investment update 2022-23

Title: HESTA Investment Update - August 2023

Sonya Sawtell-Rickson: Welcome to our 2023 financial year investment wrap-up.

In many ways it has been a challenging year. Inflation was persistently elevated, leading to a rapid increase in interest rates which put pressure on household budgets.

Despite this, financial markets have remained resilient.

Our MySuper Balanced Growth option, where most HESTA members are invested, returned 9.59% over the year to 30 June 2023.^*

And when we look at the 10-year period to 30 June 2023, it returned 8.02% p.a.^*

For members in the retirement phase, our HESTA Income Stream Ready-Made Strategy is comprised of two investment options: Income Stream Balanced Growth and Income Stream Conservative.

Our Income Stream Balanced Growth option returned 11.79% for the year to 30 June 2023.^* And over 10 years to 30 June 2023, it returned 8.65% p.a.^*

Over the same time periods, our Income Stream Conservative option returned 6.40% for the financial year,  and 6.00% p.a. over 10 years to 30 June 2023.^*

Pleasingly, these three investment options have all outperformed their 10-year inflation-linked investment objectives to 30 June 2023.^*

At HESTA, we have a history of strong long-term performance. HESTA was one of the first super funds to receive the 20-year platinum performance rating from ratings agency SuperRatings – the highest rating possible.^{^}

Our strong performance for the year was supported by elevated returns in global and Australian share markets, particularly in the second half of the year where we saw global equities surge with technology stocks and Japanese shares two standout areas.

Over the year the Reserve Bank of Australia lifted its cash rate from 0.85% to 4.10%. In this rising interest rate environment, bond and property returns were muted. However, inflation-linked assets, including infrastructure, performed well.

We have seen the impacts of higher interest rates flowing through to the global economy, leading to a regional banking crisis in the US, and likely to lead to a slowing economy.

As such, as we look ahead, we see many similarities to the year that was. High (although moderating) inflation and elevated interest rates are likely to lead to ongoing market volatility and shape relative asset class performance. However, this will also provide opportunities for long-term investors like HESTA.

Our continued focus on delivering investment excellence with impact^# also creates opportunities and reduces risk, and I want to share some of the priorities we’ve been focused on during the last financial year.

HESTA was one of the first major Australian super funds to announce a plan to reach net zero portfolio emissions by 2050. This was supported by an interim target of a 33% reduction in normalised emissions by 2030, which we’re proud to have achieved this target in 2022,  8 years ahead of schedule. This has led us to strengthen our interim target to a 50% normalised reduction in portfolio emissions by 2030.

In addition, to capture opportunities associated with the transition to a lower carbon world, we announced our intention to have 10% of the portfolio invested in climate solutions – such as renewable energy and sustainable property – by 2030.^**

It’s why we recently announced our intent to explore up to $100 million of investments in domestic green hydrogen projects — which is the cleanest form of hydrogen production – alongside our partner ReNu Energy.

We’re also continuing to engage with priority emissions-intensive companies  both directly and through collaborative programs, with the view to stewarding them towards alignment with the goals of the Paris Agreement.

Rest assured, we’ll continue to focus on generating strong long-term investment performance, helping our more than 1 million members face the future with confidence, while also accelerating our contribution to a more sustainable world.

Thanks for joining us.

^{*Investments may go up or down. Past performance is not a reliable indicator of future performance. Returns are net of investment fees and costs, transaction costs and taxes.} 

^{^ Product ratings are only one factor to be considered when making a decision. Visit SuperRatings for important information about this rating}

^{# Responsible investment is an approach to investing that incorporates the consideration of environmental, social and governance (‘ESG’) risks and opportunities into investment decision making and active ownership, to promote the best financial interests of members. For more information about Super with impact™ visit hesta.com.au/super-with-impact}

^{** Normalised carbon emissions scope 1 and 2 (tonnes CO2e / $m invested) below the 2020 baseline}