ESG

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.”

While ESG arose in the space of listed equities, private debt managers can be more effective than equity funds or other fixed income investors in getting companies to meet their ESG goals.