These positions guide our investment decisions and our engagement with the companies we invest in. We’ve developed them by asking what’s best for people, the planet and animals, using the principles of our ethical charter. As the world moves forward, these positions may change as well.
We’re taking serious action to limit global warming. We avoid climate unfriendly sectors like fossil fuels and target investment in climate friendly sectors. We’re even going further to decarbonise our entire investment portfolio. We advocate for business action and better climate policy. We’re reducing and offsetting our own operational emissions. And we recently won a global award for transparency about our alignment with our climate goals.
Read more: Beyond fossil fuel free
We carefully examine the welfare of animals used in agriculture, as well as the damage to animal habitat and biodiversity from land clearing, pesticides and fertilisers and monoculture cultivation.
We are part of a global initiative to raise animal welfare standards across the agriculture and food supply sectors, as well as initiatives to increase consumption of plant based protein and to eliminate antibiotic use which facilitates factory farming. We also support organisations supporting animal welfare through our community grants program.
We don’t currently invest in animal agriculture. We exclude cosmetics companies that test products on animals, as well as healthcare investments which use animals for medical testing unless they meet strict requirements. See our position on Healthcare.
We do not invest in companies which raise animals for live export for food because of the harm caused to animals in transport and their potential mistreatment in poorly regulated overseas markets.
Banks contribute to the transfer of money and capital across society and the economy, facilitating access to goods and services. Poorly regulated banking and unnecessary financial products and services can cause harm by encouraging excessive borrowing and unnecessary risks and costs. When assessing a bank we look at how:
Read more: Why do we invest in Westpac
We do not invest in native or old growth forest logging, but we may invest in sustainable plantation timber production.
We examine the environmental and animal impacts of any land clearing required to establish plantations, and look for Forestry Stewardship Council certification of the plantations. We do not automatically exclude a company that uses some non-certified timber, as we take into account the availability of certified timber and the positive and negative impacts of a company’s business.
We generally avoid investment in the mining sector.
When looking at the mining sector we balance 3 main factors: the value that the mined mineral has to the well-being of society, the harms of the mining process for people, animals and the environment, and whether or not the mineral is a limited resource.
We look not only at the potential positive uses of the mineral, but also whether the amount required for those positive uses could be met from higher levels of recycling and reuse of previously mined material; or whether there are alternative, more sustainable materials which can fulfil the same function. We also consider how good a job the mining sector is doing at minimising its adverse social and environmental impacts.
From this, we generally avoid investment in the mining sector, but there are potential exceptions. We could invest in lithium mining companies which appropriately manage their social and environmental impacts because of the crucial role lithium plays in expanding battery energy storage needed for the transition from fossil fuel to renewable energy.
We support marriage equality, in line with our Ethical Charter that guides us to support human dignity and avoid discrimination.
Limiting access to the civil institution of marriage based on sexual orientation is discriminatory, and it stigmatises those who are denied access (as well as their families). We do not see why sexual preference should make a difference to the way people are entitled to have their relationship commitments recognised under Australian law. Like other legal and social institutions, marriage has developed over time. The extension of marriage to all adults is an important further step.
We won’t invest in companies discriminating against indigenous people. Where there is a risk of indigenous rights breaches in a company’s supply chain or operations, we assess the company’s approach to managing that risk (including thorough monitoring of suppliers). We also avoid companies which exploit vulnerable customers.
We do not exclude companies because they operate in Israel – but we do avoid companies operating in the Gaza Strip and West Bank where they support Israeli settlements or control (direct or indirect) in these areas.
We follow the United Nations and broad international consensus that the Gaza Strip and West Bank are territories illegally occupied or controlled by Israel, and that a Palestinian state cannot emerge under these conditions.
Ormat Technologies is an Israeli green energy company which provides renewable energy solutions globally and which we have assessed to be aligned with our Ethical Charter.
We avoid investment in companies that discriminate. Where there is evidence of discrimination, we investigate whether the company has taken action to remedy and prevent recurrence of the breach, and to ensure all have an equal opportunity for recruitment and advancement.
Challenging direct discrimination is only part of the solution. For example, companies with high existing levels of male representation can perpetuate gender imbalance if they fail to take steps to ensure a positive work environment for all employees.
We do not invest in companies that unnecessarily create, encourage or perpetuate militarism or engage in the manufacture of armaments.
Simply, we don’t invest in companies that make weapons. When we are considering investment in government bonds, we assess the extent to which the country uses its military to aggressively defend or promote its national interest; and the extent of military influence in the government of the country.
We don’t invest in the alcohol industry, including brewers, distillers, wine makers and pubs.
We are concerned by the social, health and financial harms caused by the problematic relationship which many people have with alcohol, often contributed to by marketing and peer pressures.
Our ethics are defined by our ethical charter.
Every stock we invest in must meet the 23 positive and negative principles of our public Ethical Charter. The Charter guides us to invest in companies that support people, animals and the environment and do not cause unnecessary harm.
By looking at our Ethical Charter (unchanged since we were founded in 1986), people can see whether their values are aligned with ours. We find that most agree that people, animals and the environment are important, but they will sometimes strike a different balance between the interests of different groups (including the interests of current and future generations). For example, infrastructure development may cause harm to a specific community or animal habitat but bring benefits to a broader region, and these impacts need to be weighed against each other. Differences can also arise because it is hard to predict the future positive and negative impacts of a particular activity – we live in a very complex world.
We don’t invest in nuclear for a number of reasons:
These risks outweigh the potential benefits of nuclear energy as a low carbon source of energy, particularly when there are renewable energy alternatives.
Some argue that nuclear weapons deter military aggression. We don’t agree. The ‘nuclear deterrent’ won’t stop accidental detonation or launch, it works less well in crisis situations and it often won’t work at all for rogue states and other groups who are prepared to act with little regard to the risk of retaliation.
We don’t invest in tobacco companies. We have a zero revenue threshold for tobacco farming or tobacco product manufacture, and strict limits on indirect involvement. For example, we would not invest in a general supermarket company that earns over 1% of its revenue from the sale of cigarettes. We won’t invest in packaging company Amcor because it earns significant revenue from making cigarette packaging. We divested from the Norwegian company Tomra when it invested in technology to sort tobacco.
We don’t invest in the gambling industry because of the financial, psychological and relationship harm caused to problem gamblers and their families.
We don’t invest in companies which produce pornography because of the harm from potential exploitation of actors and others involved in its production, as well as the damage which consumption of pornography can cause to healthy relationships.
A healthy news and media sector offers reliable information and diverse viewpoints which inform and educate readers, viewers and listeners. It is essential to the proper functioning of democracy.
It is important to distinguish a free media from an unbiased media. While bias in media has negative consequences, this harm is reduced if media freedom allows a diverse range of media outlets and the public are exposed to a multitude of viewpoints.
We have excluded investment in News Corp because of serious reporting bias. Analysis of coverage of media climate change from 2011 and 2012 showed that 85% of Fairfax media articles either explicitly or implicitly accepted the climate consensus position, compared to 34% of stories in News Corp papers. (Papers considered for this comparison were the SMH, Age, Herald Sun and Daily Telegraph.)
We avoid companies that restrict human rights, exploit workers or discriminate.
Business has a fundamental obligation to respect human rights. The UN Guiding Principles on Business and Human Rights (also known as the ‘Ruggie principles’) make it clear that companies must avoid contributing to breaches of human rights, including through their supply chain or other business relationships.
We don’t invest in operators of offshore detention centres. We closely scrutinise companies with supply chains in countries with a poor record on human rights or worker protection. We look at the way these companies monitor overseas workplaces, including for potential use of child labour. We have chosen not to invest in several clothing and electronics companies because of human rights concerns.
We do not automatically avoid companies operating in countries with a poor human rights record. We look at the way they do business to assess whether they are making a positive contribution to the welfare of ordinary citizens of the country or whether they are supporting or complicit in human rights abuses.
On the positive side, we seek out companies that contribute to human dignity and education and the alleviation of poverty. One of the things that attracted us to the company Interface was its use of discarded fishing nets in developing countries to make modular carpets. As well as reducing waste, this provided financial opportunities to some of the poorest people in the world.
We invest in renewable energy (solar, wind, tidal, geothermal and sustainable hydro), as well as energy efficiency and battery storage. These technologies are essential to limit global warming. Not only are they more sustainable than fossil-fuel energy production, they also are job creators and can help alleviate poverty with off-grid and future-proof energy supply.
We invest heavily in companies whose products and services reduce energy demand, such as LED lights, insulation, recycling and smart energy management technology. The efficient use of energy is important because it reduces energy waste: an avoided watt needs no resource at all to be produced.
Our community grants program also provides funds for renewable energy projects in the community. Recent grants supported a solar system at a wildlife rescue centre in Victoria and a technician in East Timor repairing solar panels.
Read more: Beyond fossil fuel free
We exclude all fossil fuel company investments. This means we exclude all companies whose main business is fossil fuels, as well as diversified companies that earn some fossil fuel revenue and aren’t creating positive impact with their other activities.
We may invest in a diversified company which is having a positive impact in other ways such as producing renewable energy, provided its fossil fuel revenue is below our thresholds. For example, we assess Contact Energy to be a climate friendly investment, with 82% of their electricity production coming from renewables in 2016. They earn some revenue from gas, but we think they are worth supporting as they continue to invest in renewables and help us get to 100% clean energy.
Read more: Beyond fossil fuel free
Food production plays an essential role in the well-being of people and alleviation of poverty (important focuses for our ethical impact). But farming can also have negative impacts on people, animals and the environment. When considering agricultural activities and companies we look at:
We don’t invest in palm oil production because of the impact land clearing has on local communities and wildlife habitat. This extends to palm oil production for both food and bio-fuel uses.
We do not invest in companies which export live animals for food because of the harm caused to animals in transport and their potential mistreatment in poorly regulated overseas markets.
More information: Our investigation of palm oil production in Sumatra
We don’t currently invest in salmon farming because of concerns about the sustainability of farmed salmon feed supply.
We see that aquaculture has the potential to reduce over-fishing of wild fisheries. Unfortunately, we don’t see that the salmon farming sector is currently on track to achieve sustainable supply of the fish feed it needs. While the wild fish component of salmon feed (typically anchovies) has reduced substantially with the introduction of plant and other feed components, this trend has slowed. The sustainability of wild anchovy fisheries is a concern with growing demand for fishmeal feed and fish oil, demand which is also diverting anchovies from their use as a direct source of protein.
We invest in healthcare because it enables people to live longer, healthier lives.
Our healthcare investments include pharmaceutical and medical research companies who have passed our ethical assessment. Before investing we look at whether pharmaceutical companies have misleading advertising or pay improper inducements to doctors. We require biotech companies to conduct their medical research responsibly.
And we’re part of a global investor initiative seeking greater disclosure of the methods and results of all clinical trials. This is important to help others learn from previous research; to understand the risks and benefits of new medications; and to limit the need for further unnecessary trials and testing.
We have strict restrictions for investing in medical testing using animals. We may invest where the medical benefits to humans from vital medical research outweigh the harm to animals, but only where any animal testing is:
Read more: 10 facts about healthcare
We do not invest in companies operating detention centres. Local and international bodies like the Australian Human Rights Commission and United Nations High Commissioner for Refugees have identified many areas in which the operation of Australian detention centres breach international human rights principles. We support the ‘human rights floor’ developed by No Business in Abuse(NBIA) for treatment of people seeking asylum
Some argue that a company should not be criticised for simply implementing government policy. We disagree. Human rights transcend the laws and actions of individual countries, being universal rights possessed by all humans. Indeed international human rights law developed after World War II to protect against human rights violations committed by governments. Individuals and companies have a responsibility to respect human rights in their activities, independently of government policy.
Understanding and managing impacts on natural capital is essential for a sustainable future. This is a fundamental part of our ethical assessment of different industries and companies. In deciding whether or not to invest in a company, we research their use of water, greenhouse gas emissions and many other factors to understand whether the business is causing unnecessary harm to the natural environment.
Overall, business impacts on natural capital need to be far better measured and reported. We are strong advocates for companies to produce sustainability and integrated reporting which deals with all the ‘six capitals’: not just financial and manufactured, but also intellectual, human, social and environmental capital.
Read more: Our Sustainability Report 2016
Employee health, safety and general well-being are important factors we consider when making any investment decision. We carefully assess any evidence of discrimination and exploitation of employees of companies we might invest in. We also look more generally at the way in which company practices contribute to the dignity of employees. We seek out companies which develop participation by employees in the ownership and control of their organisations.
We strongly support the green bond market. The climate and broader green bond market has the potential to help drive much needed additional investment to renewables and other clean economy investments like energy efficient technologies and infrastructure. The Climate Bonds Initiative is dedicated to mobilising the US$100 trillion global bond market towards climate change solutions. There are now over US$600 billion of ‘climate-aligned bonds’.
But we also believe individual bond issues should be monitored carefully to ensure that they are actually helping to drive capital to climate solutions. For climate bonds issued by banks, it’s important to ensure that the bonds do in practice help to shift lending from emissions intensive to climate friendly sectors.
We’ll invest in electric car manufacturers like Tesla, but we generally avoid the airline and automobile sectors because the amount of fossil fuel used by planes and cars currently exceeds the level needed to limit global warming to well below 2 degrees. Mainstream auto companies and airlines are failing to make sufficient investment in electric cars and renewable biofuel alternatives to petroleum. We prefer to invest in mass transport such as rail which has lower emissions and also reduces congestion and other pollutants.
Insurance helps the sharing of risk across society. It can provide important protection against injuries or accidents that individuals, families and organisations may find it difficult to cope with from their own resources.
Unfortunately, insurance companies can fail their clients: Insurance may be ‘mis-sold’, with consumers paying excessive fees and commissions and in some cases ending up with inappropriate insurance – too much cover, too little cover or the wrong type of cover. Insurance companies can also be mismanaged, leaving them unable or unwilling to pay insurance claims. For this reason when we assess a specific insurance company under our Ethical Charter, we look at factors like levels of customer satisfaction, regulator penalties, financial management and overall corporate governance. We also consider how they take into account environmental and social impacts when making insurance and investment decisions.
We invest in Australia and internationally. Some of the deepest ethical challenges facing the planet are global. Catastrophic climate change can only be averted if greenhouse gas emissions are reduced across the globe. The alleviation of poverty also demands an international approach. From a financial point of view, there are also good reasons for Australians to consider inclusion of overseas investments in their superannuation. We offer a range of local, international and mixed investment options and funds.
We do not currently invest in chemical or pesticide companies, but we do not have a blanket exclusion. Excessive and inappropriate use of chemicals and pesticides is a major concern, but both naturally and non-naturally occurring chemicals can have beneficial uses. We will look at companies and chemicals on a case by case basis. We work to exercise a positive investor influence by supporting the Chemical Footprint Project, which is encouraging companies to better manage and disclose how they deal with chemicals in their products, manufacturing operations, and supply chains.
We recognise the potential value of genetically modified food and other products to alleviate food shortages, reduce pesticide use and produce biofuels. But in many cases we don’t see enough evidence to show they’re safe or that they’re appropriately regulated. This means we expect the proponents of GM crops and organisms to provide evidence of safety before they’re adopted. Companies need to satisfy concerns about the potential for:
We are also concerned by:
For these reasons we currently avoid companies which create GM organisms. We may invest in agricultural companies which use or sell food which has been grown using GM seeds. As research and experience grows in this area, we’ll keep reviewing our position.
We avoid palm oil production because of the impact of land clearing including on local communities and wildlife habitat. This position extends to palm oil production for both food and bio-fuel uses.
We generally avoid investing in new large scale hydro-electricity projects because they have some major disruptive risks to the natural environment. They can inundate large areas of sensitive habitat, force relocation of disadvantaged communities and cause greenhouse gas emissions from the decomposition of trees in flooded areas.
We will invest in ‘run of river’ hydro where dams and turbines do not result in major disruption of the flow of the river.
Where a company is involved in positive activities (e.g. generation of electricity from solar or wind power), its ownership of an existing large scale hydro project will not prevent our investment. This is because most of the social and environmental impacts have already (unfortunately) been incurred, and the project at least offers the opportunity to generate emission-free electricity (alongside the other positive activities of the company).
Using waste to produce energy is one way we can manage waste more sustainably. While we need to avoid the creation of waste in the first place and recycle waste where possible, we can also use the residual waste we do create to produce energy. Waste-to-energy is a process of incineration and gasification that reduces emissions when compared with alternatives like landfill or landfill-gas to energy. Continuing advances in waste to energy technology is increasing its efficiency and reducing risk of dangerous emissions.
Read more: The UK’s debate guide about waste to energy
We avoid companies which intentionally arrange their corporate structure and transactions to illegally avoid paying tax.
A fair tax system is essential to the proper functioning of society and the economy. Companies should pay their fair share of tax and observe the spirit of the tax law. This does not mean that companies can’t legitimately minimise tax liabilities. For example, a government may offer a tax break through accelerated depreciation to encourage companies to invest in new infrastructure. In this case we think it’s legitimate for a company to bring forward the timing of investment to take advantage of the tax break, since that’s in line with the reason the tax break was introduced.
Unfortunately it will often be difficult to work out what is and isn’t in line with the intention of the tax law. Generally the use of ‘tax havens’ would prompt further enquiry. However, there are some circumstances in which the use of low tax countries may be appropriate, for example, to help multinational companies avoid double taxation i.e. a requirement to pay tax on the same income in more than one country.
So what’s the bottom line? We avoid companies which intentionally arrange their corporate structure and transactions to illegally avoid paying tax. We will also avoid companies which we see pushing the boundaries of tax law and subverting the intention of the law. One reason we avoid investment in Apple is their location of intellectual property (IP) in low tax countries to enable them to shift profits out of countries with higher tax rates.
We invest in line with these positions and can help you direct your super money towards a better world.