Navigating climate risks, finding opportunity

The Australian Government’s recently released National Climate Risk Assessment is a major report outlining how climate change could affect our communities, economy and the environment for the next 25 years.

The findings are sobering. If global emissions remain high, the cost of natural disasters could surge to $40 billion each year, the value of low-lying properties could fall by $600 billion, and around 1.5 million Australians’ living situations could be affected by coastal flooding.

At Australian Ethical, we see these risks not only as warnings, but also signals of change – reminders that the economy of the future will look very different to the past.

Investing for resilience & opportunity

We believe companies and investments that will thrive in this changing environment are the ones helping to solve the problems outlined in the report – not contributing to them.

That’s why our portfolios are designed to invest in businesses that are part of the solution: renewable energy, sustainable infrastructure, health, education and technology.

We also deliberately avoid the worst emitters of carbon, meaning we are less exposed to industries that are likely to face increasing regulation, higher costs, or declining demand as Australia moves towards a lower carbon economy.

Our approach is already making a measurable difference. On average our listed portfolios have 75% lower carbon intensity¹ and over four times more in renewable energy solutions than Benchmark². These are companies that will become more important to the Australian economy – and we believe more valuable – as the world accelerates its transition to cleaner energy.

Additions to our portfolio in the last quarter reflect the opportunity we see as the world continues to move towards a lower carbon future, including in Vertelo, a fleet electrification solutions platform focused on decarbonising transport in India with financing support from the United Nations Green Climate Fund. 

Doing good – and performing well

Some investors still think there’s a trade-off between investing ethically and achieving strong returns. We take a different view. We believe that companies with strong environmental and social practices are better placed to withstand the challenges like extreme weather, shifting regulation and changing consumer expectations.

In short, we consider the companies helping to build a more sustainable future are likely to be the ones still standing and growing in the years ahead. These are the companies we are guided to invest in by our Ethical Charter.

Three-step process

What makes our approach unique is the way we apply our values in practice through our three-step process:

1. An ethical assessment as guided by our Ethical Charter which we have followed for almost 40 years
2. A disciplined investment process that seeks quality companies with long-term earnings potential
3. Active engagement where we use our position as an investor to align companies with science-based targets and stronger sustainability standards

This integrated three-stage process helps us to identify risks, like the ones outlined in the national climate report. It also helps us uncover opportunities other investors might overlook.

Looking ahead

The government’s climate assessment makes clear the next few decades will be shaped by how quickly we adapt to a warming world. For investors, this means the most resilient portfolios will be those aligned with the transition.

At Australian Ethical we have been investing this way for almost four decades, helping our members to grow their retirement savings by investing in the kind of future we all want to live in.