First Super ‘watching’ Orbis investment over ESG concerns

First Super is walking the talk on its environmental, social, and governance (ESG) active approach by putting its investment in Orbis Investment Advisory on watch due to its holding of XPO Logistics that have poor governance and labour practices.

Orbis is the largest institutional shareholder of the US-based freight and logistics company with a 23% of the outstanding shares.

First Super chief executive, Bill Watson, said the fund had concerns that it was exposed to significant legal, regulatory, and reputational risks in North America and Europe due to allegations of labour law and occupational health and safety violations at XPO.

“First Super is reconsidering its long-standing investment with Orbis,” Watson said.

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“XPO’s underperformance can arguably be attributed to its poor governance and labour practices. It is an interesting case study to illustrate the proposition that firms who lag on ESG imperatives can often constitute a poor investment over the long term.”

“First Super seeks better responsiveness from Orbis around our legitimate returns-based concerns about XPO.”

First Super said it had raised concerns about XPO’s governance and Orbis’ voting against a shareholder resolution that would have split the role of chair and chief executive.  Orbis had also voted against shareholder proposals calling for sustainability reporting and policies to strengthen prevention of workplace sexual harassment.

First Super has $143 million invested in the Orbis Global Equity Fund that is offered to Australian investors through the Australian registered Orbis Global Equity Fund, that totals $3.1 billion.

According to FE Analytics, the Orbis Global Equity Fund returned significantly lower than its global equity sector and MSCI World benchmark.

Over the three years to 30 November, 2019, the fund returned 34.55%, compared to the MSCI World at 57.52% and its global equity sector average at 47.4%.

XPO Logistics is the fund’s second highest holding at 6% of the portfolio, according to tis factsheet.

Orbis Global Equity Australia fund return v sector and benchmark over the three years to 30 November 2019