2022 Annual Member Meeting transcript

Start of transcript

Brad Zaknich: Welcome. Thank you for attending this online Annual Member Meeting or watching this recording later if you’re not able to be online. I’d like to begin by acknowledging Aboriginal and Torres Strait Islander peoples as the Traditional Custodians of this country. We pay respect to the Traditional Owners and Elders past, present and emerging of all lands on which we come together, and we extend that respect to Aboriginal and Torres Strait Islander peoples including our colleagues and members.

My name is Brad Zaknich, I’m a Key Account Manager and have been with GESB for over 20 years, with a total of almost 30 years and counting in the public sector. I’m pleased to be your MC this evening and welcome you all to GESB’s second Annual Member Meeting. We will be covering the 2021/22 financial year. Managing the retirement savings of around 245,000 members makes it challenging to invite everyone to gather in one location, so we’re using technology to make this possible. Hosting this meeting online also makes it easier to include our members who live and work in the regions of Western Australia.

I’d also like to thank and acknowledge Esther Conway, our Fund Actuary from Mercer, Patrick Arulsingham from the Office of the Auditor General and Michael Hoang from EY - our external auditors last year - for attending this evening along with our Board members and Executive Management Group.

I will just cover some simple housekeeping before we get started with our presentations. If you have a question, please use the Ask a Question function to submit your question. You can find this at the top right-hand side of your screen and in the footer on the left-hand side. We’ll have a question-and-answer session at the end where we will get through as many questions as we can. For any questions we can’t cover tonight, we’ll make the answers available online when we publish the recording of this session on our website. Because of timing, we’ll give priority to answering questions which could be of most benefit to the majority of our members. If you have a specific question relating to your account, please get in touch with us during business hours through our Member Services team or our online chat services.

As you may know, we are not licenced to provide personal financial advice. Please note that the information in this presentation is general in nature and not intended as legal, taxation or personal financial advice. We always encourage our members to consult a suitably qualified financial advisor who can take your personal circumstances into account.

Tonight, we’re going to hear from the Chair of our GESB Board, our Chief Executive Officer and our Chief Investment Officer. These presentations have been pre-recorded but everyone you’ll hear from tonight is currently online, so you’ll have an opportunity to engage with them directly towards the end of this meeting.

Our first speaker was appointed as Chair of our Board in October last year and you may remember hearing from her in our first Annual Member Meeting. She has extensive experience as a leader and strategic policy director at the highest level of State Government and played a leading role in the development of the WA Recovery Plan in response to the COVID-19 pandemic.

Here is the Chair of our Board, Jo Gaines.

Jo Gaines: Thank you everyone for attending this online meeting. I wish to respectfully acknowledge that we meet on Whadjuk land and that our members work on Traditional Lands across the state. I pay my respects to their cultures and communities and their Elders past, present and emerging. I’d firstly like to thank Brad Zaknich, one of our Key Account Managers, for being our moderator. I’d also like to acknowledge my GESB colleagues including our CEO Ben Palmer and our Chief Investment Officer Paul Taylor, both of whom you will be hearing from shortly.

In carrying out our responsibilities, we always put members’ best interests first and advocate for you when it comes to your super and insurance. Looking after your retirement savings and acting with your best interests at heart takes strong governance and robust stewardship. With that in mind, I’d like to introduce you to our Board and explain a little bit about what we do. Our Board was established under the State Superannuation Act 2000 and is accountable to the WA Treasurer. We’re responsible for overseeing the strategic direction and management of GESB, including our global investment portfolio which stood at over $33 billion as at 30 June 2022.

I was honoured to be appointed as the Chair of GESB Board in October last year. I’ve spent my working life representing the interests of public sector employees in WA and I’m excited to have the opportunity to contribute to the organisation that supports your future financial security and a quality retirement. One way we do this is to structure our Board to maintain a high and varied level of expertise and experience from a range of different industry and government environments.

I’m pleased to introduce our newest members - Janice Jones, our Employer Director, and Janine Freeman, our Member Director - who joined us during this year. They join Member Directors Anne Gisborne and Bruce Hawkins and Employer Director Virginia Christie. You can find more details on the backgrounds of all of our directors on our website.

As we reflect on the past year of managing your retirement savings, I would also like to recognise the contribution made by Board members who retired from the Board during the year - John Langoulant, Catherine Nance, Naomi McCrae and Frank Sciarrone - and thank them all for the significant contribution they made to GESB.

Our Board has changed over the past year and so has the superannuation industry as a whole. A range of new challenges have arisen, including the implementation of several large pieces of Commonwealth legislation, such as Member Outcomes and Your Future, Your Super, as well as rising interest rates, international economic uncertainty and the continued impacts of COVID-19.

Throughout the changes of the past year, our GESB team has remained focused on looking after your super with excellence, and working to improve your super benefits and services. Our investment team has the experience and expertise to manage your funds in challenging market conditions. They help the Board make carefully considered decisions to ensure our investment plans stay on track to achieve their long-term objectives.

You, our members, have worked hard to deliver critical services which support the WA community. We recognise that, we have an important role to play in supporting your well-deserved retirement. You trust us to look after your super and support you in making informed decisions about your retirement - and we take this responsibility very seriously. We’ve been managing the super funds of current and former public sector employees for over 80 years. During this time, we’ve consistently delivered strong long-term returns that have met our objectives with fees below the industry median.

In terms of our overall performance and services, you will soon be hearing from our CEO Ben Palmer. Ben will explain in more detail how we performed against our strategic goals and how we’ve expanded and improved our service offerings. You’ll also hear from Paul Taylor - our Chief Investment Officer - about the investment environment and our investment performance over the past financial year. It’s been a difficult year for financial markets across the world and many of our investment plans were unable to avoid the negative returns achieved by the major markets. However, it’s important we view this in the context of the past 10 years, where our investment options have delivered strong performance for our members.

Before we hear from Ben and Paul, I’ll briefly introduce some of our strategic priorities for 2022 and beyond, which Ben and Paul will cover in more detail in their presentations. A key strategic priority for us is our commitment to ESG. ESG stands for Environmental, Social and Governance and these are becoming even more important factors for investors, companies, regulators and governments across the world. ESG factors have the potential to materially impact investment returns and the long-term sustainability of returns into the future, so we have a duty to manage these issues effectively.

Paul will go into greater detail on how we manage ESG risk across our investments; however, I’d like to update you on some key initiatives and achievements as part of our ESG roadmap for the future. In July this year, our work to date was recognised when GESB Super was named as an ESG leader by Rainmaker, a research company for the Australian financial services industry. The ESG leader rating is earned by Australian super funds that are implementing ESG principles to a high level while having a track record of strong investment performance.

While our approach to ESG across our global investment portfolio has been recognised as industry leading, we acknowledge that some members might prefer their retirement savings to be invested according to more stringent or accelerated ESG criteria whilst still aiming to deliver strong long-term returns. I’m pleased to let you know that the Board and Investment Committee are currently giving detailed consideration to an enhanced ESG investment option for our GESB Super, West State Super and Retirement Income members. We’ll keep you up to date on our progress through our website.

Another strategic priority in the coming year is our member outcomes assessment. During the year, you may have seen we published the results of our second annual outcomes assessment. Our performance was assessed against the performance of like products across the industry over the previous financial year to 30 June 2021. We are pleased that these assessments demonstrated that our investment returns for My West State Super and My GESB Super met their 10-year target returns and compared well with industry medians. We are not included in the Australian Prudential Regulation Authority - or APRA - performance test but we assessed our My GESB Super Investment Plan performance against this benchmark and determined that it would have passed the performance test if we were APRA regulated.

Our operating expenses - relative to our size of our membership and assets - are in the lowest quartile and below industry medians. If you haven’t yet read our member outcomes assessment, this is available on our website; we’ll provide you a link at the end of this meeting.

We’re currently working through Your Future, Your Super legislation changes. Last year the Commonwealth Government implemented legislation to automatically attach or staple members to their existing super account when they change jobs. As you may be aware, GESB is regulated by the WA State Super Regulation. At the moment, we can only accept employer contributions from WA public sector employers. However, we’re working through our response to the Commonwealth Government’s changes in consultation with the State Government. We hope to be able to update you on these outcomes of these discussions in 2023.

We are also looking at how we can improve the support we provide to our regional members. We want all of our members to have access to information and services to help you learn about your super and make informed decisions about your future, wherever you happen to live. We’ve partnered with the Financial Councils Association of WA to support them in providing financial assistance to our members in remote communities who can often face barriers to financial literacy and independence.

During the past year we’ve also continued to focus on supporting Aboriginal and Torres Strait Islander peoples by delivering a range of initiatives in partnership with key community organisations. Ben will have some more details of our Reconciliation Action Plan and initiatives.

Finally, I would like to take a moment to touch on corporate governance. Our GESB Board operates within a robust corporate governance framework which is aligned to industry best practice, Commonwealth regulatory requirements and Australian Securities Exchange governance principles. Our framework reflects GESB’s operating environment as a state authority within the financial services market. This means that we have rigorous external and internal audit programs. The Office of Auditor General conducts our external audits and it’s pleasing to note that GESB has received an unqualified 30 June audit opinion for the past 15 years. This means our financial statements present our affairs fairly in all material aspects. I’m also happy to let you know that for the past seven years, GESB has been acknowledged as a top 20 best practice agency by the Office of the Auditor General.

In closing, I’d like to take this opportunity to thank all members of our Board, Audit and Risk Committee, and Investment Committee and, importantly, our team of 65 GESB employees for their dedicated work during the year. It’s been a challenging year, and everyone has worked hard to maintain high service standards. On behalf of the GESB Board, I would like to thank all of our members and especially those of you who have taken time to attend this online Annual Member Meeting.

Along with the Board’s commitment to strong governance and robust stewardship, I am pleased to let you know we remain committed to providing high quality, value for money superannuation and retirement products and services that meet your needs. Thank you.

Brad Zaknich: Thank you, Jo, for your presentation. I’m sure our members will agree there was a lot of valuable information shared, including information about our Board, our strong ESG credentials and how we continue to explore ways to support our regional members. Next, we’ll hear from our Chief Executive Officer. He is tasked with leading GESB and is accountable for achieving our strategic, business, policy and budget objectives. He’s been part of our team for the past decade and in the role of CEO since 2018. This evening he’ll guide us through GESB’s commitment to delivering excellent outcomes for our members and outline some of the specific developments, changes and initiatives you may have seen over the past year.

Here is our CEO Ben Palmer.

Ben Palmer: Thank you, everyone, for attending our Annual Member Meeting this evening. I’d also like to say thank you to Brad for the introduction and thanks also to Jo for what you’ve shared this evening and for your work as Chair of our Board. I’m Ben Palmer, Chief Executive Officer at GESB. I’ve been with GESB for 10 years and it’s fair to say that every one of those years has been different, each presenting unique challenges and opportunities.

As Jo mentioned, the past financial year was characterised by changing global conditions. In addition to the horrific human toll of Russia’s invasion of Ukraine, financial and commodity markets have also been impacted. Inflationary pressures grew significantly in the first half of this year, a result of low interest rates in the major economies, strong demand and employment conditions and supply chain issues. The impact of inflation - coupled with Central Bank’s responses to increased interest rates - has created a challenging backdrop for returns of major asset classes in the first half of 2022.

After a strong 2020/21 financial year, performance across investment markets was much more subdued in 2021/22. With the pick-up in inflation negatively impacting both growth and traditionally defensive asset classes, few - if any - investment markets were able to avoid negative returns. Our focus throughout the year has remained on ensuring our investment strategies are appropriate for our long-term objectives and on working with our service providers - and other stakeholders in the Western Australian Government - to continue to support and serve our members during these challenging times.

Over the next few minutes, I’ll be providing an overview of what we delivered for members in the 2021/22 financial year as well as our key focus areas for the near future and beyond. Overall, our strategic focus is across four key areas as we strive to deliver excellent outcomes to our members and to the state of Western Australia. Our number one focus is on financial outcomes for you, our members. This includes keeping fees low, delivering returns that meet our investment objectives and investing responsibly. We are pleased that our fees continue to be among the lowest in the industry. This is driven by our focus on efficiently managing your superannuation and retirement benefits to ensure we deliver value for money for you. We know that the cumulative impact of fees can make a big difference to your final balance in retirement.

As Jo acknowledged, the challenging market conditions resulted in negative returns for many of our investment plans during the financial year. However, over the long term, our investment returns remained positive and broadly consistent with both our targets and the wider superannuation industry. Jo also spoke about our commitment to prudent management of ESG risks and opportunities. As an example of that ESG policy in practice, we significantly reduced our exposure to Russian investments leading up to and following Russia’s invasion of Ukraine so that we had negligible direct exposure to Russian investments as the war escalated. As of 31 August this year, our exposure to Russian investments comprised less than 0.001% of assets and only relates to one stock that we aren’t able to sell because of foreign ownership restrictions.

Soon you’ll hear from our Chief Investment Officer Paul Taylor, who will provide more details on our investment performance and process in his presentation, including details of our carbon emissions reduction roadmap across our global investment portfolio.

Our second area of focus is about providing you with a positive experience when you engage with us. We aim to provide high quality services and timely information to help you make informed decisions about your super and retirement. We want every interaction you have with us to be as positive and straightforward as possible. As you may have seen on our website, we’ve been keeping you up to date about the improvements to our Member Online portal, making it easier for you to manage your super.

Our new Member Online provides a central hub of information, transactions and communications for your account with us. If you haven’t used Member Online before, now is a great time to register and start interacting with your super. We’ll provide you with more information at the end of this meeting.

As you may know, our administration services, Member Services Centre and Retirement Options service are provided by our outsource partner, Link. I’m very happy to let you know that our surveys have shown that over 90% of our members interacting with us were satisfied with the service they were provided during the year. Thank you to those of you who were involved directly in those surveys. We also want to make sure our products and services are easy to use and accessible to all our members. To support this, we’ve partnered with the Centre for Accessibility Australia to receive training and insights from researchers, industry practitioners and people with disability to help make our GESB website more inclusive and accessible.

Last year we were thrilled when our digital communication specialist Jane Ots was awarded the Accessibility Person of the Year at the 2021 Australian Access Awards. Jane was recognised for her continued commitment to providing our members with access to information about their superannuation regardless of impairment. GESB was also recognised with nominations for Government Website of the Year and Accessibility Initiative of the Year for our Selecting Your Investment Plan tool. This useful tool is available on our website along with other helpful tools and calculators. If you haven’t already done so, I would invite you to head to our website and have a look at these tools which serve to help you make better informed decisions about your super.

Over the past year, we have also delivered a range of initiatives to help address the unique needs and challenges faced by Aboriginal and Torres Strait Islander peoples in understanding and accessing superannuation benefits. Our second Innovate Reconciliation Action Plan is currently being finalised and will again feature the vibrant artwork of Acacia Collard. I encourage you to read through our current Innovate Plan if you haven’t already done so; this too will be in the links we provide at the end of the meeting.

Out third focus area is to provide you with value for money products and services, delivering these to you in an efficient way. As Jo mentioned, our second member outcomes assessment and our APRA equivalent performance test demonstrated that we are delivering value to our members. These initiatives were adopted to align with national industry standards and provide strong accountability and transparency to our members. We’re committed to providing specialised, cost-effective insurance that you can rely on and that doesn’t inappropriately eat into your retirement benefits. In fact, I’m pleased to let you know that on average our insurance costs less than 1% of lifetime salaries. Our insurance products are designed to meet the needs of the WA public sector workforce and can provide valuable benefits during unforeseen times of need.

In the past financial year, our insurance claim payment rates were 96% for total and permanent disablement claims, 99% for death claims and 99% for salary continuance insurance claims. During the period, we reviewed our insurance products with our insurer - AIA Australia - which resulted in reduced insurance premiums for the majority of our members. Details of these changes are available on our website; we’ll include a link at the end of this presentation.

Your feedback on our services has generally been extremely positive but we also identified a number of areas where we could improve our processes and your experience when dealing with us. Earlier this year we introduced a new compassionate release application pack aimed at simplifying the process for our members who unfortunately experience financial distress. During the year, our regulations were updated to allow us to accept binding death benefit nominations. Submitting a binding death nomination is one way to make sure that - subject to eligibility criteria - your super goes to the people you want it to when you pass away. You can now submit, replace or cancel your nomination using the form available on our website.

We’re now reviewing our benefit payment processes and looking at ways we can reduce our processing times and keep you better informed of progress along the way. We will continue to review our processes and communications in collaboration with Link with the aim of further streamlining your interactions with us and meeting your service expectations into the future.

Our fourth and final area of focus is on our people and relationships. A lot of hard work goes into looking after your retirement savings and delivering our products and services, so I’d like to acknowledge and thank our GESB team for their enormous effort over the past year in very challenging circumstances. We aim to provide a safe, supportive, productive and ethical culture, driven by good leaders and strong values both internally and in our outsourced providers. We want to ensure we have capable and competent people with high integrity and provide them with the training and support to be able to effectively manage and safeguard your retirement savings and help you make informed decisions about your super.

Each year we conduct a staff satisfaction survey and we’re pleased that this year 84% of our staff were either extremely satisfied or very satisfied working at GESB. The coming year will be one of significant change for GESB. Our focus will be on enhancing our ESG approach, expanding our digital services and progressing initiatives aimed at improving and simplifying superannuation for our members. We will also work closely with the State Government and stakeholders to progress our response to the Commonwealth Government’s Your Future, Your Super reforms.

Throughout this financial year and beyond we will continue to deliver quality outcomes to you including low fees, strong long-term returns, insurance you can rely on and a positive member experience. We remain dedicated to providing high quality superannuation and retirement products and continuously improving our services to you, our members. Thank you again for taking the time to attend this meeting and I’ll look forward to answering any questions you may have at the end of the presentations.

Brad Zaknich: Thank you for your presentation, Ben. I’m sure our members were pleased to hear about the ways GESB is working to deliver better outcomes and provide high quality products and services. Just a reminder, if you’d like to submit a question about anything you’ve heard this evening, please do so using the Ask a Question function on your screen. Anything which doesn’t get covered tonight will be answered later; you’ll find the responses on our website when the recording of this meeting is made available.

Our final presentation this evening is from someone with more than 20 years of investment experience with super funds and other institutional investors. He has been the head of asset consulting at a large global investment advisory firm, head of investment management research at an investment firm in London and director of the institutional investment team at a global financial services organisation.

Here is our Chief Investment Officer, Paul Taylor.

Paul Taylor: Thank you Brad. As introduced, I’m Paul Taylor, Chief Investment Officer at GESB. I’m responsible for supporting our Board on matters including investment strategy, monitoring, asset allocation and investment manager selection. This evening I’ll be guiding you through some key investment highlights from the past financial year. I will show you how our various plans have performed over the year and the longer term and how this has compared with investment markets more broadly. I’ll also touch on the ESG factors that can impact investments. Finally, I’ll provide some insights into current market conditions and what this may mean for the outlook going forward.

As mentioned earlier, it was a tough year for investment markets. Returns over the year to 30 June 2021 were particularly strong and some of these gains were given back over the year to 30 June 2022. Higher inflation and rising interest rates have negatively impacted most major financial markets while the Russian invasion of Ukraine worsened these impacts. This graph shows historical investment market returns for major asset classes over one and three years to 30 June 2022. As you can see, returns have generally been negative over the past year, leading to subdued returns for the past three years.

For the 2021/22 financial year, Australian and international shares fell by around 6%. As mentioned, the large increases in inflation and interest rates over the past 12 months were the main reasons for share market falls. Bond investments experienced some of their weakest returns in recent history with the significant increases in interest rates causing bond prices to fall sharply. It’s important to note that although the value of bond investments fell over the year, this wasn’t because they were all of a sudden bad or riskier investments; their price declined to reflect the high interest rate environment going forward. The good news is that with higher yields, future return expectations are higher than what they have been in the past and we’ve already seen some improvements since 30 June.

So, what does this mean for your retirement savings? This graph shows an overview of many of our investment plans. As you can see, the negative returns that occurred in financial markets flowed through to our Readymade plans over the financial year. Looking at My GESB Super plan - the second green bar from the top - you’ll see it returned minus 3.8% for the year which was 0.2% above its benchmark return. The benchmark reflects the return that would have been achieved if returns were in line with the markets. My West State Super plan returned a slightly lower minus 5.3% for the year because it has a higher exposure to bonds than My GESB Super. For more conservative plans, returns were around minus 4% to minus 5% with exposure to bonds being the largest negative contributor to performance.

While it is quite unusual for conservative balanced and growth options to achieve broadly similar and negative rates of return, this can happen from time to time, particularly in an environment of rising interest and inflation rates, which negatively impact growth and defensive asset classes. While negative returns can be concerning, they are a normal part of investing when aiming to achieve long term returns that are above returns from cash or inflation. This year is the first negative return from our conservative plans in the past 10 years. For our higher risk plans, such as our growth plans, it’s the second negative annual return in the past 10 years. This frequency of negative returns is in line with expectations for those plans.

Looking over the medium term, despite the volatility and significant world events, returns over the past three years remain positive yet subdued. Conservative plans have returned a little over 1% per annum, balanced plans around 3% per annum and growth plans around 4% per annum.

Now to look at our long-term objectives, this graph shows some of our plan returns against their respective primary return objectives. These are measured over rolling seven-year periods for My West State Super, My GESB Super and Retirement Income balanced plans and rolling five-year periods for conservative plans. The relatively flat purple lines show the return objectives which are CPI plus 3% per annum for the most recent period for more growth orientated plans and CPI plus 2% per annum for conservative plans. The other lines on the charts show the actual rates of return achieved by these investment options.

As you can see, performance can fluctuate from year to year but most of the time our plans have achieved objectives which is consistent with our expectations. Importantly, we’ve been through similar periods before. Around 2011 to 2013 long term returns were slightly below objectives for both balanced and conservative plans but performance was very strong in the years that followed. As at 30 June 2022, returns were in a broadly similar position to what they were in the early 2010s. Hopefully this provides comfort that performance has been at similar levels in the past and has later rebounded.

The final area I’d like to update you on is how we consider ESG factors when we invest on your behalf. This includes assessing the physical and transitional risks of climate change to ensure we are managing risk appropriately and investing your funds responsibly. I want to highlight that we integrate these factors with the aim of improving financial outcomes for our members. Rather than avoiding all ESG risk, we aim to ensure that we are adequately compensated for them just like other investment risks that we’re exposed to. We believe managing ESG risk and achieving better financial outcomes go hand in hand.

We do this in a range of ways, including analysing potential climate change scenarios, measuring carbon emissions of our share portfolios, understanding and monitoring how our external investment managers integrate ESG factors into their investment decisions and asking our investment managers to meet with company management and boards and undertake proxy voting on our behalf.

Our long-term analysis demonstrates that failing to manage the carbon intensity of our portfolio and prudently managing a transition to net zero carbon emissions introduces material risk to investment outcomes and is likely to negatively impact long term rates of return. To manage this risk and support long term financial outcomes for members, last year our GESB Board committed to transitioning our investment portfolio to net zero carbon emissions by 2050. This was supported by an interim target for our share portfolio to reduce carbon emissions by 35% by 2030. I’m pleased to report that since introducing this target, the carbon intensity of our share portfolio has reduced by 17% from 2020 to 2022. This is a result of initiatives that we’ve implemented to achieve better financial outcomes for our members.

In recognition of this significant progress, the Board has updated the interim target for our share portfolio to a 45% carbon reduction by 2030. If you’d like to learn more about our ESG approach, I encourage you to take a look at the Responsible Investing page of our website; we’ll provide you with a link at the end of this meeting.

So, where to from here? Since 30 June, returns have continued to be volatile. Returns across most Readymade plans were down slightly over the three months to 30 September with expectations of higher inflation and high interest rates weighing on market returns. Despite this, there is plenty of reason for long term optimism, including cash and bond yields have bounced strongly off levels close to zero. While this has meant past returns from these asset classes have been low, forward-looking returns appear meaningfully better than the past few years. Corporate profitability remains sound, which provides support for share markets. As mentioned though, risks do remain. Geopolitical factors remain an ever-present risk and while inflation is above Central Bank targets, high interest rates are a possibility.

In weighing up all these factors, we believe our long-term strategic asset allocations remain appropriate for meeting our return objectives. On that note, it has been a pleasure to provide this update and I will be pleased to address any questions you may have. Thank you.

Brad Zaknich: Thank you Paul. It really has been - and still is - a time of uncertainty. Paul’s presentation was a timely reminder that while negative returns can be concerning, they are a normal part of investing. At GESB we remain focused on our long-term objectives and history has shown that investors who can endure negative returns from time to time typically end up with better long-term outcomes. Thanks to Paul for also discussing some of the ESG factors which come into careful consideration in our investments.

Now it’s time for our Q&A session. If you have a question which you haven’t already submitted, please use the Ask a Question function now. I’ll begin by reading some questions we have received from members before this evening and will direct these to the most appropriate person on our panel to respond. We’ll try to respond to as many as we can but there may be some questions which are not able to be answered during this meeting because of time constraints or having specific information on hand. We will however respond to all of your questions and publish these on our website.

Please remember we will be giving priority to questions most likely to benefit a number of our members. For specific questions relating to your account with us, please contact our Member Services team. They are available during business hours through our online chat or Perth based call centre. Again, please note that we are not able to provide financial advice.

Okay, first question has come from Michael. Michael’s question, GESB’s performance hasn’t been as high this year compared to previous years. Can you explain why and what you are doing about it. This question is directed to Paul.

Paul Taylor: Thanks, Brad, and thanks, Michael, for your question. As has been touched on today, many of our investment plans did achieve negative returns over the past financial year. Whilst they are never welcome by anyone really, I will sort of mention a few things just to put those returns into context. The first thing is - as has been mentioned - that we are investing for the long term, generally five to 10 years. What we are aiming to do is to achieve strong investment returns that meet our investment objectives while limiting the probability of a negative return in any one financial year. Ideally, we do want to make this journey as smooth as possible but given we are investing in financial markets that the ups and downs are inevitable.

The second point I wanted to reiterate - and again it has being touched on a little bit is and depending on which plan you were invested in - that negative returns are expected. So, for the conservative plans we are aiming for less than three negative returns over any 20-year period. There’s no guarantees around that, but certainly it may be three, it could be higher, it could be lower, but certainly that’s the aim to do a bit less. As we’ve said, this is the first negative return in the past 10 years for that conservative plan, so entirely consistent with those expectations. If you’re in any more higher risk - more high growth orientated - strategies, negative returns as I’ve said depends on which one your invested in, anywhere from around four to six negative returns in any 20 year period, and which we are aiming for less than that but that is certainly a possibility.

The third point to put into context and the final point just from the context is the year ending 30 June 2021 was a really strong year. It was for growth orientated plans returns were 17% or even higher in some cases and for even conservative plans around about 8% returns. So, some of those returns were given back a little bit over the past financial year with those returns of around the 4% to 5% negative but the returns were still positive over even that short two-year period. Since 30 June this year as well, we’ve seen some positive performance across conservative balanced and more growth orientated plans which has been good.

What was the reason for those negative returns - and again it’s been touched on a little bit already - but certainly the share market and bond market returns were negative over the year. It is a very rare event for them both to be that negative and both in unison, but certainly that was the most contributing factor was that volatility.

So, what have we done to address it? I think it’s important to acknowledge what we’ve done but also what we haven’t done or what - and we don’t intend doing as well, just so you get a really clear flavour of how we’re investing. So, what we haven’t done is really changed our long-term objective/our long term investment strategy. We’re not making knee jerk reactions to one year of past performance, but we’ve got a really strong, robust investment strategy that we are sticking to and sort of exiting a really high-quality portfolio of equities or as shares and a portfolio of bonds and locking in those losses will certainly expose us to not getting any gains should they occur, so we certainly do have a strong commitment to our long-term strategy.

Probably one of the things that we are doing though, in particular - and what we have been doing over the past year or two and certainly even in this current financial year sort of post 30 June - is ensuring that we continue to have a really well diversified portfolio of assets that can perform well across different market cycles. You know, we don’t want to be over exposed to any particular risk or any particular area, so just some examples of that. We’ve increased exposure to some unlisted infrastructure investments where the cashflows are inflation linked, for example, so it’s not as exposed - in a negative sense - to rising inflation. In some of our alternative asset classes where we do have exposure and increased exposure in some areas which are less exposed to equity and bond market movements.

The other thing that we are doing is that we are ensuring that the portfolio is managed as efficiently as possible. As mentioned before, we’ve got some of the lowest fees in the industry and certainly on the investment fees. Certainly, when there are negative returns, one of the last things - well, you know, one of the last things you want to happen is then for unnecessary fees to eat further away at those investment returns. I am pleased to report that over the past year that our investment fees have reduced by around 10% to 20% depending on the Readymade plan that you’re invested in. If you’re on a Readymade plan it has been a material reduction off a very low base, so maintaining that really cost-effective outcome is one of the things we really have focused on and what we really have delivered.

So, I guess in conclusion, Michael, we really believe we’ve got a robust long term investment strategy, we’re not making knee jerk reactions, but we are very conscious of market conditions. I think the long-term focus that we have and the long term results that we deliver do reinforce that. Thank you.

Brad Zaknich: Thanks, Paul. The next question is from Mary. Mary asks, as government employees, we spend our working lives receiving a fortnightly wage and budgeting to a fortnightly schedule, yet when it comes to receiving our allocated pensions there is no option for fortnightly payments. Each time I’ve asked or enquired I’m met with, it will never happen responses. Is it that hard? Most super funds are able to accommodate fortnightly payments. Is there any possibility of fortnightly payments from GESB for allocated pensions in the future? We’ll direct this question to Ben.

Ben Palmer: Thanks, Brad, and thank you to Mary for your question. So, just to remind members that GESB is a state regulated fund that exists and is governed by state legislation and state regulations. So, the frequency of our allocated pension payments is actually prescribed in our state regulations. They currently provide - as Mary pointed out - not fortnightly, they currently provide for monthly, quarterly or annual payments. The regulations were established in 2003 and it was certainly reflective of industry standards and member expectations at that time. It’s also fair to say we haven’t had a great deal of member feedback on this particular issue; however, I certainly acknowledge, Mary, you’re raising the change of process for you in adapting from fortnightly pay schedules - which we all in the WA public sector are used to - transitioning to a monthly income stream in retirement.

Is it easy to do? It’s something we will certainly take your feedback and look at. As I’ve said, frequency is determined by the state regulation, so if we were to change and offer a fortnightly option, we would need to proceed to have regulation amendments done so that may take some time. There’s some other things that we - as we always look at with systems changes there’ll be a cost involved in amending the systems. There’s also some implications for other schemes because when we process a pension payment run it does take our core systems offline for a short period which means they can’t transact on the other schemes.

So, we’ll certainly consider this feedback with feedback from all our membership. When we work through - we’re doing extensive work on looking at our retirement products and services over the coming months, so we’ll certainly take this feedback onboard and consider a fortnightly payment option as part of that review as well.

Brad Zaknich: Thanks, Ben. Next question is asked by - actually, where are we - Anna. GESB’s ESG policy states that transparency is important and GESB is committed to disclose information reasonably requested by members and key stakeholders. To this effect, could GESB please start disclosing its proxy voting activity on climate-related resolutions. This one is directed for Paul.

Paul Taylor: Thank you, Anna, for your question. Transparency important to GESB, absolutely that is the case. In all proxy voting activity, we have been asked by members in the past for our voting activity and on every one of those occasions we have disclosed what we have voted in. You are right, we are not currently disclosing all proxy voting activity on our website. There is thousands and thousands of proxy votes which occur each year, we are currently looking at how we can best distil that into a digestible form without, as I said, just putting thousands of different things on the website.

So, yes, I guess the message is we are looking into what we can provide, but if you do want to know anything about any of our voting activities that have been undertaken, please don’t hesitate to contact us. We will fully disclose that, but, as I said, it’s just more of a - I guess digesting those thousands of proxy voting into something that members might be able to look at is a bit of a challenge at the moment.

Brad Zaknich: Thanks, Paul. The next question has been asked by Robin. What do you say to people retiring in a downturn? The GESB website says investment prices fluctuate and prices recover, units are worth more selling them at a later time. As an alternative, have bank savings to access, but at some point, savings and assets diminish. It doesn’t make any difference which investment plan a retiree is withdrawing from - such as a high to medium plan or a less risky cash plan - cash prices can decline due to the RBA interest rates dropping. This question will be for Paul.

Paul Taylor: Thanks, Brad, and thanks for your question as well. So, yes, investing in a downturn as a retiree I’m sure it is tough and trying to navigate various aspects of that. The first thing I will say - and again it has been mentioned - that if there’s anything specific about your circumstances, we would encourage you to seek financial advice, but I will give some general comments which will hopefully assist you or at least assist you being able to speak with a financial advisor to work out what may be appropriate for you and your retirement.

So firstly, I think investing in a downturn in retirement it is important to have a clear strategy and that’s true of both retirement and the accumulation phase. I think what you do want to avoid is investing and then the moment a negative return comes sort of get worried and then you sort of switch out to something more conservative and then you see that markets rebound and then you switch back again, and you’re sort of chasing your tail. So, if you have a clear strategy that you’re comfortable sticking with I think that’s one of the really key things to look at and really acknowledge that we are investing in financial markets, and it does involve risks and negative returns do occur, so you need to be prepared for those.

Those negative returns might occur in the first year of your retirement, it might be the second year, it might be the fifth year, so just being prepared for the time that it occurs.

The second consideration may be to hold a portion of your retirement balance in a cash plan. By doing that, you know, when returns are a little bit higher, possibly putting a bit more in that cash plan and vice versa when a negative return does occur then possibly allowing that cash plan to wind down a little bit. You sort of might find yourself then selling at the highs rather than selling at the bottom of market. That does require a fair bit of discipline and it may be uncomfortable sometimes that even when markets are going well and your plan is going well, to actually have the discipline to take that out in cash and vice versa when things do have a bit of a downturn to have the confidence of just allowing that cash balance to wind down and then reducing exposure when required to more growth orientated strategies.

The third consideration - and again this may not be appropriate for your circumstances - is to consider the extent to which you could vary your pension payments. Again, it’s really what you - you know, the willingness or the ability for you to do that and also within various regulatory requirements of what you are required to draw down from your pension. Again, if it’s a case where you can reduce the amount from your pension payments in the more down years but acknowledging that might mean that when returns are better you may sort of reduce - sort of increase the amount you draw down just to make up for that, and as you sort of referred to some - a bank balance there as well.

So, I want to reiterate, this isn’t financial advice but just maybe some points for consideration for yourself and/or to speak to an advisor about.

Brad Zaknich: Thanks, Paul. The next question is from Deborah and Deborah has asked how do I work out how much I’ve paid in fees over the last three years. I’ll direct this question to Ben.

Ben Palmer: Thanks, Brad, and thank you, Deborah. Very good question. So, fees within GESB and generally - well, I’ll speak about fees within GESB. So, the charges levied against your underlying investments that you own through the units in the investment plans, it either relates to administration of your account or relates to managing the investments that sit beneath, that you own indirectly through the units in your investment plan. So, we talk about administration expenses, and we talk about investment management expenses. In terms of the administration, within the majority of our schemes - certainly in the accumulation schemes - there’s a fixed dollar monthly account keeping fee and there’s an ad valorem administration expense ratio that is levied as a proportion of the balance of your account.

They will show up on your Member Online transaction information as deductions from your account and it will be similar to bank statement, it will show as a transaction on your account. In terms of investment costs, these are disclosed in all our product information, and we also have a fee page on our website which provides a holistic and comprehensive quantification of the investment cost for each investment option. That includes the internal investment management costs, so Paul and the team and our asset consultants and our custodian and then the fees that we’re charged by the managers that we use to manage your investments on our behalf in different asset classes. It then also looks at the underlying costs through the portfolio in terms of transactions and look through costs, so it’s a very comprehensive measure of the costs of managing your investments.

So, to look at the last three years, I would encourage you to look through your Member Online transaction statement and you will be able to see the administration costs. The investment costs are not - because they are deducted from the unit price before the unit price is struck - and I’d just like to take this opportunity to shed a little bit of light on the concept of unit pricing. In superannuation we refer to units and that can create some confusion for many people. A good way of looking at it, it’s just a share. It’s a share of a global investment portfolio and when you have $X of global investments that are owned by X number of members, they’ve each got a slice - a unit - in that portfolio.

So, as I said, the costs of managing the investments are actually deducted from the value of that portfolio before we then divide it up to the ownership of members via the unit price. So, that’s a little less clear to calculate from looking at your Member Online statement but, as I said, you can look at our website. Our product information has the investment management costs and we also have, as I said, that very comprehensive look through measure in our fee disclosures on our website.

I’d like to also take the opportunity just to mention our principles around pricing and how we actually set the prices of the different schemes. The Board has a very clear equity principle in terms of recovering the cost to administer and manage the investments and administer the accounts. We also are required to maintain reserves that provide a degree of capital should there be an operational risk event or should there be reforms that we need to progress where we don’t want to make members directly charge for in the event that we have to progress those reforms.

So, we do have financial reserves as well and when we look at our pricing, we effectively model out the next five-year period in terms of all the dynamics of the fund and the administration costs and the investment management costs and we then effectively calculate what fee on a forward looking basis will allow us to recover costs and maintain our reserves and that’s the pricing that we pass through to our members. So, we really do have a very strong principle of equitable pricing. You may notice different investment options and different schemes have slightly different pricing and that explains why there’s slightly different pricing because there’s different underlying membership activity and dynamics for the different schemes.

I’ll also add that in the new Member Online platform that we are very close to launching - it was referenced in one of our earlier pre-recorded presentations - there will be enhancements to the presentation of money in and out of your account. So, while if you wanted to do it now on a backward-looking basis, you’d look through your Member Online at the transactions there, as soon as we launch our new Member Online platform - which is imminent - there will be summaries on the front page of money into and out of your account. So, that will aggregate all the outflows from your account so that will be fees as well as insurance premiums - if you pay those, if you have insurance cover through GESB - but it will summarise on a financial year to date basis and will allow you to look back at previous financial years in terms of aggregating all the monies paid out of your super account.

So, I hope that answers your question.

Brad Zaknich: Thanks, Ben. Got another question. This one is from Therese. Therese has asked, if GESB Super fund members leave government employment they cannot contribute to West State. People who have already retired and who may want to take a part time job are disadvantaged because they cannot contribute to their existing West State or GESB Super fund. As seniors are being encouraged to go back to the work environment, will the government, West State and GESB Super be changing this policy. I’ll direct this question to Jo.

Jo Gaines: Thanks for the question, Therese. Look, I understand the sentiment of the question and the decision to close West State was made by the State Government a number of years ago. It’s not a decision that GESB and the Board have control over, and it would be a decision for the State Government if they were to make that change. Certainly, we can take your feedback today and I understand the point you are making that for people want to put their money into the one fund that they do have and to be able to do that is important to you. You can continue to contribute to GESB, but it would require setting up a separate fund at this point in time, but certainly we take that feedback, and we can raise that issue with State Government.

Brad Zaknich: Thanks Jo. Another question, this one is by Keith. Does GESB have investments with any nuclear weapons producing companies? I’m reliably informed that Hostplus and CareSuper both have plans to divest from such companies and I respectfully ask that GESB makes the same commitment if you have such investments. Also, what progress has GESB made in response to the Premier’s statement in the press earlier this year that he’s requested GESB to divest of Russian assets supportive to the current war. We’ll pass this question on to Paul.

Paul Taylor: Thanks Keith. So, yes, a couple of questions there. So, we do have a very small exposure to companies that do have some involvement in the process of nuclear weapons. A lot of those companies are - it’s not their core business but they might be - sort of 98% of the business might be doing something like making car engines and there’s 2% of their business that has some aspect that may be contributing to the process of nuclear weapons. We did make many exclusions to controversial weapons around about 12 months ago or so and it always was the intention for nuclear to be the next cab off the rank so to speak to address that.

So, we certainly will be resolving that and we’re certainly aiming to resolve that this financial year in terms of that exposure. As I said, there’s just sort of some complexities around throwing out some companies that have an extremely small portion, but we just need to work through some thresholds there, but we would expect to announce something, as I said, this financial year.

The second question you asked about the Russian exposure, was touched on a little bit in the pre-recordings. Probably the points I want to emphasise is that even prior to the Russian invasion of Ukraine, the exposure that GESB had to Russian investments was very, very small. We had started reducing exposure in the lead up prior to the invasion and also well in advance of the Premier’s statement regarding exposure to Russia. As was mentioned by Ben earlier, we do have just one security - one Russian security - that is unable to be sold at this point in time as a result of sanctions that Russia has imposed in response to western sanctions.

So, as I said, it’s one security, very, very small portion of assets out of a $33 billion portfolio and, at this stage, can’t be sold but we’re certainly - as situations evolve, we’re certainly looking to liquidate that where practical.

Brad Zaknich: Thanks, Paul. Another question, this one’s from Tadius regarding transparency. How can we find out the yearly income of each member of the Board? This will be passed on to Jo.

Jo Gaines: Okay, thanks for the question, Tadius. The Board fees are recorded in our GESB Annual Report and are also available on our website. They are set by the State Government and are reported through both of those mechanisms so you can readily find it available through either the Annual Report or on our website, thank you.

Brad Zaknich: Thanks Jo. We’ll go to the next question asked by Jeffrey. We’re living in a climate emergency with projected global temperature increases set to exceed 2.5 degrees by 2050. This represents a clear existential threat to all of humanity and ecosystems. In this context, is it not the best interest of all members to urgently divest from climate wrecking investments associated with coal, gas and oil. Like I said, this was from Jeff, and we’ll pass this question on for Paul.

Paul Taylor: Thanks for the question, Jeff, and certainly hear the sentiment in terms of your concerns. What we certainly recognise and agree that there is a real risk out there and what we are committed to is a transition to making an appropriate response to that. What we are really conscious of is that the approach isn’t just to sell out of assets at all costs because that, in our context, doesn’t have a real-world impact. In the sense that we could sell a security in a fossil fuel producing company, someone else will buy it and they may not have the same concerns that you have and that we have in relation to that.

So, we really are committed to be part of the transition. There’s lots of examples that we’ve seen in recent times. Probably AGL is probably the best example where it’s shown that just exiting securities is not always the best approach but to engage with these companies and put pressure on them to ensure that we do have an appropriate transition, they do disclose appropriately, and they do act appropriately for the long-term best interest of all our members. So, the key message I want to say is that we certainly acknowledge what you’re saying, certainly are aware of the risks and certainly we want to be part of a transition rather than just dumping the securities and washing our hands of it in that context.

Brad Zaknich: Thanks Paul. We’ve got another question, this one’s from Meredith. If you do not complete a Death Benefit form will your superannuation - in this case West State - still be automatically distributed as per your will? Ben, if you could answer this question.

Ben Palmer: Sure. Thanks Meredith. The simple answer is, yes. So, as you’re no doubt aware, we have implemented the ability to submit binding death benefit nomination in the last 12 months or so, prior to that, the only option was for a member’s death benefit to be distributed via the will. In amending our regulations to permit BDNs - or binding death benefit nominations - we identified that was something that was of our members’ interest to offer that. Obviously, we also recognised that was a gap to many other superannuation funds in not providing binding death benefit nominations.

However, in the absence of a valid binding death nomination, the default position does still apply which is in the absence of a binding death benefit nomination the benefit will be paid via the estate as per the practice prior to implementing BDNs. So, yes, if you don’t have a BDN, it’s still distributed via your will as per our default position, which actually is different to many funds. In many other funds, trustees have a role to use their discretion to apply death benefit, so it’s a feature of GESB that our default position - in the absence of a BDN - continues to be via the estate and through the will. So, that may be to members’ benefit as well to have that default option if they don’t provide a BDN.

Brad Zaknich: Thanks Ben. Another question, this one’s from Carmelo. When will I be able to salary sacrifice with an employer who is not in the WA State Government. This question will be for Jo.

Jo Gaines: Thanks for the question, Carmelo. At the moment, you’re right, that we aren’t able to accept contributions either through salary sacrifice or the normal employer contributions for an employer that’s outside of the public sector. We’re very keen to see that change and as part of the work we’re doing with the Your Future, Your Super Commonwealth legislation changes, we’re currently exploring the opportunity of opening up the option of paying into our fund from employers outside of the public sector.

Again, I think Ben has mentioned a number of times, we are governed by state legislation and that change will require legislative amendments. We’re currently working with the State Government on those changes, and we would look forwards to those occurring some time in the future when the legislation and that work concludes, and we’ll keep members up to date as we progress through that.

Brad Zaknich: Thanks Jo. Our next question is from Max. Could you explain more why bonds go down so much when interest rates go up and even though the fixed interest return must go up substantially. Why is this not foreseeable by financial experts knowing interest rates are rising? Are you limited by the conservative parameters, for example, and don’t have the flexibility to address such changes to reduce interim losses? This one’s for you Paul.

Paul Taylor: Okay, thanks for the question, Max. Again, there’s a couple of things in that. So, why do bonds go down when interest rates go up, which is a very good question and a very logical question. Really the sense - the best way that I’d like to explain it is just think of an example where you’ve got a - you own an investment, it’s a bond that gives you - it costs you $10, and it gives you $1 every year for the next 10 years. Now, if all of a sudden interest rates are only - well maybe it costs $100 and it’s $1 so it’s giving you a 1% return.

Now, if the general interest rates out there are quite low that’s probably an okay return but if all of a sudden interest rates rises to 5%, all of a sudden getting $1 on that $100 investment isn’t that attractive. So, if you want to buy and sell that in the market, then no one is going to be willing to pay the $100 for it, they’re only going to want to spend maybe $90 or $80 on it, so it can really reduce the value of that investment. What we have seen in the past - I was going to say 12 months, but probably even the past six months in particular, that the rate of increase in interest rates has been extreme and extreme on any historical measure. It's some of the fastest pace of interest rate increases that we certainly have seen and that’s been the reason of why it’s been such a rapid reduction in bond price, which is quite unprecedented, certainly in modern times.

So, your question around, well, why can’t this be foreseen, and I guess that’s probably the difference between what we see as interest rate changes that the Reserve Bank comes out every month and what your bank, if you have a mortgage or even a savings account, they come out once a month and it raises 0.5%. Certainly, sort of going back a few months, it was very obvious that interest rates were increasing, and they were increasing at a reasonable rate. Now, the challenge with that is that financial markets also know that and already priced that in. So even though it’s only been the last six months and the Reserve Bank within Australia has just been gradually increasing rates over the past - well I say gradually but sort of quite materially increasing rates by around either 0.5% or 0.25%, the financial markets where you’re buying and selling bonds already anticipated that.

So, that’s why it sort of changed - it did change so quickly, but it certainly was unprecedented. Is it the conservative parameters, I don’t think that’s the case. Certainly, if we had a crystal ball and knew the extent of what would happen to share markets or bond markets or any other market, that would be handy, but it is a challenging thing to predict.

Brad Zaknich: Thanks, Paul. Next question is from Robert. Robert’s asked, in light of the latest hacking attacks of Optus and Medibank Private, how is GESB protecting their members’ private information. This one is for Ben.

Ben Palmer: Thanks, Brad, and thanks, Robert. Yes, very good question and it’s really been concerning to see the impacts of those data breaches at Optus and Medibank. I’ll start by saying that cyber risk is a key material risk as identified by the Board and the safety and protection of member information and our data is an absolute strategic priority identified by the Board and feeding through all our strategic initiatives and business operations.

How do we protect data? Well, I think there’s a number of - it’s a very multifaceted problem. So, the first environment is protecting data and systems from external penetration and the key controls around that are ensuring you have industry leading practice in terms of your controlled environments, in terms of your standards of accreditation from all your service providers internally and externally, we have very stringent requirements around the location of data warehouses. Obviously, it should go without saying, but ensuring that all systems and servers are employing best practice security protections and patching schedules et cetera, so that’s more the integrity of the hardware, if you like, from external penetration.

Another key facet is around accessing data and that continues to be really the dominant risk around cyber is either having user credentials compromised or having - another instance is where there can be member impersonation or fraud perpetrated on a member account. So, what we’re really trying to do at the end of the day is to stop members’ assets from being taken away from them without authorisation. In terms of the data access, there’s a significant control environment, we have a very detailed internal compliance system and control management system. That has all the things that you would reasonably expect in terms of access privileges only by appropriate people and as needed for their roles.

We have stringent controls around screening of employees, around - if someone leaves the organisation, ensuring access is removed. We have very significant financial control mechanisms and global standards - internal and external audit programs - around the controls around financial transactions and releasing money effectively and implementing financial transactions. We have extensive training programs for our staff, we have a specialist third party provider who is constantly testing and challenging.

We have a program to simulate people trying to make our staff use malicious links. We have an automated reporting process, we obviously have processes around blacklisting URLs, a significant training program with our staff. In terms of that final facet that I mentioned around member access, we have a number of measures around member identification. So, as you will be aware if you’ve contacted us or logging into Member Online, you need to - you have identification requirements.

What we have done since the Optus attack is added additional steps that members can implement in terms of adding, for example, additional security questions to their account. That would typically be a question and answer that wouldn’t have been in, for example, the suite of data that was compromised through Optus. So, that is something we’ve implemented since the Optus breach just to help provide an extra layer of security for those members whose data - if they were an Optus client - may have been compromised.

Finally, on this, again, to point to our new digital - our new Member Online platform which will be launched imminently. We have - a key feature of that upgraded platform is the more stringent authentication and security around access to your Member Online. So, we’re introducing multifactor authentication and there’s a lot more rigour that sits behind access rights to Member Online for transacting on your account. So, it’s a very multifaceted problem, but one that is at the forefront of our minds both on the Executive and the Board. As I said, we’ve got a suite of controls across many different facets of that that we’re committed to continuing to operate at global better practice in those areas.

Brad Zaknich: Thanks, Ben. Next question is from Barbara. Are you still investing our superannuation funds into the fossil fuel industry? If so, when will GESB be changing tack and investing our super funds into the renewables industries. Thank you. Obviously, this question is for Paul.

Paul Taylor: Thanks Barbara and, yes, similar to the previous question. So, to answer your question directly, yes, we do have some exposure to companies in the fossil fuel industry. As I mentioned before, we are committed to a transition plan which is not just net zero by 2050 in terms of carbon emissions but reducing our carbon intensity of our share portfolio by 45% by 2030. That’s off a 2020 baseline and, as I’ve mentioned, we’ve achieved 17% already in the short timeframe in the past couple of years.

Probably to answer the question around, well, what would it take to reduce that exposure further, and I think there’s probably three points I’d add there. One is in - Jo mentioned in her pre-recorded speech around the potential that we - you know, we are quite progressed in terms of looking - you know, what it would look like to have an enhanced ESG option that had a much stronger lens in terms of ESG characteristics, whether it’s environmental, social or governance factors. Certainly, should that be finalised then members would have the ability to invest in a plan that would likely have a much lower exposure to the fossil fuel industry.

The second reason why it would reduce even further would be if it was - any of the investments were inconsistent with that long term transition. As I said, that’s not to say we’re aiming for net zero today, but we have a plan, we have a strategy to reduce carbon emissions. If it got to the point where it was just not possible to meet those targets, then certainly we’d have to look at it.

Thirdly, which is an overarching comment for all of those potential options, is the best financial interest of our members. That’s, I guess, a regulatory requirement that we do have to manage assets on your behalf for your retirement, acknowledging that there are some - you know, those concerns that you mentioned but certainly that’s the lens that we do look through it. As I said in my presentation, we do think that goes hand in hand, those best financial interest and what we’re doing to reduce and appropriately manage that transition into lower carbon emissions.

Your questions around, well when will we invest in the renewables industry, that’s probably an easier question to answer in the sense that we already are. We do have many investments in the renewable industries and, again, we’re doing that and, again, for that best financial interest duty. We’ve got unlisted infrastructure investments that’s dedicated to certain areas that are essential to the decarbonisation process, we’ve got investments even in listed markets. We’ve got investments both the owners and operators of wind farms, so we’re well and truly on that journey already in terms of the renewables space and on the fossil fuels space we are certainly well and truly on that journey in terms of a transition.

Brad Zaknich: Thanks Paul. We’ll just see if there’s any more questions to come through. All right, we’ve got one here from John. What is the exposure to the European markets? With high costs of energy from the US and the loss of cheap gas from Russia, the industries in Germany in particular are in crisis. Again, for Paul.

Paul Taylor: Thanks for the question, John. So, it really depends on what plan you are invested with, so I’ll just speak fairly generally. So, our European exposure - or our global equity exposure - for plans like My West State Super and My GESB Super are around about 30% or a touch higher. Conservative plans has materially lower exposure to international equities overall at around probably 15% or thereabouts. So, the exposure to Europe is a fraction of that, I’ll have to take that question on notice to get the exact percentage, but certainly the majority of that global exposure is to the US, it’s generally around 60% exposed to the US and the rest is diversified exposure.

So, once you sort of drill down that - you know, if a third of the portfolio for a conservative option much less. It is a relatively small exposure to European markets, but to get the exact percentage I will have to take that on notice.

Brad Zaknich: Thanks, Paul. Another question from Hari. Where can I find the investment returns since the inception of all plans for comparison, I’m looking for long term returns. This one is for Ben.

Ben Palmer: Thanks, Brad, and thanks, Hari. We have detailed investment histories on our website. If I remember correctly, it’s through the dropdown for investments and then unit prices or performance. It will take you by default to a - I think - graphical illustration, however you can change the time period on that, and you can check - select to different investment options to include on that chart. If you’re a bit more of a data/spreadsheet person, you can actually download the historic unit prices from that same page to a CSV file which will have daily unit prices back available, I think, since inception.

Through our website is where you can get long term investment history. I think, as I said, the presentation will default to a shorter timeframe for certain options and on a chart, but you have a lot of options there to change the time period, the plans that you’re including and then to extract a data file with historic prices.

Brad Zaknich: Thanks Ben. Another question, this one is from Chris. Has any thought been given to diversifying the GESB portfolio to include social housing initiatives to support the WA community. For Paul.

Paul Taylor: Thanks for the question, Chris. Yes, so certainly that is an area that we have looked at and continue to look at it. We obviously undertake a lot of due diligence prior to making investments and, to date, we haven’t got to the stage where we’ve got over the line in terms of our comfort in terms of the financial interest to GESB members in addition to that sort of social housing impact. There’s obviously some announcements were made in the recent Federal Government to make this particular area a little bit more attractive to superannuation funds, so, again, we’ll look at the outcomes of that.

So, we do cast the net very wide in terms of what we look at in terms of our investment portfolio, but it really comes back to what is best for our members and certainly that ESG component which we do factor into it is something that is considered as well.

Brad Zaknich: Thanks Paul. Next question by Michael. Is GESB going to develop an app to use rather than the website? I think we might direct this one to Ben.

Ben Palmer: Thanks Brad, thanks Michael. Look, as we’ve made very clear, I think, in the presentations, we do have a clear digital strategy and we are committed to expanding our digital services. An app - the consideration of an app will form part of that strategy. We’ll go through a process of assessing if the benefit to members justifies the cost of implementing an app. What I will say, however - again, pointing to our new Member Online platform and as alluded to earlier in the pre-recorded sessions - is all the work we are doing on our digital progress is very focused on (1) accessibility and (2) responsiveness.

So, the work we are doing - both on our website and in the new Member Online portal - actually translates by design very well to mobile - in fact, any - devices. So, we’re really committed to making sure that the work we’re doing in the digital space is accessible and responsive through all types of devices. So, I won’t commit to whether or not we will have a standalone app in the future, however, the new Member Online will be very user friendly from a mobile device, so I think that works practically in terms of mobile usage. As I said, we will review as part of our digital strategy going forward whether plugging into that or having a specific app is something that provides cost benefit to our members.

Brad Zaknich: Thanks, Ben. Another question from Su Lee. Will you be reporting the carbon intensity and fossil fuel exposure of different portfolios regularly to show progress to your goals. For Paul.

Paul Taylor: Yes, thanks, Su Lee, that’s a really good question. The brief answer is, yes, that is certainly the plan. We are planning to make available on our website a climate report that we’re in the process of drafting which will have a lot more detail in terms of what we’re doing in that space and, yes, absolutely, it is certainly the plan to keep our members regularly updated on those initiatives. We obviously do, as part of this annual members’ meeting, but, yes, certainly in a different form on our website, but that is the intention that over time we will do that.

Brad Zaknich: Thanks, Paul. Next question is from Sarah, not so much a question. I can’t believe there are only 65 people on the team, well done. Jo.

Jo Gaines: That’s probably the easiest one of the night. Thank you, Sarah, and look, I agree, they’re a great team at GESB. They do a fantastic and that there’s only 65 people there is amazing. They are supported by other service providers who do a lot of work to support them, including our colleagues at Link, but the team at GESB are fantastic and they’re working really hard to bring a whole range of new initiatives to our members. The Members Online initiative going forward in the next, hopefully, few weeks is the next great initiative and we’re also doing a whole lot of work the ESG as Paul’s outlined in significant answers to multiple questions today and we’re also looking very intently at the offerings for our members in retirement.

Look, they do a great job and we, as a Board, continue to ask them to do more and they continue to rise to the challenge. So, on behalf of all of you I’d like to thank the work of the GESB staff because they do a fantastic job.

Brad Zaknich: Thanks Jo. The next question is from Andrew. I hear a lot about cryptocurrencies. Does GESB invest in this? Paul?

Paul Taylor: So, we don’t invest in cryptocurrency. Probably, I guess, an expansion of that, the thing underlying blockchain technology within cryptocurrency certainly has a lot of vast reaching applications. But it’s certainly an investment that is extremely volatile in nature and tend to be driven by more speculative factors rather than actual fundamental factors, so it’s not the sort of investment that we are looking at at the moment.

Brad Zaknich: Thanks, Paul. The next question is from Therese. Does GESB have an office that members can visit if they need help from staff to complete forms? That will be a question for Ben.

Ben Palmer: Thank you Brad and thank you Therese. Yes, we do. We have our member servicing offices at the top of the St Georges Terrace here in Perth at QV1. There is a reception where members can lodge forms and we’ve got an extremely friendly and helpful reception staff there who can give you some assistance. There is a small couple of desks there for that exact purpose of if you do need some help or need to sit down and lodge a form there is certainly facility to do that, so that’s in QV1.

Again, I’ll go back to our digital strategy. We are very much aware that a lot of our processes still require paper forms and that’s something that we’re very committed to resolving in terms of providing self-serve and digital and pre-populate forms and more simpler forms to work through, so that’s part of our digital strategy going forward. Again, following the launch of our Member Online platform, we have a pipeline of work into the coming months and years that will really provide a strong platform for more digitisation. But to answer your question, yes, there is an office here in Perth that our members can attend to lodge forms and get some assistance.

Again, just to reiterate, we’re not able to provide financial advice but I’ll take the opportunity to also mention that if you’re close to retirement or looking at - interested in understanding your options around retirement within your GESB interests and the GESB schemes, there is a face to face service here in Perth as well where members can sit down with a consultant and talk through their options on what happens with their GESB benefits when they approach retirement.

Brad Zaknich: Thanks Ben. We’ve now come towards the end of our meeting this evening, that was the last question, so we’ll close them off now. Thank you everyone for your questions, it’s been great to hear from so many of you. If there’s anything you’d like to revisit from this evening, a video of this meeting and the minutes - along with the answers to any outstanding questions - will be available on the website within the next month. We’re here to help you learn more and make informed decisions about your super. We encourage you to explore our website at gesb.wa.gov.au; it’s an excellent source of information, tools and resources relating to our super.

On your screen now you will see some links for the resources mentioned throughout this meeting. We hope you’ve enjoyed the opportunity to hear from our GESB speakers tonight. As you’ve heard this evening, we’re committed to understanding and delivering on your expectations relating to your super and our top priority is putting you, our members, first. Once again, thank you for attending our second Annual Member Meeting, have a lovely evening.

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