Defining Ethical & Sustainable Investments


We have noticed an interesting correlation between a rising desire for clients to consider investing ethically with an increase in the number of new super and investment funds now offering this option. So is this just their marketing teams jumping on the green bandwagon?

Like many complex issues, it is often portrayed in a very simplistic way. After all, who doesn’t want to protect Amazonian rainforests and save the whales?

It all depends on how the fund manager defines ethical. There is one ‘ethical’ Australian share fund that proudly states that it doesn’t include investments in weapons, armaments and nuclear power. No prizes for guessing how many Australian companies operate in this space….

Some funds have a ‘positive’ screen so they can own the best of the breed. (This would however, allow them to buy the most ethical coal miner or the most sustainable tobacco producer!)

The alternative is a ‘negative’ screen where you screen out all those evil arms producers and coal miners.

And how do you feel about banks after Westpac accidentally breaking the law … 23 million times. What about companies that mine the material required in lithium batteries? Are they green?

The website for one fund we looked at had lots of lovely images of green energy and wind farms. Makes you feel very positive until you consider that their actual holdings in these were less than 1%.

There is significant opportunity in the changing energy mix as a major thematic theme for investing. We just need to look past the name and the shiny website pictures and understand the actual investments, the investment philosophy, costs and risk. Then we can make properly informed choices.

We are currently developing several investment model portfolios so if this is an area that you feel strongly about, please call to schedule an appointment for the new year and we can outline the options.

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