2021 Annual Member Meeting questions and answers

1. For several years I have had my superannuation invested in cash because I am loath to contribute to investment in fossil fuels. Is GESB able to offer a portfolio for people like myself who want net zero emission and renewable investments truly supported by the science. Or should I put my funds elsewhere?
2. Will GESB introduce a new climate friendly-investment option that excludes fossil fuel investments? And if not, why not? It’s a matter of members having choices and a future.
3. Does GESB have aspirations to offer non-fossil fuel-based investments?
4. Has or will GESB plan for ethical investments as an option in the future as a choice as part of a My plan? Thank you
5. When do you advise your members about this past ESG screened option? When I enquired a few years ago, I was advised you only screened out tobacco companies. As a health professional, there are many other sectors I would prefer NOT to invest in including the fossil fuel companies and I would choose a negative and positive screened portfolio. This option exists in other superfunds and evidence shows their returns are as good as or better standard growth funds.

At GESB, we believe it’s important to consider and manage ESG risk, including climate-related risks, across all investments. That is, regardless of which option you choose, we integrate ESG into our investment process for all investment options. Our approach to ESG is captured in our ESG policy.

At the same time, we understand that as a member you may have individual preferences and have expressed a desire for an option that goes beyond how we might integrate ESG across our entire portfolio. We are committed to understanding what’s important to our members and a deeper dive into the feasibility of an investment option that provides a greater level of ESG-screening is scheduled for 2022.

1. Page 5 of the Annual Report: GESB is committed to transitioning its investment portfolio to net zero carbon emissions by 2050, which is consistent with the Paris Agreement. COP26 in Glasgow, requires countries to strengthen their 2030 climate targets in 2022, recognising global emissions must fall 45 per cent by 2030 to limit warming to 1.5°C. I request GESB adopts the COP26 agreement to strengthen 2030 targets, given the expert option of the IEA there should be no new oil and gas fields approved for development. Mr Sciarrone said GESB will be working towards 'net zero by 2050.' This target, which our Prime Minister took to Glasgow, was widely and rightly seen as virtually meaningless without rigorous short and intermediate-term targets. COP26 showed that this coming decade is critical if we are to avert a climatic tipping point, so 2030 targets are vital. Will GESB as a matter of urgency follow the lead of other super funds who have divested from coal, oil and gas companies?
2. The aim to transition to net-zero carbon emissions by 2050 does not reflect a level of ambition commensurate with the scale of the climate emergency we currently face - described by the U.N. secretary-general as a "code red for humanity". Will GESB commit to ending all investment in fossil fuel-related projects within the next five years? GESB showed a commitment to ending all tobacco-related investments in 2013, will GESB make a similar commitment to prevent further contributing to the climate emergency?
3. RE: ESG policy to make exclusions of companies or industries - where the majority of services causes: human death, significant damage to the environment, or gross inequality. Other super funds have divested from fossil fuels. Fossil fuels impact island nations who will lose access to a home and food security. Given predictions made at COP 26 of 2 deg warming with current 2030 targets, any review must be in haste, and not in three years’ time. When, specifically, will GESB divest from fossil fuels?

GESB continues to develop a climate change transition plan which captures the intended pathway and metrics to measure our progress with respect to climate change risks.

As part of this transition plan, we have set an interim target of 35% reduction in carbon intensity by 2030 for our listed equity portfolios, using a 2020 baseline. Strategies to support this target are currently being considered and we look forward to sharing our approach with you once implemented.

Our aim is to review our 2030 interim target on an annual basis. This review will include outcomes of COP26 and consider whether additional divestment is required, allowing us to track progress against the target, assess whether it remains appropriate and consider if more needs to be done. It also provides an avenue to consider the pace and progress made by governments, companies and the industry to transition to a low-carbon economy.

In line with our current ESG approach, we do not have any current plans to divest from all fossil fuels, coal and oil and gas companies . This may change in the future if it is within members’ best financial interests.

With GESB being accountable to the Treasurer of WA (Mark McGowan), would GESB be allowed to divest from a government-favoured company like Woodside if GESB decided to exclude investment in new gas projects?

The role of the GESB Board is to manage the GES Fund and administer the GESB schemes. As part of this role, it has the authority to instruct an investment manager to divest from a company, or group of companies, if it believes it will be in the best financial interest of members.

GESB has said it is committed to transitioning its investment portfolio to net-zero carbon emissions by 2050. Has GESB engaged with Woodside and BHP on the Scarborough gas project? Now that the companies have announced their intention to go ahead with the project, which is incompatible with the net-zero by 2050 pathway produced by the International Energy Agency, will GESB be divesting in order to fulfil its net-zero portfolio alignment commitment?

As shareholders of Woodside and BHP, our investment managers have engaged with these companies directly through one-on-one meetings and via collaborative efforts led by Climate Action 100+. Senior management in attendance at these meetings included, for example, the relevant company’s Chief Executive Officer, Chief Financial Officer, Chair, Non-executive Directors, General Manager of Industrial Relations and Head of External Affairs.

Engagement efforts carried out by our investment managers are not a one-off occurrence. Engagement with investee companies typically spans over multiple years and covers a range of topics including corporate governance issues and environmental-related risks. Our investment managers’ engagement with Woodside and BHP over the past few years has focussed on climate risk, encouraging these companies to set and publish target to promote innovation and drive reduction in their carbon footprint and energy use.

Engagement with companies about ESG issues is an important way that our investment managers integrate ESG factors into their investment activities. Engagement seeks to have a positive influence on outcomes, rather than merely avoiding investments that rank poorly, or companies with sub-standard existing practices. In some cases, engagement with poor-ESG credentialed companies can promote change and yield strong investment returns as the company’s ESG practices improve. Engagement also offers our investment managers an opportunity to further understand a company’s approach to climate risk and its plans to align its business model to a net zero pathway. By way of example, one of our managers met with these companies on eight separate occasions since the Scarborough gas project announcement in August 2021, and also attended public briefings.

We expect our investment managers to continue to engage with BHP and Woodside on climate risk, including in relation to the Scarborough gas project in the lead up to the shareholder vote.

At this stage, we have not fully divested from these companies.

1. An earlier speaker indicated GESB is now publishing ESG risks, including carbon emissions, in Australian and International Shares portfolios. Will GESB make this information available to members in a transparent manner on the GESB website.
2. Your speaker just mentioned that GESB has a roadmap to net zero by 2050 but I rang last week and asked where I could find this roadmap online. Your officer was obviously looking online but not finding it. He told me that an investment consultant would call me about it. Nobody called me. If you indeed have a current roadmap to net zero, when will you post it online?

Our intention is to be transparent with respect to our ESG risks. This includes disclosing meaningful ESG information to our members where we are able to do so. Our efforts to date include disclosing our full portfolio holdings on our website, enhancements to our Responsible investing page, updating our ESG-related FAQs and profiling one of our investment managers to demonstrate how they integrate ESG on behalf of GESB’s members.

Our ESG roadmap is a Board document that details planned initiatives that will be considered over the coming years. This includes consideration of an ESG-focused investment option, enhanced communication with members and initiatives relating to Task Force on Climate-Related Financial Disclosures (TCFD) reporting.

We are aiming for this improved disclosure, including our climate change transition plan, to be available to members in the 2022/23 financial year.

You can view full portfolio holdings for all investment plans via the Investment options section of our website. Navigate to the product dashboard of the relevant plan and select the ‘what we invest in’ tab.

1. Why should my super be used to subsidise climate change actions?
2. According to [a superannuation fund’s] last Climate Change Report, investments in Woodside, Oil Search, and Santos would (over past 10 years) have provided a -3.28% annualised return to shareholders. The three thermal coal companies that [this super fund] has divested from would have returned -0.13% over the same period (with the ASX 300 providing 7.71% annualised returns for this period). Can GESB’s gas and coal investments still be worth it financially to GESB?
3. I note that Woodside, Santos and Oil Search have lost money over the past 10 years. What case is there for remaining invested in these fossil fuel industries if these are not profitable and coming to a close in the medium term?
4. Do you invest in companies involved in promoting the coal industry?
5. What is GESB’s approach to companies such as Woodside which are not sustainable and actively damage the climate?
6. I understand your comments about why we are not currently doing a fossil fuel investment option now - past interest was perhaps not high or the urgency obvious.  I would urge you to aim for a higher target rather than the 2050 50% goal which is so low it’s meaningless, except to mean we all have to move to Albany. Perth will have 80 days over 40 degrees by 2100 with 1.5 degree warming! Younger members will have to plan for this. Keep up the good work.
7. If you invest in renewables or any other means, do you replace it with any of the current investments in the portfolio?

We make investment decisions that are aimed to be in the best financial interest of members. Part of this includes considering climate change risks, along with many other risks applicable to the investments that we make.

We consider climate change risks, as well as other ESG risks throughout the investment process. This includes:

• Investment strategy – through understanding the impact that climate change could have on long term investment returns and risk
• Portfolio construction – through understanding exposures to various ESG related risks, focusing initially on the Australian and International equity portfolios
• Investment manager selection and monitoring – through understanding how external investment managers integrate ESG factors into their investment decisions and monitoring whether they act in a manner consistent with their stated approach
• Company engagement – through requesting that external investment managers appropriately undertake proxy voting on GESB’s behalf
• Engagement with asset consultant/s – through requiring that appointed asset consultant/s integrate ESG factors into their investment process.

We also have a broader target to transition the investment portfolio to net zero carbon emissions by 2050. As part of our annual review process, we assess whether our targets remain appropriate and consider if more needs to be done.

If our investment managers deem a particular investment to be in the best financial interest of members, subject to any investment restrictions, they will continue to invest in it.

Do GESB representatives attend company AGMs and raise questions/resolutions around their ESG criteria and decarbonisation plans to ensure that these risks are managed and minimise risk to members?

We believe effective stewardship can play an important role in improving the ESG practices of companies we invest in and help enhance the long-term risk-adjusted return of our investments. Stewardship covers both company engagement and exercising voting rights. Our investment managers are generally best placed to carry out these activities on our behalf. GESB staff do not engage with companies directly nor do we attend company Annual General Meetings (AGMs) on behalf of GESB as this is undertaken by our investment managers.

Our investment managers’ interaction with investee companies assists them to not only understand and assess the ESG risk of a company, but provides an avenue to ensure ESG issues are being appropriately managed and good ESG practices are employed. One example of this is ensuring investee companies have sufficiently considered the transition to a low-carbon economy and, where appropriate, have decarbonisation plans in place.

The outcomes of these stewardship activities do contribute to how our investment managers assess a company and/or issuer, which may influence the size of their investment in that company. What we expect of our investment managers is that they understand and assess any ESG risks that may affect the investment, ensuring that they are adequately compensated for any ESG risk which they may be taking on.

It is quite common that engagement with company management will occur in the lead up to the AGM to discuss the upcoming proposals. This provides an opportunity to resolve any concerns ahead of the vote. That said, voting at an AGM can often be used as a tool if the managers have been unsuccessful in reaching the intended outcome of the engagement, or the company has not adequately dealt with the concerns raised.

We meet with our investment managers regularly to ensure that portfolios are managed in accordance with our expectations and requirements. During these meetings, we often discuss the engagement and voting behaviour in relation to specific investments. Engagement with companies on their climate-related disclosure and climate action plans is a common theme.

Hi, I've compared the returns of GESB with another fund and it turns out their returns are a whole of a lot better. This is mainly due to the fees that GESB charge (with GESB charging twice the administration fee). Can you tell me why people should stay with GESB considering this?

Also, can you tell me how much of the fees that members pay go towards the Director's salaries and how much they get paid?

We regularly review our fees against other superannuation funds and they are among the lowest in the industry. For example, the average (median) total fee for a member with a $50,000 balance is 1.1% p.a. If you only look at the lowest cost funds i.e. only looking at 25% of funds with the lowest costs, the fee is 0.9% p.a. The My GESB Super fee fits comfortably below this level at 0.8% p.a. and My West State Super at 0.6% p.a. To find out more, read our member outcomes assessment.

Director fees are fully disclosed and can be found on our website.  Total remuneration for the seven directors totalled $455,206 over 2020/21 – around 0.001% of total assets.

There are many reasons why we believe GESB is a great place for our members, including:

• We solely exist to provide   retirement benefits on behalf of current and former public sector employees –   not to make profits for shareholders. This enables us to focus on your needs and   provide services in an efficient manner
• We have a strong track record of   delivering returns that meet our investment objectives. This means that   you can have confidence in how we are investing your money
• We have insurance offerings that   have been designed to meet the requirements of the WA public sector
• We pride ourselves on a high level   of service – an example includes our 30-second wait time service standard at   our Member Services Centre, which we generally achieve, and a target to have   queries resolved within one call

Please explain how you are continuing to lower the fees on members funds invested and could you put a cap on the total fees paid per member?

GESB unit cost fee appears substantially higher than the larger funds. What advantage is there to maintain GESB super given this higher fee issue?

1. It has been reported in the media that GESB has had very low returns for its members and has not performed well. What is the forecast for investors and what is GESB doing to improve returns, without blaming COVID-19?
2. How is my super going?  Any hints to improve

GESB’s has out-performed its primary objectives across all Readymade plans for periods to 30 June 2021. My GESB Super’s return was 7.2% p.a. over the seven years to 30 June 2021, whilst My West State Super returned 7.4% p.a. over the same period. These were both above the CPI+3% p.a. objective of 4.7% p.a.

Further, superannuation funds undergo annual performance testing by the Australian Prudential Regulation Authority (APRA), the industry regulator, to determine whether they are “under-performing”.

As a statutory authority, we’re regulated by the WA State Government and not APRA but we aim to align with Commonwealth Government policy and regulations where possible. Therefore, we have applied the same methodology used by APRA to calculate whether we would be classified as “underperforming”. Based on our calculations, we estimate that we would not have been classified as an underperforming fund by APRA, if we were evaluated.

Looking at shorter term numbers, the returns achieved (before tax and fees) by the asset classes in which we invest are compared with benchmark returns below.

• Australian shares - 29.5% vs 28.5% benchmark
• International shares - 32.7% vs 31.6% benchmark
• Private equity - 40.1% vs 33.6% benchmark
• Infrastructure - 18.0% vs 12.1% benchmark
• Property - 29.2% vs 30.2% benchmark
• Medium Risk Alternatives - 11.8% vs 3.8% benchmark
• Investment grade bonds - 0.7% vs -0.5% benchmark
• Defensive Alternatives - 3.5% vs 2.1% benchmark
• Cash - 0.3% vs 0.1% benchmark

We have performed above market benchmarks in the vast majority of asset classes.

We continue to manage diversified portfolios that aim to achieve consistent performance over the long term in order to meet our stated performance objectives.

How is it OK to have Saudi and Russian government bonds?

We manage very well-diversified portfolios across many countries and industries, with our appointed investment managers tasked with selecting appropriate assets. Exposure to Russian and Saudi Arabian bonds comprise less than 0.1% of assets and were deemed by our investment managers to offer an appropriate risk/return trade-off given the very small allocation to those bonds.

On page one of my member statement at ‘Investment details’ it lists the eight classes of asset allocations, with a nice, coloured pie chart.

My question is:
1. Why can’t these eight classes be available in the Mix Your plan (nine classes if you include fixed interest)?
2. What is the annual percentage return for each of the classes and can that be included in future statements?

We do offer most of the asset classes as stand-alone options, but some asset classes are better designed for a diversified portfolio, rather than stand alone. This is due to factors such as liquidity and risk concentrations. We have a limited uptake of sector-specific options and we aim to keep options as simple as possible for members. Having more options is also expected to be more costly to members, without a material benefit overall.

Regarding the annual percentage return of the asset classes being made available, we aim to strike the right balance between disclosing all possible information and disclosing the information most relevant to our members (and that they want to see).

That said, the annual percentage returns (before tax and fees) for each sector to 30 June 2021 are as follows:

• Australian shares - 29.5% vs 28.5% benchmark
• International shares - 32.7% vs 31.6% benchmark
• Private equity - 40.1% vs 33.6% benchmark
• Infrastructure - 18.0% vs 12.1% benchmark
• Property - 29.2% vs 30.2% benchmark
• Medium Risk Alternatives - 11.8% vs 3.8% benchmark
• Investment grade bonds - 0.7% vs -0.5% benchmark
• Defensive Alternatives - 3.5% vs 2.1% benchmark
• Cash - 0.3% vs 0.1% benchmark

What investment type is best for this time. I'm a pensioner and only have my investment super in cash at about $20,000, what’s my best option?

Your best investment option will depend on your own personal circumstances. We have some resources on our website, including a Selecting your investment plan tool and information on our Investing with us webpage, which may be of help. However, please note that we do not provide personal financial advice. We encourage you to seek professional advice to determine which investment option may be best for you. We have tips for how to find an adviser.

1. Are you investing in bitcoin?
2. Is investing in gold an option and is it an attractive option?
3. Is GESB invested in crypto currency?

We do not currently invest directly in bitcoin or other cryptocurrencies.

Whilst the underlying blockchain technology does appear to have significant applications, cryptocurrencies are still highly volatile and appear to be driven by speculative factors, rather than fundamental factors. Therefore, at this stage, it is considered to be inconsistent with achieving our investment objectives.

GESB does not offer gold as an investment option.

How can [I] transfer interest in an external fund […] to GESB?

There are several ways you can transfer super from other funds into your GESB Super or West State Super  account. You can:

• Log in to Member Online and select the ‘Roll in other super’ tab
• Transfer via the ATO through your MyGov account
• Complete and submit a physical copy of our Roll in other super form

Before you combine your super, you should consider any potential loss of insurance benefits you may have with your other super account(s). You might want to speak to your other fund(s), or a suitably qualified advisor, about how your insurance may be affected if you close your other account(s).

When will I be able to view my GESB account online?

GESB provides a secure online portal for members to access their account 24 hours a day, seven days a week.

You can use Member Online to:

• Check your account balance and recent transaction history
• View and print your member statements
• View and update personal details
• Roll in super from other funds
• Make contributions to GESB Super or West State Super via BPAY®, your employer or by cheque or money order
• Change your investment plan for West State Super and GESB Super
• View and change your insurance cover (not applicable for Gold State Super)
• Change your communication preference for your member statement
• View your current investment performance (not applicable for Gold State Super)

You can access Member Online from a range of devices including your laptop or PC, smart phone or tablet.

How come GESB is "not licensed to provide financial advice" when it used to in the past?

GESB closed its financial advice business in 2012 . However, there are suitably qualified financial advisers in the private sector who can provide personal advice to help you clarify your current situation, define your future goals, and help you take the necessary steps to implement them.

GESB can provide you with factual information about your specific situation and answer any questions regarding your super with us.

Related to an earlier question, my salary sacrifice contributions have sometimes taken up to three or four weeks to appear in my online account. Where is my money sitting during this period and will there be any progress on making this contribution appear in my account sooner so I can take advantage of any growth?

GESB receives salary sacrifice contributions in electronic files sent either directly from the member’s employer or via a salary packaging provider. Our service standard to process these files is three working days from the day we receive the file. We can confirm that this service standard has been met over the past 12 months.

Once the salary sacrifice contribution has been allocated to your account, it can be viewed in Member Online within two business days.

Why does it take three days for my allocated pension to go from my GESB account to my external bank account when EFTs between banks in Australia only takes a day or two?

With any payment made by us, there is always a one-day processing timeframe due to the nature of the transaction process. Any additional delays are generally attributable to the banking institution that we are sending the money to.

Have just tried to add a beneficiary via the member portal having heard the answer about the recent changes in this area. Portal states that funds will be paid to the estate and nothing listed as to how to add a beneficiary.

To submit a binding death nomination, please complete our ‘Binding death nomination’ form available at gesb.wa.gov.au/bdn. We need to receive a physical form signed by two witnesses over the age of 18 before we can process the nomination.

Once we have accepted your nomination as valid, we will confirm this with you in writing. Beneficiary details will be provided in your member statement.

Hi, good evening. I'm new to GESB. My question is how does superannuation work for an individual please?

Super is one of the best ways to save for your future. While you can grow your super with ongoing contributions from your employer, there are other options to add extra money, such as salary sacrificing and personal contributions. You can also choose an investment plan to match your goals and help you grow your retirement savings.

The GESB website at gesb.wa.gov.au contains a wealth of information to assist you to understand super and your GESB account. To get started, try What is super page.

1. Can a member continue contributing super after age 75? If not, why not?
2. Can members still contribute super into GESB after the age of 75? If not, why not? Age discrimination is not allowed in Australia!
3. Can members still contribute super into their GESB accounts after aged 75? If not, why not? Age discrimination?

Commonwealth legislation does not allow people over the age of 75 to make personal contributions to superannuation. If you’re aged 75 or older and still working in the WA public sector, your employer is required to contribute superannuation guarantee contributions to your GESB account.

Is it possible that draw down from pension accounts continue to be 50% discounted in the next financial year?

Reduced minimum annual payment rates for pension accounts was an initiative introduced by the Commonwealth Government to assist retirees financially impacted by the COVID-19 coronavirus pandemic.

The 50% reduction of minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities is applicable for the 2019/20, 2020/21 and the 2021/22 financial years. There is no indication at this time whether this will be extended beyond the 2021/22 financial year.

Can a person aged 67+ sell an asset and place the money from this into their superannuation after they have retired?

If you are selling your home, you may be eligible for the Commonwealth Government’s downsizer contribution. This allows people 65 and older who meet the eligibility requirements to make a contribution of up to $300,000 from the proceeds of selling their home.

You do not have to be working to be eligible to make this contribution. Assets other than your home do not qualify as downsizer contributions. More information is available on the Australian Taxation Office website.

I'm retired and on a pension. If I take out what I have in my super, do I pay tax on the way out?

If you’re over 60, you won’t pay tax if you withdraw your super as a lump-sum payment from GESB Super. You may pay tax if you withdraw a lump-sum benefit from West State Super or Gold State Super. This is because GESB Super is what’s known as a taxed scheme, while West State Super and Gold State Super are untaxed schemes.

Tax still applies to both types of schemes, but the tax is deducted at different stages. Taxed super funds deduct tax when pre-tax contributions get added to the fund and earn investment returns, while untaxed schemes only pay tax on untaxed contributions and investment returns when money is taken out.

If you’re under 60, tax will apply according to the components that make up your benefit and your age at time of withdrawal. For more information, read our page Paying tax when taking your super money out or our Tax and super brochure.

Will you enable captions in future online displays?

Attendees at our live Annual Member Meeting did have the option to turn captions on via the display settings. We’re sorry if you were unable to use this function during the meeting.

We will make every effort at future online meetings to ensure this function is highlighted for viewers.

For any questions you don't respond to during the meeting, will you follow up with a response after the meeting?

Yes, all questions unanswered during the Annual Member Meeting that were not of a personal nature will be responded to after the meeting.

Where there were a number of questions asked about the same topic, we will provide one answer that covers all related questions.