Skip to main content

Our ethical criteria

rice-fields

A path to an ethical future

We only make investments that we believe are aligned with our ethical principles, laid out in the Ethical Charter, in 1986. In essence, these principles provide a tried and tested framework for examining whether a company is part of a path to a better future for people, animals and the environment.

See the ethical charter

How we assess

Within this framework, we assess whether a company is having a positive impact aligned with one or more of the 12 positive principles of the Charter, and also how it is managing harmful impacts under the 11 negative principles.

We look in detail at what the company produces and how the company operates, examining its products and services and how those products and services are produced, marketed, used and mis-used.

We also consider the balance between the positive and negative effects of the company’s activities.

Exceptions and tolerances

Most activity of humans and companies has some positive and negative impacts, and there are very few people or companies doing everything possible to reduce their planetary footprint. So our investment exclusions include some exceptions and tolerances.
little-girl
Criteria_Balance-1624945071029.jpg

It's a balance

A company with positive products and services can remain an ethical investment even though it earns some revenue from a negative product or activity, or if its products and services are used by some in a harmful way. Also, where a company makes a mistake, we don’t automatically exclude it but we assess whether the mistake indicates a systemic problem, and if the company has acted to fix the mistake and stop it happening again.

Sample of thresholds and other criteria for investment exclusion

The following table gives examples of our revenue tolerances and other criteria for different types of products, services and conduct. These are based on our exclusion policies, assessments and investments as at 30 June 2021. 

Tolerance % of revenue, and other criteria for companies directly involved, by product, service or conduct of concern:

AlcoholAnimal testing  |  Fossil fuel mining & generation  |  Finance for fossil fuels  |  Food which is unsustainable  |  Gambling  |  Human rights abuses, worker mistreatment & discrimination  |  Nuclear energy & uranium mining  |  Pornography  |  Old growth logging  |  Tobacco  |  Weapons

Different % exclusion thresholds can apply depending on the positive impact of other activities of the company. See explanatory notes below table.

Alcohol

5 or 10%

Examples: 

Brewers, distillers and wine makers excluded.

BACK TO TOP

Animal testing

0% for animal testing for cosmetic products.

Testing for healthcare must adhere to the 3Rs (replacement, reduction, refinement of animal testing)

Examples: 

We exclude companies relying on animals in their development of cosmetics and cosmetic products including teeth whitening products.

We invest in biotech and healthcare companies which rely on animal testing for development of new medicines and treatments, provided they are implementing the 3Rs.

BACK TO TOP

Fossil fuel mining, generation

5 or 10% for coal

10 or 33% for oil

10 or 33% for gas 

Examples: 

We exclude companies like Woodside, Whitehaven Coal, Santos, Origin and AGL because of their fossil fuel revenue.

Contact Energy has some revenue from gas but has passed our ethical screening. It generates 80% of its electricity from renewables, continues to invest in new geothermal, and relies on gas when low rainfall reduces its hydro-power.

BACK TO TOP

Finance for fossil fuels

Large banks must be aligning their corporate lending with the objectives of the Paris Climate Agreement.

Examples:

We examine bank fossil fuel lending restrictions and their green lending targets. We currently allow investment in Westpac which has a strong Climate Action Plan. We exclude Export Finance Australia which finances fossil fuels and does not demonstrate a genuine commitment to align its lending with the Paris Climate Agreement.

BACK TO TOP

High emissions transport

We don’t currently invest in any airlines or conventional auto companies but we could invest if they were investing sufficiently in electric or other renewable energy sources to transition their business to net zero.

Examples: 

We invest in electric vehicle companies like Tesla as well as rail and bus companies like Stagecoach Group which have lower emissions and reduce congestion and other pollutants.

BACK TO TOP

Food which is unsustainable

(for health, environmental or animal harm concerns)

10% for conventional animal agriculture

15 or 33% for food processing revenue from conventional animal agriculture ingredients

33 or  50% for other types of non-sustainable food such as junk food unless positive or strongly positive impact from other activities

Food is assessed as sustainable if it is (1) part of a healthy diet; and (2) produced in a way which avoids unnecessary harm to people, animals and environment.

Examples: 

These thresholds apply to food producers and processors, not to retailers like supermarkets.

We assess processed food with low nutrient and high salt, trans-fat or sugar content as non-sustainable. We excluded Retail Food Group for its revenue from unhealthy food brands like donutking. We excluded Darling Ingredients for its animal food business lines and misleading information about the emissions footprint of animal protein consumption.

We have been strong advocates for an end to live export through our corporate engagement, government submissions and public voice.

BACK TO TOP

Gambling

5 or 10%

Examples: 

We exclude Tabcorp and Aristocrat. One of the reasons we excluded investment in shares of Woolworths was its poker machine revenue. We have invested in a green bond issued by Woolworths to increase the energy efficiency of its stores, and we are reviewing the company again after completion of its demerger.

BACK TO TOP

Human rights abuses, worker mistreatment and discrimination

0% for systemic disregard by board and senior leadership of worker entitlements and human rights impacts

Examples: 

We look at how companies monitor high risk operations and locations, and we have chosen not to invest in several clothing and electronics companies because of human rights concerns. We also use our investor voting power to signal concerns about low diversity and potential discrimination.

Sadly human rights breaches including modern slavery occur somewhere in the operations or supply chains of most large companies. We look for opportunities to engage and positively influence companies to change, rather than automatically rule them out for investment. Where a company makes a mistake, we consider if this indicates a systemic problem, and whether the company has acted to fix the mistake and stop it happening again.

BACK TO TOP

Nuclear energy & uranium mining

0%, but we don’t exclude investment in nuclear medicine for diagnosis and therapy in healthcare.

Examples: 

One of the reasons we exclude BHP Billiton is its uranium mining.

BACK TO TOP

Pornography

5%

Examples: 

In general large listed companies involved in pornography are media companies which earn revenue from distribution of “adult entertainment” below our exclusion threshold, typically less than one percent. Examples are AT&T Inc (who we invest in), and Amazon (who we exclude for other reasons).

BACK TO TOP

Old growth logging

0% for logging of old growth forest except for conservation, fire risk or other acceptable forest management purposes.

Examples: 

We excluded SCA (Svenska Cellulosa) for concerns about its old growth forest management.

We may invest in sustainable plantation timber production.

We do not automatically exclude a real estate investment or company that uses some non-certified timber, because we take into account the availability of certified timber and the positive and negative impacts of a company’s business.

BACK TO TOP

Tobacco

0%

Examples: 

As well as cigarette makers, we have excluded Amcor for its specialist cigarette packaging and Tomra for its specialist tobacco sorting equipment.

BACK TO TOP

Weapons

0% for whole weapons, 1 or 5% for components used to make weapons.

These thresholds apply to companies. When we are considering investment in government bonds, we assess the extent to which the country uses its military to aggressively promote its national interest; and the extent of military influence in the government of the country.

Examples: 

We exclude Lockheed Martin and Honeywell International.

Weapons excluded include both conventional and controversial military weapons, as well as non-military weapons

BACK TO TOP

Important notes 
Sample criteria; changing criteria and examples 

The exclusions in the table are a sample of our criteria only – we have over 200 revenue thresholds for positive and negative products and services. The criteria and examples listed also change over time as the world and our understanding of it changes, including changes in technology, companies and the urgency of the threats we face. 

More than one threshold  

Different thresholds are specified for some exclusions (e.g. 5 or 10%) where exclusion depends on the other activities of the company. For example, a company which earns revenue from production of alcohol will be excluded in the following cases: 

  • The company does not generate any positive impact from its other activities; 

  • Alcohol revenue is more than 5% of total revenue, and the company does not generate strong positive impact from its other activities; or 

  • Alcohol revenue is over 10%, irrespective of the company’s other activities. 

As an example, we may invest in a company which earns less than 10% of revenue from alcohol if it also has strong positive impact through its production of sustainable plant based food. 

Green bonds 

We may invest in specific securities issued by a company which support positive impact, even though we have excluded the company for other reasons. For example, ‘green bonds’ and ‘climate bonds’ are designed to fund positive environmental or climate projects focused on issues like energy efficiency, recycling and waste reduction. An example mentioned in the table is Woolworths: before their demerger we excluded Woolworths shares because of the gambling and alcohol revenue from their pubs, but we did invest in the Woolworths 2019 green bond to support their initiatives to reduce the carbon intensity of their supermarkets, including using solar panels, retrofitting LED lighting and reducing plastic wrapping on fruit and vegetables. 

Engagement and advocacy 

Where there is reason to divest from a company in which we are already invested, instead of divestment we may engage with the company to influence change to bring the company into alignment with our Ethical Charter. If this is not possible within a reasonable period we will proceed with divestment as we did with Marsh & McLennan. 

Research process, gaps and judgement 

For our ethical research, our team draws on third party information and analysis from company, industry, government, ESG research, academic and civil society sources. Often judgement and estimates are necessary to deal with information gaps, unreliability and complexity. 

Additional Information

Learn more about our approach, engagement, advocacy and impact.

Sustainability Reporting Our Positions