Australian Ethical Investment Limited is an Australian owned company established in 1986 for the purpose of environmental and socially responsible investing. The company is based in Sydney and is listed on the Australian Stock Exchange (ASX). The company's main products are a retail superannuation fund and a series of managed investment funds across Australian and international shares, fixed interest, cash, smaller companies and diversified funds. The superannuation fund is predominantly used by individuals as well as by responsible companies and not-for-profit organisations as the default option for their employees.
Australian Ethical invests for a better future. By using capital as a force for good, the company makes money for shareholders and investors while investing in a more sustainable future for the planet, people and animals.
The company works off the framework provided by the Australian Ethical Charter, a list of principles that have been part of the company constitution since 1986. The Charter is used in decision-making on what companies and practices Australian Ethical will and won't invest in. The company's in-house ethics team evaluate and research over 200 points of impact for each investment.
The company offers a number of managed funds and superannuation options, with all guided by the Ethical Charter. The company is overweight in sectors like breakthrough healthcare, energy efficiency, renewable energy and innovative technology and avoids sectors like mining, weapons, tobacco, logging and companies with involvement in human exploitation or cruelty to animals. The Ethical Charter is regarded as the most stringent ethical investment test in the industry.
Australian Ethical donates 10% of its before tax company profit to Australian charitable, benevolent and conservation projects through a community grants program. It's donated more $2 million as of 2015. Previous grant recipients have included: the Environmental Defenders Office NT, Green Connect, Animal Aid Abroad and more. Shareholders, staff and investors vote on the grant recipients each year.
Ethical investing has a variety of names and colours. Australian Ethical works off a screening model whereby it screens potential investments for adherence to the Australian Ethical Charter. If an investment doesn't meet the screening criteria, Australian Ethical won't invest. The full list of approved companies it will invest in is listed on the Australian Ethical website. This list is updated periodically.
This type of investing integrates ethical factors into the investment decision making process not only for the goal of share price and financial performance but also for societal and environmental benefit.
The key difference between ethical investment and ESG strategies, which are very common, is that ethical investment starts with a values-based decision - is this investment good for society and/or the planet? ESG does not include a values-based decision, it is chiefly concerned with how environmental, social and governance factors will impact the future share price. This can lead to good outcomes and change of corporate behaviour but investors should be wary not to view ESG and ethical investment as the same thing. ESG is not a strategy aimed to deliver meaningful change for the world.
One of the main myths of ethical investment is that it does not perform as well as conventional investment, which can be measured by the return of a market index.
Australian Ethical have consistently demonstrated competitive returns (after fees) across all of their investment funds. In its 30 year history, Australian Ethical's funds tend to concentrate on long term returns (especially superannuation). In the 10 years to 31 August 2016, the company's Australian Shares Fund produced an average annual return of 10.3% (after fees), higher than the mainstream market indices, the S&P/ASX200. The company is highly transparent regarding its fund performance with returns updated monthly.
Research by the Responsible Investment Association of Australasia and Morningstar has found that ethical funds continue to outperform conventional funds across multiple asset classes in the short, medium and long term.