In a recent Australian Financial Review article, journalists Fiona Buffini and Hannah Wootton explore how superannuation funds are increasingly scrutinizing the culture of their portfolio companies.
Aware Super, for example, has launched a new engagement strategy whereby it asks the leaders of its biggest holdings to complete surveys on their culture and possible conduct risks. This process flagged concerns at WiseTech, of which Aware owns 1.18 percent, before its founder stepped down amid reports of inappropriate relationships with employees.
"The team is looking to engage and understand the investigation, what the board is looking to do, their views on succession planning and what that really means, and unpacking the root causes," Aware CEO Deanne Stewart said of the fund's engagement with WiseTech.
Aware Super is not alone. AustralianSuper recently divested from MinRes after the mining company failed to reassure the fund of its long-term value after facing a tax avoidance scandal. Louise Davidson, CEO of the Australian Council of Superannuation Investors (ACSI), said that the governance of culture is critical for ensuring long-term value and returns. ASCI represents superannuation funds which manage $2.2 trillion in total assets.
In this Ground Breakers interview from the 2024 Compendium, Norges Bank Investment Management's Nicolai Tangen, CEO, and Carine Smith Ihenacho, Chief Governance and Compliance Officer, explain why understanding culture is an essential aspect of sound investment decision-making.
"There are some industries where culture is extremely important because you can’t see the risks from the outside, and banking is perhaps the most important one," Tangen says. "There is no way you, as an investor, can really understand what’s going on inside a bank. You saw that in the extreme with Silicon Valley Bank and Credit Suisse. In those situations, you need to understand corporate culture more than anything else." ▸ Read More
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