Speech by David Neal, Managing Director of the Future Fund, at the 30% Club investor event, Melbourne

I’m very pleased today to have the opportunity to share a perspective on Board gender diversity, the work of the 30% Club and the role I see institutional investors and fund managers playing in this issue.

The Future Fund is Australia’s Sovereign Wealth Fund. We invest for the benefit of future generations of Australians and our investment mandate from government requires us to seek to maximise returns with acceptable but not excessive risk.

That means that we are financially focused. It is our job to seek to generate strong risk-adjusted returns.

We do this by building a broadly diversified investment portfolio and working through our in house investment team and external investment managers to build and manage the portfolio in line with our objective.

This focus on generating strong risk-adjusted returns includes our being an active owner and using our position to encourage the entities in which we invest to create value for us.

Across the various portfolios that we manage – the Future Fund itself, but more recently the Medical Research Future Fund as well - our Australian listed equity holdings, at the end of March 2016, were valued at over $7.8 billion.

Eight out of our ten largest listed equity holdings are Australian companies and in all we invest in over 200 Australian listed companies.


So it will come as no surprise that we take a strong interest in how those companies are governed by their boards and in the quality and capability of those boards.

We are not alone in this.

Other large Australian institutional investors, such as superannuation funds, as well as investors from offshore including pension funds, sovereign wealth funds and so on – are increasingly interested in governance issues including Board expertise, experience and composition.

At the Future Fund we directly exercise all our voting rights in listed companies in Australia.  That means that last year in Australia we voted on 1,210 resolutions at 228 meetings.

In exercising these voting rights we apply our voting and governance principles to guide our decisions, as well as drawing on the advice of our external investment managers.

These principles are published on our website but I want to highlight one in particular. It states that:

“Companies should exhibit sound and robust corporate governance by proposing high-calibre, commercially experienced and diverse boards of directors to provide superior business leadership and integrity.”  

There is extensive evidence and research that shows that having the right mix of skills and experience and having gender diversity on Boards creates value.  Moreover, the research shows the value of diversity increases as the task becomes more complex, and the task facing large corporate boards is certainly complex and multi-faceted.

So gender diversity is an important lens that we use as we consider the application of this voting principle.


More than just exercising our voting rights, we engage with companies.  We do this directly through meetings between our staff and listed company Chairs and Non-Executive Directors, and indirectly through our external investment managers. 

Over recent years we have engaged with companies on a range of issues: capital management, executive remuneration, Board remuneration and environmental and social risk management including matters such as climate risk and supply chain issues.

And alongside these topics, we talk to Boards about their composition, skills and succession plans and about their diversity in the Boardroom and throughout their organisation.

We seek to understand how Boards address the processes and thinking - whether conscious or unconscious - that may limit their ability to identify and propose high quality Directors that add a diversity of background and expertise.

And we seek to understand what actions they are taking and how they integrate gender alongside the many considerations that play a part in identifying Directors.

Our message in raising these matters is clear. Our expectation is that Boards ensure they are considering the full range of talent – female and male – in identifying appropriately skilled Directors and building appropriately diverse Boards.  Done properly and without bias, this will lead to more women on company Boards in Australia.

Asset owners and fund managers working together

Whilst we have a growing program of direct engagement ourselves, we also work through our external investment managers.

In fact, our external managers typically have more engagement with these companies than we do,  given it is their job to understand, analyse and value in detail the strategies and prospects of the companies in which they invest on our behalf.

So we are increasingly focused on ensuring that the messages and expectations that we present to companies in which we invest are aligned with - and reinforce - the messages and expectations that our external managers communicate.

Our in house ESG Risk Management team, along with our Equities team, make sure that our voting and governance principles and our expectations around the quality and diversity of Boards – as well as the other expectations captured in our voting and governance principles – are understood by our external partners and communicated consistently to investee entities.

Across the investment industry, this emphasis on having fund managers and the institutions for whom they invest speak with one voice is growing. It is certainly something we are continuing to emphasise and focus on.

Within this there is an important message for fund managers – their engagement activity needs to go beyond understanding the numbers.  Fund managers need to continue to develop their skills and experience at engaging on the softer issues of governance, and how these issues can drive or destroy value in a company.

And of course there is a message to Boards, which is that their shareholders support them in their efforts to build high quality, diverse Boards.

Relentless change

Its important for us to be clear about how meaningful, valuable and sustainable change will be effected.  The activities of thoughtful institutions, like many on this room, and certainly the fine efforts of the 30 Per Cent Club, are about generating an incremental but inexorable process of change in mindset, behaviour and culture.  All in this room and beyond must keep the issue prominent and live, highlighting that diversity isn’t just about being the right thing to do for our society, but is also demonstrably the right thing to do for our returns.  By doing so, we are creating a powerful water-on-a-stone effect that over time will see the norm change, and the 30% club put out of business.  What a great day that will be.

Thank you.