TAFE, hospitals, correctional facilities, water treatment plants, and other social infrastructure sectors as well as wind and solar farms.
  • Private Equity investments within the SR investment option are focused on businesses that generate a clear and measurable positive social and/or environmental impact across one or more of the following key impact themes: climate action, inclusive growth, and healthcare. This includes businesses providing healthcare for elderly and low-income populations, digital learning solutions, environmental regeneration, and mobile banking solutions in developing countries.

Selecting investment managers

TThe SRI option takes a best-in-class ESG approach in the selection of its investment managers and its investments.

Funds SA identifies investment managers that have deep expertise in understanding ESG criteria and can demonstrate its application into investment decisions. Funds SA surveys the ESG practices of its Investment Managers when completing initial due diligence and every two years to ensure that ESG processes are being maintained, as well as incorporating ESG discussions into routine monitoring activities. 

The investment managers within this investment option include:

Asset ClassInvestment Manager
InfrastructureDexus
PropertyAMP
Australian EquitiesDWS International GmbH
International EquitiesDWS International GmbH
Private MarketsLGT Capital Partners
PropertyFunds SA - Property
InfrastructureEQT Partners
InfrastructureMorrison Global
InfrastructurePalisade Investment Partners
CreditAres Management
Fixed InterestFunds SA - Fixed Interest
CashFunds SA - Cash

Targeting socially responsible investments

Within the SRI Option, the best in-class ESG approach to portfolio construction means prioritising investment in companies that are considered to be at the top of their sector according to external ESG ratings. These include ratings provided by MSCI ESG Ratings LLC (who provides ESG ratings on a 7-point scale from ‘AAA’ (leader) to ‘CCC’ (laggard) (MSCI ESG Ratings)) or proprietary ratings provided by external investment managers (IM Ratings).

For the listed equities portfolio, companies with the highest ESG ratings (‘AAA’) are prioritised to fill target sector weights before considering those rated ‘AA’. Companies must have an MSCI ESG Rating of ‘A’ or above to be eligible for investment inclusion. For International Equities, companies already in the SRI Option portfolio that experience a downgrade below an ’A’ rating must maintain a minimum ESG rating of ‘BB’ to remain eligible in the portfolio. In the SRI Option’s ‘Sub-Investment Grade Credit’ portfolio, companies with an MSCI ESG Rating or IM Rating below ‘BB-‘ as well as those that do not hold an MSCI ESG Rating or IM Rating are excluded

The investment approach for the Socially Responsible Investment option and the way that the SRI Criteria is applied to each asset class in the SRI option can be found here

SRI Option Approach