An Ethical Charter of 23 principles (represented by the graphic above) is the foundation for how Australian Ethical invests for a better future for people, planet and animals. 

“Who said you had to choose between having a positive influence and making money?” asks Australian Ethical. The ASX-listed investment management company, established in 1986, has always restricted investments in companies that contribute to global issues. Their ethical investing approach favours businesses that exist for a lower-carbon and fairer future such as those in renewable energy, IT, healthcare and education, and restricts investment in areas
such as fossil fuel, gambling and tobacco.

How do they do this? They ensure all their superannuation, managed fund, pension and Exchange-Traded Fund (ETF) products are ethically screened. 

We caught up with Australian Ethical’s Head of Impact and Ethics, Alison George, to learn how the company formulates and follows a value-based approach and what this means to for-purpose organisations and their donors.   

What can Australian Ethical offer for-purpose organisations and philanthropists? 

Australian Ethical enables for-purpose organisations to invest in alignment with their mission — with us you can trust that your corpus is invested towards a better future for people, planet and animals. When it comes to those who donate, they can ensure their investing approach aligns with their passion for giving. The world is facing big challenges, so we need every dollar to be working for positive change.  

How does Australian Ethical align with the for-purpose sector?

Australian Ethical exists for a purpose, not just for profit. We are an investment manager and investment is a key way we pursue our purpose. We attract other for-purpose businesses and organisations who want to ensure their money is invested in a way that is consistent with their values and objectives while growing the reserves that fund their work.

I think those working for-purpose would be horrified if they found their investments were actively undermining their purpose. But this can easily be the case, even in an Environmental Social Governance (ESG) fund. ESG too often stops when the issue is bad for the investment, not when the investment is bad for the issue. There is strong potential for misalignment because the intention is limited to financial returns, so it doesn’t look at real world outcomes.  

We are also part of the for-purpose sector. We have a foundation through which we donate 10% of our profits every year to charitable organisations that align to our purpose. The foundation’s focus is to fight climate change as effectively as possible and since 2000 we’ve donated more than $9 million to support high impact, effective and innovative climate projects and solutions. 

Those in the for-purpose sector need all their talents focused on their mission. They need partners that they can trust are genuinely aligned to their core values, which is what Australian Ethical strives for.    

What does ‘ethical’ mean to Australian Ethical?  

Australian Ethical was founded upon a clear and transparent set of principles for people, planet and animals. Our Ethical Charter (our ‘North Star’) sets out 12 positive things we want to see more of in the world (eg, the development of sustainable land use and food production) and 11 harms we want to reduce (eg, the pollution of land, air or water). 

These principles guide everything we do — our investment activities, the way we operate our business and treat our people, and our supply chain. 

In our examination of investments, we interpret and apply these general principles using our more detailed Ethical Criteria (including criteria that apply to energy sources, human rights, materials, products and services). Our in-house ethics team looks in-depth at what
a business does (its activities), how it does it (its operations) and what is happening along their value chain. Every investment Australian Ethical makes has passed this comprehensive and detailed evaluation to make it into our investible universe. 

How does this process differ from other investment funds? 

These days every investment manager wants to say that they consider environmental and social issues. They might be less upfront about how this consideration is often narrowly financial. So, if an environmental or social issue can hurt the bottom line of an investment, they will adjust their valuation to account for it. That’s where the ESG stops. It’s enlightened self-interest at best.  

Australian Ethical is a values-based investor. We want to achieve a better world, not just a better portfolio. We take environmental and social issues into account in every scenario. Our approach includes absolutes, such as not investing in weapons or tobacco, as well as tolerance thresholds where we evaluate the mix of positive and negatives of an investment. For investments that get past the absolutes hurdle, the question becomes, “Is there a net positive for people, planet and animals in this activity?” which seems like a great question for anyone in the for-purpose sector to ask. 

We are living in the time of the ‘conscious consumer’. What do you believe consumers expect from businesses and for-purpose organisations in 2024?  

Consumers want to know who they can trust. Transparency is fundamental and evaluation is critical. Each of us has limited capacity to scrutinise the claims of others. It is exhausting to live in the modern world and try to be an ethical person too. This is where certifications such as ‘B Corp’ are helpful.     

To be a certified B (benefit for all) corporation, you must meet high standards of social and environmental performance, transparency and accountability and be a force for change towards a more sustainable future for the environment and people. Australian Ethical was the first listed B Corp in Australia in 2014 and, as of 13 July 2023, the highest scoring B Corp in Australia and New Zealand. We seek out B Corp status in our supplier relationships too.    

Can you tell us more about Australian Ethical’s Theory of Change and how this guides your values and operations? 

The crux of our theory of change is this: We believe it’s possible to influence progress towards a better future for people, planet and animals, while also delivering attractive investment returns.

Our theory of change looks at not just what we invest in, but also how we use our platform as an investor to exercise our voice for change. It also encompasses our foundation giving —
the more successful we are an investor, the more we can give and the louder
our voice for change will be.     

Since 2002 we have used the Global Reporting Initiative (GRI) reporting framework to help track and report on our success at delivering on our purpose. Our annual Sustainability Report is a vehicle for communicating this and in 2023, it included an overview of our theory of change; our ethical credentials; our key achievements for the year (eg, 4.6 times the investment in renewables and energy solutions compared to relevant benchmarks); and a three-year scorecard demonstrating how we measure up to our ethical goals. 

Our Ethical Charter, Ethical Criteria, theory of change and Foundation tell investors, for-purpose organisations and businesses what we aspire to be and do. Our reporting is how we stay accountable to this. 

To find out more visit australianethical.com.au/not-for-profit or contact Kirk McNeill, National manager Investor Relationships on 0415 035 950.