Insignia Financial : 2023 ESG report

Insignia Financial Annual Report 2023

Environmental, social and governance report

In the face of global challenges such as climate change and social inequity, we acknowledge the role we must play in working towards sustainable outcomes in our business operations, and the products and services we offer.

Our ambition to secure financial wellbeing for every Australian extends to environmental responsibility, social

equity and community wellbeing. We believe the good health

of our planet and the wellbeing of our communities is part of

true prosperity.

Embedding ESG factors into decision making across our business is critical for us to deliver sustainable long-term growth for the benefit of our clients and stakeholders.

At Insignia Financial, we are committed to helping secure a better future for our clients, people and planet.

In June 2022, we became a carbon-neutral organisation by measuring and offsetting our scope 1, 2 and 3 operational carbon emissions. In September 2022, we achieved certification with Climate Active, further validating this achievement. Our focus now is to use our emissions baselines and set science-based reduction targets.

Working towards a sustainable future

Insignia Financial is evolving our responsible investment approach in line with our commitment to ESG. We believe in climate science and support global efforts to achieve net zero greenhouse gas emissions by 2050.

Our memberships with the Investor Group on Climate Change (IGCC) and Responsible Investment Association of Australasia (RIAA) through our MLC Asset Management business helps inform our response to ESG-related risks within our investment business.

We support the United Nations Sustainable Development Goals as a shared blueprint for peace and prosperity for people and the planet. The goals most aligned to our ESG strategy have provided a framework to guide our ESG principles and initiatives.

Alongside these approaches, we have:

gained approval from Reconciliation Australia for our new corporate Innovate Reconciliation Action Plan (RAP). This is designed to strengthen our relationship with First Nations people

signalled the beginning of our alignment with the global Principles for Responsible Investment (PRI), by our boutique funds management business, Antares, becoming a signatory

maintained overall gender equity in the business with 49.16% female workforce participation at 30 June 2023.

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Materiality topics

This financial year, we revised our materiality topics by implementing globally recognised best practice. In collaboration with our advisory firm, we carried out a Global Reporting Initiative (GRI) compliant materiality and significance assessment.

The material topics were assessed on the significance of their economic, environmental and social impacts, in accordance with the GRI guidelines. Each topic was assessed against multiple criteria, including scale, scope and likelihood, giving it an overall significance score (as shown at right). All topics are important, but those assessed as having the 'Highest impact' are the ones with the most importance to our stakeholders. They are, therefore, a priority for our organisation.

	•	Governance, compliance, transparency
		and disclosure
Highest	• Responsible investment, ESG integration
	and stewardship
impact
•	Data and cybersecurity
	•	Climate risk assessment
	•	Employee engagement, wellbeing
		and retention
	• Diversity, inclusion and equal opportunity
Most	• Product simplification and innovation
• Engaging First Nations people
important
• Technology and artificial intelligence (AI)
	• Procurement and modern slavery
	•	Biodiversity and conservation
	• Financial wellbeing and advice accessibility
More	•	Community investment
important	•	Operational environmental impacts

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Insignia Financial Annual Report 2023

Definitions

To understand our impacts, it is important to first understand the definitions of each of these topics and what they mean to us at Insignia Financial.

Topics

Definitions

GOVERNANCE

CLIENT

ENVIRONMENTALSOCIAL

Governance, compliance,	•	Attaining best-practice corporate governance, compliance, transparency and
transparency and disclosure		disclosure - specifically regarding progress on ESG performance at corporate
	•	and investment levels
	Governing these best ESG practices through clear structures and processes to
	•	minimise risk
	Efficient resourcing to achieve and implement our ESG strategy
	•	Communicating our progress to stakeholders in line with emerging industry
		standards
Data and cybersecurity	•	Implementing robust standards of data privacy and cybersecurity to limit the risk
		of cyber-attacks and to protect our clients' and employees' data
Technology and AI	•	Monitoring developments in emerging technology and AI so we can respond
		accordingly, maximise opportunities and mitigate risks
Procurement and	•	Sourcing products from suppliers that meet social criteria, and identifying and
modern slavery		managing any human rights issues in the business and supply chain
Responsible investment, ESG	•	Establishing measurable ESG integration and stewardship processes in line with
integration and stewardship	•	leading practices and standards
	Integrating ESG criteria into investment decisions and the financial products and
	•	services we offer, for the benefit of clients and members
	Being active owners
Financial wellbeing and	•	Providing access to reasonably priced financial services for our clients
advice accessibility	•	Finding more ways to assist vulnerable clients groups
Product innovation and	•	Using innovation and digitalisation to benefit clients
simplification
Engaging First Nations	•	Creating pathways for Indigenous employees and businesses to partner with
people		Insignia Financial
Community investment	•	Giving back to the local communities of Australia through jobs, donations,
		volunteering and strategic partnerships
Employee engagement,	•	Attracting and retaining talent and providing employees with training and
retention and wellbeing	•	development opportunities
	Protecting employees' health and wellbeing
Diversity, inclusion and	•	Ensuring individuals - whether clients, staff or business partners - are treated
equal opportunity		equally and without discrimination
Operational environmental	•	Reducing the environmental impacts in our operations, including minimising
impacts		our emissions and waste, and educating staff on how to reduce their
		environmental impact
Climate risk assessment	•	Assessing the impact of climate risks on our strategy and business model
Biodiversity and	•	Protecting and preserving the land, minimising any negative impact from our
conversation		business activities or investment

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Our ESG strategy and framework

We see sustainability as an ongoing journey, requiring regular ESG impact evaluations. This year we engaged an independent sustainability advisory firm to refine our ESG strategy, addressing emergent sustainability challenges and aligning with stakeholder expectations. We also submitted to a formal materiality assessment in line with the GRI requirements.

Our strategic framework has four primary focus areas, each with relevant material topics. We are working with our advisory firm to build targets and initiatives for these focus areas by the end of March 2024. At that point, our updated ESG strategy will be launched, providing a

roadmap for our actions over the following two years and aligning with our broader business objectives.

In developing our strategy, we recognise upcoming mandatory climate-related reporting proposed for financial year 2025, and the adoption of global best practices such as the International Sustainability Standards Board's (ISSB) new sustainability standards, announced in June 2023. We also remain committed to understanding and addressing climate-related risk in our business through support of the Task Force on Climate-related Financial Disclosures (TCFD), which will be incorporated into the ISSB standards.

Governance

Client impact

Social impact

Environmental impact

Governance and transparency are crucial to the overall sustainability, credibility and success of our organisation.

MATERIAL TOPICS

We believe financial wellbeing is a right for every Australian. We seek to deliver more value to existing clients and make advice more accessible.

Having an inclusive workplace that reflects the society we serve is important to us.

We recognise financial wellbeing is out of reach for many vulnerable communities and are working to close the gap.

We understand the sustainability of our organisation is linked to being a good environmental steward.

•	Governance, compliance,	•	Responsible investment,	•	Engaging First	•	Operational
	transparency and		ESG integration and		Nations people		environmental impacts
•	disclosure		stewardship	•	Community investment	•	Climate risk assessment
Data and cybersecurity	•	Financial wellbeing and	•	Employee engagement,	•	Biodiversity and
•	Technology and AI
	advice accessibility		wellbeing and retention		conservation
•	Procurement and	•	Product simplification	•	Diversity, inclusion and
	modern slavery		and innovation		equal opportunity
	KEY TARGETS AND INITIATIVES
•	Align sustainability	•	Align investment	•	Complete Innovate	•	Set 2030 emissions-
	reporting to ISSB		business to Principles		RAP actions by		reduction target for
	standards by		for Responsible		March 2025		operational emissions
	financial year 2025		Investment (PRI)	•	Increase employee
					volunteering to
					40% by 2025

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Insignia Financial Annual Report 2023

United Nations Sustainable Development Goals

Since 2021, Insignia Financial has supported the United Nations Sustainable Development Goals (UN SDGs), using them as a framework to guide our ESG principles and initiatives. While we support all 17 UN SDGs, we have prioritised five goals, given their relevance to our business and our ability to drive change in these areas. Following the development of our new material ESG topics, we have looked to broadly align these to the SDG initiatives shown in the table below.

Sustainable
Development Goal	Ensure healthy lives and	Ensure inclusive and
	promote wellbeing for all	equitable quality education
	at all ages	and promote lifelong learning
			opportunities for all
	•	Employee engagement,	• Community investment
Aligned material	•	wellbeing and retention	• Financial wellbeing and advice
topics	Community investment	accessibility
	• Monitored health and wellbeing of	• Further partnered with The Smith
		staff through Our Voice survey	Family on its Money Talks program
	•	Implemented hybrid work	• Expanded Member Engagement and
		practices	Wellbeing Team
Initiatives	•	Delivered Development Matters
	career growth program
	• Grew employee giving and
		volunteering across the
		organisation
	• The Our Voice staff survey	• Up to 500 disadvantaged students
		highlighted:	have the opportunity to learn
		- 71% of our employees perceive	skills for financial decision making
		wellbeing as a key priority within	due to our partnership with The
		Smith Family
		the organisation
		• Our Member Engagement and
		- 83% of our employees feel
		able to balance personal	Wellbeing Team grew by 10 people,
		to provide more help, guidance,
		responsibilities while working in
		coaching and advice to clients
		a hybrid way
Outcomes		and members
• More than 800 employees in total
	• We experienced 280,000 client
		attended seven Development
		engagements across our teams and
		Matters workshops, designed to
		digital channels
		help employees take charge of their
		• We delivered 6,850 digital
		own skills development and career
		statements of advice to clients
		progression
	• Community giving and volunteering
		increased across the organisation
		with the launch of a new digital
		community giving platform

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Ensure women's full participation at all levels of decision making in political, economic and public life

• Diversity, inclusion and equal opportunity
• Employee engagement, wellbeing and retention
• Implemented Our Leading Women initiative and talent pipeline
• Joined Champions of Change Coalition
• Applied for Family Inclusive Workplace certification
• Despite an increase in our gender pay gap, from 14.3% to 14.5% in financial year 2023, we remain below Financial Services and Australian norms. We continue to work towards reducing this gap.
• Maintained overall gender equity with 49.16% female workforce participation at 30 June 2023

Reduce inequality within and among countries, including human rights and Indigenous people's rights

• Diversity, inclusion and equal opportunity
• Engaging First Nations people
• Procurement and modern slavery
• Monitored staff sentiment on diversity and inclusion through
  Our Voice survey
• Submission for Australian Workplace Equality Index (AWEI) Bronze
  Tier status
• Received Reconciliation Australia's endorsement for our Innovate RAP
• Implemented digital procurement system, helping to better manage modern slavery risk
• 85% of Our Voice staff survey participants agreed Insignia Financial values diversity and inclusion, same as previous year
• Completed the processes required to achieve AWEI Bronze Tier status, which formally recognises our commitment to Australian LGBTQIA+ inclusion, equality and equity
• Delivered 23 of 90 action items for our Innovate RAP by the end of June 2023, ensuring we move quickly to meet our commitments
• All employees completed training on compliance with the Modern Slavery
  Act 2018 (Cth)
• The integrity and availability of data from our new digital platform enabled us to better monitor suppliers' modern slavery risks

Take urgent action to combat climate change and its impacts

• Environmental operational risk
• Climate risk assessment
• Responsible investment, ESG integration and stewardship
• Became recognised as a carbon- neutral organisation for operational emissions
• Extended climate risk assessment across a broader range of investment portfolios
• Commenced alignment to PRI
• Achieved Climate Active certification as a carbon-neutral organisation in September 2022
• Assessed climate risk of in-house managed diversified investment portfolios in addition to MySuper portfolios
• Our boutique investment business,
  Antares, became a PRI signatory in April 2023

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Insignia Financial Annual Report 2023

Governance

Governance, compliance, transparency and disclosure

Governance, compliance, transparency and disclosure are crucial aspects of the overall sustainability, credibility and success of our organisation.

We maintain rigorous processes, policies and measures to uphold our standards in this respect. In doing this, we foster the trust of our employees, our clients, regulators, and the communities we serve, ensuring the enduring strength and resilience of our organisation.

'Three lines of accountability' model

We adopt the 'three lines of accountability' model to govern risk management activities across the organisation. The model is represented as follows.

First line - business management

Business units are accountable for identifying, managing and owning the risks inherent in the products, services, activities, processes and systems they are responsible for.

Governance statement

Our approach to corporate governance is based on a set of values and behaviours that underpin day-to-day activities, provide transparency and fair dealing, and seek to protect stakeholder interests. The Board and management of Insignia Financial recognise the importance of good corporate governance and are committed to maintaining the highest standards of corporate governance within the Group. Find out more about our approach to corporate governance here: https://www.insigniafinancial.com.au/ corporate-governance

Second line - Risk Management function

The independent Risk Management function, led by the Chief Risk Officer, is responsible for the design, maintenance and ongoing development of the Risk Management Framework.

Risk Management supports the first line in its risk management responsibilities by providing independent challenge and oversight, as well as specialist risk advice. This includes assessing the use and adequacy of frameworks, systems, processes and behaviours, to form a view of how well risk and compliance is managed across the Group.

Third line - independent assurance

Internal audit provide a third line of independence and oversight of the first and second-line activities. This oversight may include other independent reviews commissioned by the Board.

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Internal audit

Our internal audit activities are undertaken by the Group Internal Audit function, which is governed by a Charter approved by the Group Audit Committee. The role of Group Internal Audit is to provide the Board and management with independent and objective assurance on the effectiveness of the Group's governance, risk management and internal control processes. To maintain independence, Group Internal Audit has no direct operational responsibility or authority over any of Insignia Financial's business or risk management activities.

Group Internal Audit has full and unrestricted access to all of Insignia Financial's information systems, records, physical properties and employees. The Group Audit Committee monitors Group Internal Audit's activities and performance, including its independence.

Anti-bribery and anti-corruption

The Anti-Bribery and Anti-Corruption Policy at Insignia Financial serves as a strict guideline, prohibiting employees from taking part in any activity that constitutes bribery or corruption. This policy establishes a systematic structure to effectively identify, mitigate and manage potential bribery and corruption risks across our operations.

Our policy aims to ensure equitable client outcomes, foster integrity in the financial markets, strengthen our credibility with stakeholders, including clients, it also reaffirms our commitment to corporate responsibility. This policy was evaluated and endorsed by the Board in April 2021 and is slated for its next review in April 2024. The intention of the policy is to build on the existing governance and risk management frameworks.

Whistleblower protection

Our Whistleblower Policy recognises the critical role whistleblowing can play in the early detection and rectification of misconduct. Insignia Financial is committed to providing support and protection to whistleblowers, so they feel free to report without fear of reprisal.

Under the Whistleblower Policy, our people, suppliers and contractors can report concerns through several channels, including a confidential Whistleblower Hotline operated by PwC. Matters raised under the Whistleblower Policy, including any material incidents, are reported

to the Group Audit Committee or the Group Risk and Compliance Committee.

Board effectiveness

Insignia Financial's corporate governance initiatives aim to:

• consolidate and simplify the structure of the Insignia Financial Group
• improve the effectiveness of our business and people
• provide the foundation for future product and entity simplification, and
• deliver more effective and efficient governance, communication and coordination.

Our board governance programs have included:

• standardisation and enhancement of board and committee foundation documents, frameworks and processes across key entities, to improve business effectiveness
• initiatives to improve director effectiveness and enhance board decision making, and
• improvements to the capability and efficiency of board support functions.

The Member Office

The Member Office (MO) is an independent function within Insignia Financial. The purpose of the MO is to advocate for members and support the Insignia Financial registrable superannuation entity licensee (RSEL) boards to discharge their fiduciary responsibilities in the best financial interests of members. The MO is an extension of our RSEL boards and provides a day-to-day link that spans the trustee

on one side, and management and service providers on the other.

The MO is independent of Insignia Financial Group's management and has the authority to obtain all information necessary to assist the RSEL boards in meeting fiduciary obligations.

The Office of the Responsible Entity

Similarly, the Office of the Responsible Entity (ORE) is an independent function within Insignia Financial. The purpose of the ORE is to assist the responsible entity (RE) boards to discharge their fiduciary and licensing responsibilities in the best interests of investors. The ORE oversees the performance of managed investment schemes and the provision of scheme services to the REs. The ORE is independent of management and has access to all the information and resources required to perform its duties.

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Insignia Financial Annual Report 2023

Governance

Financial Accountability

Regime

The Financial Accountability Regime (FAR) extends the current Banking Executive Accountability Regime to strengthen the responsibility and accountability of directors and the most senior and influential executives of financial institutions. The intention of the legislation is to build on existing governance and risk management frameworks, ensuring that accountable persons within organisations are taking reasonable steps in meeting their obligations.

Insignia Financial continues to progress work in readiness for the anticipated implementation date, which will be 18 months from the royal assent date. The project is on schedule to meet this timeframe. Work completed to date includes executive and director workshops, drafting of executive accountability statements, review of significant related entities within the group, and commencement of a reasonable steps assessment.

Executive remuneration

Executive remuneration comprises fixed and variable remuneration, with variable remuneration awarded under the Executive Equity Plan (EEP). The EEP, which is delivered wholly

in equity vesting over a four-year performance period, is designed to encourage decision making that is focused on sustainable long-term results. It is assessed against a balanced set of financial and non- financial measures (including client, people and ESG), delivery of strategic priorities, and our ability to meet cultural, risk and conduct standards.

In H2 2023, a revised plan - the Executive Incentive Plan - will be introduced. It will align closely with the framework of the existing

incentive plan but will see variable reward outcomes delivered via a balance of short-term and long- term incentives, deferred for up to six years. This rebalancing helps to reward and incentivise executives in the immediate term, while continuing to align to shareholder interests and creating long-term sustainable value in the organisation.

In the past year, we have undertaken a rigorous review of our remuneration framework and structures to ensure compliance with the Australian Prudential Regulatory Authority's CPS511 standards and that our practices meet the aims of our remuneration policy. CPS511 aims to ensure clearer connections between risk accountabilities, performance, and remuneration outcomes. We support this goal, and it reflects the path we have been on over the past few years to strengthen our remuneration governance. Notably, we have enhanced and restructured our consequence management framework for governing risk events.

Tax transparency

The Insignia Financial Group is committed to tax transparency and integrity, signing up to the Board of Taxation's Voluntary Tax Transparency Code, as an early adopter, in early 2017.

The code is a set of principles and minimum standards to guide disclosure of tax information by businesses and encourage them to avoid aggressive tax planning, and to help educate the public about their compliance with Australia's tax laws.

The Group provides a reconciliation of accounting profit to tax expense, and to income tax paid/payable, including identification of material temporary and non-temporary

2023 tax contribution by type

$148m

(total)

Income tax $2m

GST $93m

Payroll tax $42m

Fringe benefits tax $1m

Rates and property taxes $8m

Other $2m

Further taxes collected and paid to tax authorities by the Insignia Financial Group on behalf of clients and employees are not directly borne by the Group. These include income tax, GST, withholding taxes, PAYG withholding taxes, and local duties, which total a further $992 million for the year ended 30 June 2023.

differences and accounting effective company tax rates for the Group's Australian and global operations.

Information about international related party dealings

The Group largely conducted its activities in Australia for the current financial year. There are minor operations in foreign jurisdictions, including in the USA and UK. Each of those entities is subject to the local tax regime. Related party dealings between the Group's Australian and foreign jurisdictions are supported by transfer pricing and country-by- country documentation.

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The overall tax strategy drives our approach to tax risk management and aims to ensure corporate tax compliance and transparent tax reporting.

Approach to tax strategy and governance

Tax governance is part of our overall risk management framework, as well as being part of an overall tax strategy. The overall tax strategy drives our approach to tax risk management and aims to ensure corporate tax compliance and transparent tax reporting. It also helps us to meet and be prepared for regulatory changes. Tax governance is continuously monitored and is in line with the Group's tax strategy. We aim to maintain open, transparent and collaborative relationships with all tax regulators.

Tax contribution analysis

The Group paid a total of

$148 million in taxes to the Australian Governments (state and federal) in the 2023 tax year ($143 million in 2022). The chart on the previous page shows the types of taxes paid by the Group during the financial year. Remediation payments of $125 million in the current year continue to be the main driver of low taxable income for the consolidated group for the year ended 30 June 2023. Corporate income tax for financial year 2023 remains low at $2 million.

Data and cybersecurity

Insignia Financial is committed to data and information governance. This aims to ensure we:

• safeguard the security, privacy and quality of our information as well as that of our clients and stakeholders
• keep precise records of our business activities
• facilitate well-informed and timely decisions through appropriate access to vital information
• provide regular and up-to-date training for employees on data security
• align with strategic goals, and
• comply with regulatory requirements.

Data management

Our adherence to APRA prudential guidelines, participation in industry and regulatory forums, and adoption of emerging industry standards reflect our commitment to protect and preserve privacy and ethically manage sensitive client and business information. These principles are reinforced by the Group Information Management Policy and accompanying policy standards.

Beginning in 2023, we implemented regular organisation-wide data awareness and literacy training. Additionally, we've initiated a program encompassing data and information classification, issues management, ownership and accountability, along with proper archiving or disposal of unnecessary data.

Privacy management

We believe good privacy governance is an organisational responsibility and we have created a strong culture of privacy compliance, where organisational risks are managed proactively. We have a privacy program, including controls that ensure compliance with privacy laws, regulations, industry standards and regulator expectations.

The personal information our clients have entrusted us with is handled in accordance with the Insignia Financial Group Privacy Policy. Annual online privacy awareness training is provided to all employees and targeted training is delivered as appropriate.

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