Industry super fund First Super has halted new private equity investment and is reviewing $100 million in existing exposures over concerns of poor labour practices by companies it invests with.
These companies include Urban Purveyor Group, OSH Club, and Aero-Care, the company at the centre of the Sydney Airport ground staff wages and conditions scandal.
“Our $100 million private equity program is under review and we are not making additional investments,” First Super CEO Bill Watson said.
“We are extremely concerned at exposure to investment risk through companies that have enterprise agreements in place which have lower wages and conditions than what is contained in the relevant modern award.”
“Businesses based on unsustainable labour costs or challengeable industrial arrangements pose a high risk of a permanent adverse movement in labour costs, potentially impacting on returns,” Mr Watson said.
“Furthermore, where employees are denied a living wage, there is a risk of workplace injuries due to fatigue through excessive hours or high turnover.
“First Super is not interested in investing in companies that operate in a ‘grey area’ when it comes to labour practices.”
Mr Watson said the outcome of the review could mean that the Fund may wind up its private equity program.
It may also result in increased investment in other asset classes such as unlisted infrastructure, unlisted property or more investment in listed companies.
In February, First Super raised its concerns with equity fund managers and the Australian Council of Superannuation Investors over investment in companies operating under franchise model, after wage scandals at 7 Eleven and Dominos’ Pizza.