08 December 2020
3 min read

A new report by research company Morningstar has named Australian Ethical among just six ‘leaders’ in ethical investment out of 40 asset managers assessed worldwide. It confirms our position as a deeply ethical investment manager – not just in Australia, but on a global stage.

  • Morningstar found we were one of only six asset managers out of 40 assessed worldwide to be awarded the top ranking of ‘leader’ in ESG Commitment.*
  • Australian Ethical was the only Australian asset manager out of the 40 assessed to be assigned leadership status.

Interest in ethical investment is continuing to grow as issues like climate change and the COVID-19 pandemic dominate our lives. In addition, more and more research is pointing to the strong investment performance of sustainable investment options. But as more asset manager and super funds ‘go green’, it can be difficult to separate the truly ethical players from the ‘greenwashers’.

That’s why we welcome the recent report from managed fund research company Morningstar about ESG Commitment, which seeks to break through the greenwash and highlight those companies truly investing for a better world. (ESG stands for Environmental, Social and Governance and is an umbrella term which the finance industry uses to cover responsible and sustainable investing.)

The Morningstar ESG Commitment Level white paper looked at 40 asset managers worldwide and 107 individual investment strategies. It analysed the extent to which responsible investment products lived up to their claims about sustainability. Morningstar found Australian Ethical was one of only six asset managers of the 40 assessed globally to be given the top ranking of ‘leader’ in ESG Commitment. In addition, we were the only Australian asset manager out of the 40 to be assigned leadership status. We’ve been hard at work integrating sustainability into everything we do for over 30 years.

We’ve been investing ethically on behalf of our customers since our inception in 1986, and while our brand of ethical investing goes far beyond ESG investing, the term is still useful for making comparisons with other funds. The Australian Ethical Charter forms the bedrock of our investment process, guided by our dedicated Ethics Research team. Unlike many other sustainable investment managers, we scrutinise the statements, behaviour and track record of companies to ensure they align with our Charter. And our highly experienced investment team construct robust portfolios of sustainable stocks. In other words, Australian Ethical is a true-to-label ethical investment manager. It’s who we are – you could say it’s in our DNA!

So why has Morningstar rated us so highly on a global scale?

Australian Ethical Investment

On a company level, Morningstar found that we were deserving of “strong praise” when it comes to ESG Commitment. The research company said we are “unquestionably” true to our ethical label, with our principles deeply embedded into our investment process, advocacy, activism and industry memberships. The report also pointed out that our commitment to ethical principles extends to our relationships with employees, suppliers, investors and shareholders.

“The company has a well-established history of applying strict ESG guidelines to all asset classes to guarantee all portfolios are ethical and sustainable,” said the report.

Morningstar highlighted our expert ethics team, headed by Dr Stuart Palmer who joined Australian Ethical from the St James Ethics Centre in 2014. Stuart’s team was described at being at the “forefront” of ethics and active ownership activities, including engagement, proxy voting and advocacy. Under the leadership of Stuart, we do occasionally divest from companies for ethical reasons. It’s not a decision we take lightly, and the decision to divest always comes after repeated efforts to engage with the company in question.

The report concluded: “Australian Ethical Investment’s business model, investment products, and ethos are all focused on detailed and well-considered ethics, sustainability, and ESG principles, which ensures our highest conviction.” No faint praise!

Australian Shares Fund

As well as recognising us as a leader on ESG Commitment at the company level, Morningstar also singled out our Australian Shares Fund as a leading investment strategy. The report says that the fund “sets the ESG standard for Australian domestic-equity strategies”. The fund benefits from the strong ethical investment process laid out above, with portfolio manager Andy Gracey and his equities research team carrying out “exhaustive” fundamental analysis to select companies for the portfolio. In addition, ESG analysis is a key part of identifying investment risks and opportunities in stocks “well ahead of competitors”, according to Morningstar.

We’ll continue to lead the way

While we’re thrilled to have been recognised for our deep commitment to ethical investing, we’re not resting on our laurels. We’re looking at new ways to monitor and measure the social impact our investment decisions have on the planet, people and animals. For example, our share portfolios were exposed to 75% less carbon emissions than the market (as measured by the S&P/ASX 200 index), and our investment in education had 16 times the sustainable impact of an equivalent investment in the share market. You can read more about our impact in our 2020 sustainability reporting suite.

* The Morningstar ESG Commitment Level: Our first assessment of 100-plus strategies and 40 asset managers white paper. © 2020 Morningstar, Inc. All rights reserved. You can download the white paper here.

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