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The investment approach for the University鈥檚 Endowment Fund is aligned with the principles of the Strategy, reflecting the University鈥檚 values.

There are circumstances in which the University believes it is appropriate to exclude certain exposures from the Endowment Fund鈥檚 portfolio on ethical grounds. The University acknowledges that some investments may expose the Fund to activities where companies may generate a small proportion of their revenue from fossil fuels but remain suitable investments from an ethical perspective. The Endowment Fund鈥檚 stated exclusions, therefore, include allowances and tolerance levels to account for such nuances.

The Endowment Fund policy excludes public equities and corporate bonds issued by:

• Any listed company that derives 10% or more of total revenue from the ownership and exploitation of its fossil fuel reserves, including thermal coal, oil, and gas^摆2闭听
• Any listed company which manufactures tobacco products
• Any listed company which manufactures controversial weapons (including components produced exclusively for use in controversial weapons) such as cluster munitions, biological/chemical weapons, and land mines.

In 2023, the Endowment Fund underwent a number of changes to facilitate the transition to an investment portfolio that will be able to meet the objectives of the Strategy. These changes included:

• Appointment of Frontier Advisors Pty Ltd (Frontier) as the University鈥檚 independent asset advisor 鈥� March 2023
• Review of the Governance structure of the Endowment Fund 鈥� approved by Council on 5 June 2023
• Review of the Endowment Fund Policy incorporating ESG principles and ethical investment exclusions 鈥� approved by Council on 5 June 2023
• Review of the Fund objectives and long-term targets and subsequent approval of new Strategic Asset Allocation (SAA) 鈥� approved by Council on 16 October 2023.

2024 has seen the continuation of activity, including the development of a transition plan based on the approved Strategic Asset Allocation and divestment from fossil fuels throughout the year. The transition plan incorporated a review and approval of the following asset classes: Australian Equities, International Equities, Fixed Income, Alternative Debt and Cash.

The transition to the recommended funds was successfully completed before the end of 2024, and minimised out-of-market risk. Illiquid Asset classes (Infrastructure, Private Equity and Property) remain within Funds SA investments.

The University requested assurances from all fund managers of existing investments that they are compliant with the Endowment Fund policy exclusions as at 31 December 2024. All fund managers confirmed compliance, except for one. One fund manager noted that it contains a re-inclusion policy for fossil fuel companies if they exceed 50% of revenue from renewables to encourage transition. As a result, the Fund has indirect exposure to one utilities stock that derives 15.5% of its revenue from oil and gas despite 100% of its electricity being generated from renewable sources. The value of this stock is approximately $200k (0.05% of the total fund value). The fund manager's philosophy is based on the principle that by considering the re-inclusion of transitioning companies, they support and incentivise positive environmental change while adhering to the investment criteria.

The University engages Frontier to provide analysis of the Endowment Fund鈥檚 investment in all listed equity and corporate bond exposures using the Morgan Stanley Capital Index (MSCI) ESG Research data. Funds SA provided the Carbon Intensity for unlisted property and infrastructure exposure as at 30 June 2024 (contained within the Funds SA Climate Report 2024).

The Weighted Average Carbon Intensity (WACI) of the fund is estimated to be 62.1 tCO2/$m sales based on the combined data available from Funds SA and MSCI. Data was obtained for all asset classes, except for private equity and private debt, resulting in portfolio coverage of 84.2%. Within listed equities, data coverage was greater than 97%. However, listed debt had a lower coverage of 63.5%. For comparison purposes, the WACI has reduced from an estimated calculated figure of 90.8 tCO2/$m sales at 31 December 2023.

The Endowment Fund WACI has been summarised at the asset class level and measured against relevant benchmarks (where available):

*Financed emissions for Funds SA investments听(sourced from Funds SA Climate Report)

**Market Capitalisation (MC) v Enterprise Value including Cash (EVIC)

Enterprise Value including Cash (EVIC) is a broader measure of a company's value that includes market capitalisation, total debt, and non-controlling interests, without deducting cash and cash equivalents. Market Capitalisation, on the other hand, only considers the value of a company's outstanding shares. EVIC provides a more comprehensive view of a company's value for purposes like calculating carbon footprints or comparing different companies and is a more suitable method of allocation for debt securities. This influences the carbon footprint and carbon intensity metrics but not the Weighted Average Carbon Intensity (WACI) metric.

MSCI ESG Research defines portfolio carbon footprint as the carbon emissions of a portfolio per $million invested. The weighted average carbon intensity is a measure of a portfolio's exposure to carbon related potential market and regulatory risks and is computed as the sum product of the portfolio companies' carbon intensities and weights.