ESG

The move towards renewable sources of energy gathers pace, and while the majority of our power still comes from coal and gas, efforts to put capital behind low-emission companies is paying dividends according to the ethical investor.

The ethical investor is using the China’s sluggish reemergence from the pandemic as an opportunity to rotate into more investments that facilitate a sustainable future, while simultaneously fortifying the return profile of its flagship fund.

The $10 billion ethical investors expects “quite an evolution” in climate resilience and mitigation investing, as well as growing interest in sectors like water, where it is “actively exploring” opportunities.

Institutional investment teams may still oscillate between engagement and divestment as their first choice in leverage with large emitting companies, but one thing is certain – they are all looking at ways to hold these groups accountable for their activities and behaviours.

“Rational, economic arguments” are required to support a reduction of the costs of global warming on the planet and the economy, says Australian Ethical.

As advisers we tend to forget the incredible position in which we sit, as the stewards of client capital, with the power to determine what types of companies deserve or warrant additional investment. Our advocacy effectively provides capital to these companies to continue to grow and evolve.

Eighteen months ago, the fund started by former US banker David Di Pilla announced its target to achieve net-zero for scope 1 and scope 2 emissions by FY28. Alongside this came an energy road map and the first phase of its ‘Energy Management System’, which was subsequently rolled out across 18 sites.

ESG is the “emptiest” idea, according to Aswath Damodaran, while AI will morph into higher costs for companies overall with no competitive advantage in a world where the technology is ubiquitous.

As Australia’s energy transition ramps up, spurred by a greater government commitment, the ethical investment manager says investors risk getting saddled with “stranded assets” if they don’t limit their exposure to fossil fuels.

Using Coles as a case study, Australian Ethical demonstrates how sustainability-minded money managers are dealing with the nuanced issues involved in appraising the activities of big companies.