Future Fund takes big step for corporate governance

The A$58 billion ($46 billion) Australian Future Fund has made a number of corporate governance-related decisions, including bringing its proxy voting for domestic shares in-house and the creation of an environmental, social and governance risk management function.

Gordon Hagart has been appointed to lead the Fund’s approach to environmental, social and governance risk management, while Rebecca Farrell will develop and implement a proxy voting policy.

The Future Fund has to date left proxy voting up to its funds managers (except for its Telstra shares), after first ensuring each manager’s governance outlook aligned with its own. Farrell will help in-source the voting decisions on Australian holdings, but any decision on hiring an external proxy voting adviser for offshore holdings is some way down the track.

The Fund has about 10 per cent of its portfolio in Australian equities, while 15.5 per cent is in global developed markets, and 3 per cent is in global developing markets. It still has about 41 per cent in cash.

Hagart will focus on influencing Future Fund investee companies to appropriately manage their environmental, social and governance (ESG) risks to protect shareholder value. He will also work with the broader investment team to identify relevant investment opportunities, particularly on environmental grounds.

Hagart will start in October, reporting to general manager Paul Costello with a ‘dotted line’ to chief investment officer David Neal.

Hagart joins the Future Fund from consultancy onValues, a Switzerland-based firm that combines traditional investment analysis with knowledge of environmental, social and governance drivers.

His career history includes the role of programme manager with the United Nations Environment Programme Finance Initiative (UNEP FI), where his responsibilities included the United Nations Principles for Responsible Investment. The Future Fund is not yet a signatory.

Meanwhile, Rebecca Farrell’s efforts to develop and implement a proxy voting policy for the Future Fund commence immediately. Farrell was most recently a partner corporate governance with Clarendon Lawyers, was previously a senior associate with Freehills in its corporate governance advisory team and has also worked as a
transactional lawyer in Melbourne and New York.