Tag: ESG

In an era of volatility and heightened societal that influence the sentiment toward sustainable investing, Grace Su, Portfolio Manager at ClearBridge Investments, offered a refreshing and grounded perspective during her fireside chat at the Investment Leaders Forum INAUS, held in Byron Bay. What emerged from her discussion was a firm belief in the enduring relevance of ESG—not as a marketing label or a fashionable acronym, but as a lens for identifying value and driving long-term performance.

It doesn’t matter whether funds mislead investors with intent or not, and it doesn’t matter if other parties were partly to blame. The authorities have had enough of the excuses, and they’re lobbing record fines at transgressors.

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.

The ethical money manager says Lendlease failed to provide information required to independently assess the impact of its planned development in Mt Gilead, an area deemed critical to the survival of a resident koala colony.

While greenhouse emissions and diversity remain key issues, the spate of cyber breaches seen in 2022 has made cyber security the number one ESG issue.

As potential clients become more discerning, advisers must have a framework through which to consider investments for inclusion in portfolios, but also to extract the most personal of information from clients.

The ethical investment house believes consumer credit can be positive for society if it is used to buy useful items. But companies like Afterpay focus on impulse purchases that are more likely to push vulnerable Australians into financial over commitment.

In its latest sustainability report HMC details the kind of comprehensive ESG strategy typical of a fund manager that appreciates the value of corporate responsibility – both to the group’s three funds and the broader environment.

Being independent used to be enough to attract new clients, says Wattle Partners’ Drew Meredith. Today, they are increasingly demanding alignment with their own values.

What investors often misunderstand is that despite having ‘environmental’ in its description, ESG integration screens often don’t exclude companies that damage the environment according to the 2022 Sustainability Report.

“Sometimes, the market thinks we prioritise ESG factors above investment fundamentals,” says Perennial’s Emilie O’Neill. “But the reality is that it’s just another investment lens.”