2020 Annual Report
ETHICAL ADVISERS’ CO-OPERATIVE – 2019 YEAR IN REVIEW
- The Ethical Advisers Co-operative Australia represents 33 financial advisers across Australia with over 3,600 clients/investors.
- The Ethical Advisers’ Co-operative (EAC) Funds under management report compiled March 2020. Ethically screened funds under management rose 20% over the last calendar year to $2.115 billion by EAC members.
- Greenwash Gong Award 2019 awarded again to AMP Responsible Investment Leaders Products rebranded ethical, lots of engagement chat, but no change to their portfolio or what they do.
- Ethical Fund manager engagement Webinars – 7 Webinars and 10 managers at the mid-year meeting and the AGM.
- NGO engagement – Market Forces and ACCR. Shareholder campaigns assistance with our clients – Rio Tinto, Whitehaven Coal, Qantas, Westpac, Bluescope Steel, Suncorp, CBA, BHP, Santos, QBE, Origin Energy, Noni B (Mosaic).
- Engage with international fund managers on Siemen’s holdings
- Royal Banking Commission submission on transparency, disclosure and ethics screening.
- Engaged with fund managers on disclosure of holdings, fossil fuel screens and water trading rights
- Ongoing education articles and training education to the financial planning sectors on Ethics and Ethical investment via KAPLAN education
- Speaking events FPA, Australian Investors Association.
- 6th Annual Ethical investment Week “The Sustainability Revolution” October 2019 with 11 community events in 7 states & territories, radio, interviews, social media and videos. Movie Event – Damon Gameau’s film 2040
- Ethical Investment Guide and subsequent changes
- FASEA submission and response to proposals
2020 PLANS IN PLACE
- Speaking at Australian Shareholders Association, IMAP financial planners conference
- Talking with Bank Australia
- Continue Leaf Ratings for Responsible Investment Products
- Extending EIW to New Zealand and getting RIAA involved in EIW and possibly take the UK lead on the theme.
- Extending Co-op membership to NZ advisers.
- Marketing co-op to new advisers through Certification process
- Encouraging sharing EI resources to the co-op membership eg presentations etc
ABOUT THE ETHICAL ADVISERS’ CO-OPERATIVE LTD
The Ethical Advisers' Co-operative Ltd (Co-op) is a member operated organisation created to help communicate the intention and benefits behind ethical investment. The Co-op aims to help investors understand ethical investment and also to help investors find a specialist ethical investment adviser. The Co-op aims to benefit its clients through ethical investment by:
- Providing investors with financial and ethical insights;
- The peace of mind that comes with aligning investments with ethical values; and
- Saving time and effort in evaluating socially responsible investment options.
ETHICAL ADVISERS’ CO-OPERATIVE – 2018 YEAR IN REVIEW
- The Ethical Advisers Co-operative Australia represents 34 financial advisers across Australia with over 3,500 clients/investors.
- The Ethical Advisers’ Co-operative (EAC) Funds under management report compiled March 2019. Ethically screened funds under management rose 34% over the last calendar year to $1.764 billion by EAC members.
- Greenwash Gong Award 2018 AMP Responsible Investment Leaders Products for broad definitions on ethical screening.
- Ethical Fund manager engagement Webinars – 9 Webinars.
- NGO engagement – Market Forces and ACCR. Shareholder campaigns assistance with our clients – Whitehaven Coal, Qantas, Santos, QBE, Origin Energy and IAG.
- Royal Banking Commission submission on transparency, disclosure and ethics screening.
- Engaged with fund managers on disclosure of holdings, fossil fuel screens.
- EAC speaker at Morningstar adviser education event on ESG and client relationships.
- RIAA Benchmarking Report participation and inclusion August 2018.
- 5th Annual Ethical Investment Week “A World of Choice” October 2018 with 7 community events in 4 states, radio, interviews, social media and videos. Exclusive distribution rights Movie Event – Jeff Bridges “Living in Futures Past”.
2019 PLANS IN PLACE
- Ongoing education articles and training education to the financial planning sector on Ethics and Ethical Investment via KAPLAN education
- Speaking events via FPA Australia on Ethical Investment and Ethics
- Ratings for Responsible Investment Products
ABOUT THE ETHICAL ADVISERS’ CO-OPERATIVE LTD
The Ethical Advisers' Co-operative Ltd (Co-op) is a member operated organisation created to help communicate the intention and benefits behind ethical investment. The Co-op aims to help investors understand ethical investment and also to help investors find a specialist ethical investment adviser. The Co-op aims to benefit its clients through ethical investment by:
- Providing investors with financial and ethical insights;
- The peace of mind that comes with aligning investments with ethical values; and
- Saving time and effort in evaluating socially responsible investment options.
ETHICAL ADVISERS’ CO-OP 2016/17 YEARS IN REVIEW
- Ethical Investment Week (EIW) 2017 will be in the week 8th – 14th October 2017 and will align with Ethical Investment groups in UK and around the world. This will be the event’s fifth year and there will be speakers and community events held across Australia. The Ethical Investment Week highlights and communicates the objectives and benefits of ethical investments. #EthicalInvestWk
- The theme of EthicalInvestWk 2017 is Ethical Investment: ‘Make an Impact’ with a focus on exploring new developments in Impact Investments.
- EAC Funds under management report compiled March 2017. Ethically screened funds under management increased by 10% over the last year to over $1.15 Billion
- We are pleased to announce that 5 new Financial Advisers have joined EAC in the past year, totalling 24 Specialist Advisers in the field of Ethical Investment as part of the EAC
- We have met with many NGO's, including Market Forces and ACCR. Assisted them with their campaigns by linking our clients with company campaigns on Climate/Carbon disclosure and reporting
- Assisted Market Forces with their campaign on listed private health funds and their fossil fuel investment exposure by linking our clients with the campaign
- Engaged with fund managers and asset managers to assist them in developing new ethical investment products
- Webinars/Teleconferences with a number of fund managers that have screened investments products
- EAC held Ethical Investment Week 2016 from the 23rd to the 30th October with 6 events held around Australia in collaboration with Infigen Energy, Australian Ethical, Banyule Council and Responsible Investment Association Australasia (RIAA). The theme was Divest-Reinvest.
ETHICAL ADVISERS’ CO-OPERATIVE – 2015 YEAR IN REVIEW
- The Ethical Advisers’ Co-operative (EAC) Funds under management report compiled March 2015. Ethically screened funds under management rose 18% over the last year to close to $1 billion by EAC members
- Company engagement with Wesfarmers and Woolworths on labor practices in May 2015 along with Responsible Investment Association of Australasia
- Participated in client involvement with ACCR to achieve over 100 shareholders in both Origin and AGL. Client investors put up a shareholder voting resolution on climate reporting, accountability and transparency, September 2015
- Participated in shareholder voting resolutions and shareholder engagement with ANZ, CBA and WBC, NAB with ACCR on climate risk reporting and transparency
- Ethical Fund manager engagement on gas stocks, April 2015
- NGO engagement – collaboration with Market Forces and 350.org
- RIAA Benchmarking Report participation and inclusion August 2015
- Ethical Investment Week 2015 12-16 October, Divest>>>Reinvest
- Ethical Investment Week 2015 website: www.ethicalinvestmentweek.com
ABOUT THE ETHICAL ADVISERS’ CO-OPERATIVE LTD
The Ethical Advisers' Co-operative Ltd (Co-op) is a member operated organisation created to help communicate the intention and benefits behind ethical investment. The Co-op aims to help investors understand ethical investment and also to help investors find a specialist ethical investment adviser. The Co-op aims to benefit its clients through ethical investment by:
- Providing investors with financial and ethical insights;
- The peace of mind that comes with aligning investments with ethical values; and
- Saving time and effort in evaluating socially responsible investment options.
The Ethical Advisers' Co-operative recently published their inaugural Annual Report, which showcases the important efforts the Co-op has made throughout 2020, highlighting the engagement activities, ethical fund ratings and member events that are lifting the finance industry and spreading the word to more investors.
Australian Councils Talk Divestment
11/10/2016
In October 2016, Sydney City Council became the latest in a long line of Councils from around Australia to announce their plans to Divest from fossil fuels. What is driving this rapid change? Hear the reasons driving the Councillors in this video:
Blog
25/08/2016
Responsible investment becoming mainstream
12/09/2016
The concept of responsible investment is that through well considered allocation of investment capital, positive change is made to our world. Businesses doing good are rewarded with capital to fund growth, whilst those with negative impacts on the planet or society are slowly starved of capital and wither.
This is a great concept, but for it to work there has to be a certain “weight of money”. An investor selling a tiny fraction of a company isn’t likely to have any influence on management decisions. However when a large investment fund decides to shift investments on ethical grounds, as we saw with the ANU divestment of mining stocks last year, companies takes notice.
It’s impossible to pin-point the commencement of the responsible investment approach. Many religious organisations have applied their particular moral filter to investment selection for many many years. However in a practical sense, for most investors, investment options that incorporated ethical considerations in portfolio construction became available in the 1980’s and 90’s.
Lacking scale, the early offerings were often expensive, but they laid an important ground-work for considering more than just which investment is likely to deliver the highest return.
It has taken some time, but skip forward to 2016 and all the major superannuation funds in Australia offer some form of ethically screened investment option. The terms vary somewhat – the option may be called “Socially aware”, “Sustainable”, or “Ethical” for example. But the evolution from a very niche concept around 30 years ago, to where it stands today is truly remarkable.
The Responsible Investment Association of Australasia’s recently released benchmark report found that 47% of Australia’s professionally managed assets now consider environmental, social and governance (ESG) issues. At the end of 2015, the total responsible investment industry accounted for $633billion in assets under management.
Pleasingly the report also found that investors allocating their money in this way actually benefited in terms of investment return with Australian and International share funds showing out-performance compared to market benchmarks.
The responsible investment approach has come of age. Yet still too few Australians know of the options available to them. Ethical Investment Week, starting 24 October, is one way the word can get out on this great success story.
This is a great concept, but for it to work there has to be a certain “weight of money”. An investor selling a tiny fraction of a company isn’t likely to have any influence on management decisions. However when a large investment fund decides to shift investments on ethical grounds, as we saw with the ANU divestment of mining stocks last year, companies takes notice.
It’s impossible to pin-point the commencement of the responsible investment approach. Many religious organisations have applied their particular moral filter to investment selection for many many years. However in a practical sense, for most investors, investment options that incorporated ethical considerations in portfolio construction became available in the 1980’s and 90’s.
Lacking scale, the early offerings were often expensive, but they laid an important ground-work for considering more than just which investment is likely to deliver the highest return.
It has taken some time, but skip forward to 2016 and all the major superannuation funds in Australia offer some form of ethically screened investment option. The terms vary somewhat – the option may be called “Socially aware”, “Sustainable”, or “Ethical” for example. But the evolution from a very niche concept around 30 years ago, to where it stands today is truly remarkable.
The Responsible Investment Association of Australasia’s recently released benchmark report found that 47% of Australia’s professionally managed assets now consider environmental, social and governance (ESG) issues. At the end of 2015, the total responsible investment industry accounted for $633billion in assets under management.
Pleasingly the report also found that investors allocating their money in this way actually benefited in terms of investment return with Australian and International share funds showing out-performance compared to market benchmarks.
The responsible investment approach has come of age. Yet still too few Australians know of the options available to them. Ethical Investment Week, starting 24 October, is one way the word can get out on this great success story.
Jargon busting – what is “SRI”?
05/10/2016
Anyone with even a passing interest in sustainability is likely to have bumped into the acronym SRI at some point. So what is SRI all about?
SRI stands for Socially Responsible Investment (though at times Social is replaced with Sustainable). Originally born out of the women’s rights, civil rights and antiwar movements of the 1960’s and 70’s. In recent times the focus has most often been on environmental sustainability, though the concept has broader application.
Investors looking to apply SRI considerations to their portfolios will aim to evaluate investments based on environmental, social and corporate governance criteria (ESG), as an overlay to the typical financial analysis that an investor may do.
Most Australian superannuation funds have “Sustainable” investment options available that aim to meet the needs of SRI investors. What this actually means “under the hood” is sometimes less clear. Investors interested in incorporating ethical considerations into their portfolios should start by visiting the Responsible Investment Association of Australasia (RIAA) web site. RIAA has a certification process for both fund managers, and financial advisers. So for the self-directed ethical investor, this can point you to funds worth exploring. For those looking for some help and guidance, professional financial planners who specialise in SRI considerations are listed.
When considering the application of ethics in your investment decisions, it is not unreasonable to wonder whether there is a cost, in terms of lower returns, that flows from investing in this way. Pleasingly considerable research suggests that in fact consideration of these themes can improve performance.
A report commissioned by the MSCI on gender diversity on boards and released in November 2015 found that for companies in the MSCI World Index, those with strong female representation (a governance factor in ESG analysis) at board and leadership level had a 36.4% higher return on equity and a 12.8% higher valuation (based on price to book ratio) compared to companies that lacked this diversity.
Locally, RIAA’s benchmark report, recently found that funds investing in Australian equities who incorporated responsible investment practices outperformed both the ASX300 index, and the average large cap Australian fund manager over 1, 3, 5 and 10 year measurement periods.
So what are you waiting for? You can do good with your investments and retirement savings.
Paul Benson
Financial Planner – Practice Principal
Guidance Financial Services
Important Information:
This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.
SRI stands for Socially Responsible Investment (though at times Social is replaced with Sustainable). Originally born out of the women’s rights, civil rights and antiwar movements of the 1960’s and 70’s. In recent times the focus has most often been on environmental sustainability, though the concept has broader application.
Investors looking to apply SRI considerations to their portfolios will aim to evaluate investments based on environmental, social and corporate governance criteria (ESG), as an overlay to the typical financial analysis that an investor may do.
Most Australian superannuation funds have “Sustainable” investment options available that aim to meet the needs of SRI investors. What this actually means “under the hood” is sometimes less clear. Investors interested in incorporating ethical considerations into their portfolios should start by visiting the Responsible Investment Association of Australasia (RIAA) web site. RIAA has a certification process for both fund managers, and financial advisers. So for the self-directed ethical investor, this can point you to funds worth exploring. For those looking for some help and guidance, professional financial planners who specialise in SRI considerations are listed.
When considering the application of ethics in your investment decisions, it is not unreasonable to wonder whether there is a cost, in terms of lower returns, that flows from investing in this way. Pleasingly considerable research suggests that in fact consideration of these themes can improve performance.
A report commissioned by the MSCI on gender diversity on boards and released in November 2015 found that for companies in the MSCI World Index, those with strong female representation (a governance factor in ESG analysis) at board and leadership level had a 36.4% higher return on equity and a 12.8% higher valuation (based on price to book ratio) compared to companies that lacked this diversity.
Locally, RIAA’s benchmark report, recently found that funds investing in Australian equities who incorporated responsible investment practices outperformed both the ASX300 index, and the average large cap Australian fund manager over 1, 3, 5 and 10 year measurement periods.
So what are you waiting for? You can do good with your investments and retirement savings.
Paul Benson
Financial Planner – Practice Principal
Guidance Financial Services
Important Information:
This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.
Investing in Violence
06/10/2016
What is a gun? It is a tool for violence, simple as that. It has no other use except to cause harm through physical violence. Most people do not want to profit from domestic violence, terrorism, gang violence, war and school shootings. However, by investing in companies which manufacture weapons, you are by default enabling and investing in tools used in these forms of violence.
Let say for example ‘Aussie Joe’ has a superannuation account with Super Fund One. Super Fund One uses Investment Manager Two to manage their investments. Investment Manager Two invests globally and in the US holds stocks in Big Guns Three Corporation. Big Guns Three Corporation supplies guns to Walmart, where US Barry buys his guns. US Barry has two guns, one in his car and one in his home. Barry’s home gets burgled one day and his gun is stolen by Dan. Dan uses the gun to shoot twenty children at his school with his mate Pete, Pete uses his dad’s gun. The very same gun that was used by Pete’s uncle to shoot his aunty ten years ago.
Now do not get me wrong, weapons can be profitable - and have been for some time, thanks to the US. Some of Australia’s big financial institutions hold significant weapon investments in nuclear weapons production and manufacturing including ANZ $1,886 million USD, Westpac $463 million USD, $635 million USD, Macquarie Group $1,897 million USD see www.dontbankonthebomb.com for more details. However, weapons also have negative social and economic affects.
Weapons and gun investments place additional risk on the economy. Violence damages the economy is causes economic disruptions and can lead to economic collapse as we have seen in Syria recently.
There are smaller scale disruptions, such as when there is a school shooting in a local area and students are killed. There are numerous flow-on affects to parents and family who have to take time from work as a result of grief. Or when individuals in our community are killed that have great social importance and benefit (such as that of surgeon Victor Chang), not to mention the community investment of time and money into their education and training.
Guns and weapons cause economic inefficiencies. As we continue to globalise and move to a global economy it is no longer possible to expect that because violence is not happening in our country, that it does not affect our economy. The economies of the world are now entwined and reliant on each other.
If you do not want to invest in violence, a good way to see this achieved is through divestment from weapons manufacturers. Investors need to demand that fund managers and superannuation fund trustees are transparent about their holdings, and must divest from weapons.
Hope Evans,
Simply Ethical Advice
Ethical Advisers' Co-op Board Member
August 2016
Let say for example ‘Aussie Joe’ has a superannuation account with Super Fund One. Super Fund One uses Investment Manager Two to manage their investments. Investment Manager Two invests globally and in the US holds stocks in Big Guns Three Corporation. Big Guns Three Corporation supplies guns to Walmart, where US Barry buys his guns. US Barry has two guns, one in his car and one in his home. Barry’s home gets burgled one day and his gun is stolen by Dan. Dan uses the gun to shoot twenty children at his school with his mate Pete, Pete uses his dad’s gun. The very same gun that was used by Pete’s uncle to shoot his aunty ten years ago.
Now do not get me wrong, weapons can be profitable - and have been for some time, thanks to the US. Some of Australia’s big financial institutions hold significant weapon investments in nuclear weapons production and manufacturing including ANZ $1,886 million USD, Westpac $463 million USD, $635 million USD, Macquarie Group $1,897 million USD see www.dontbankonthebomb.com for more details. However, weapons also have negative social and economic affects.
Weapons and gun investments place additional risk on the economy. Violence damages the economy is causes economic disruptions and can lead to economic collapse as we have seen in Syria recently.
There are smaller scale disruptions, such as when there is a school shooting in a local area and students are killed. There are numerous flow-on affects to parents and family who have to take time from work as a result of grief. Or when individuals in our community are killed that have great social importance and benefit (such as that of surgeon Victor Chang), not to mention the community investment of time and money into their education and training.
Guns and weapons cause economic inefficiencies. As we continue to globalise and move to a global economy it is no longer possible to expect that because violence is not happening in our country, that it does not affect our economy. The economies of the world are now entwined and reliant on each other.
If you do not want to invest in violence, a good way to see this achieved is through divestment from weapons manufacturers. Investors need to demand that fund managers and superannuation fund trustees are transparent about their holdings, and must divest from weapons.
Hope Evans,
Simply Ethical Advice
Ethical Advisers' Co-op Board Member
August 2016
How Separately Managed Accounts can help your ethical investment goals.
07/10/2016
What is a Separately Managed Account (SMA)?
SMAs are funds that are being created by advisory groups to more closely represent their client’s financial goals. Effectively a SMA allows ethical advisory groups to put together what they see as an ideal fund for most of their clients. SMAs can hold a lot of different investments that can be easily tailored to suit individual clients.
For example, Ethical Investment Advisers (EIA) has a SMA that is ‘fossil fuel free’ and that obviously suits a lot of our clients. In the fund are companies of varying sizes, although mostly medium to small, that are not directly involved in the extraction, exploration, production, refinement, marketing or storage of fossil fuels.
It also avoids investments in areas such as tobacco, gambling, mining, alcohol and weapons manufacture. Instead, the fund targets companies which are involved in positive environmental activities or that provide benefits to society, such as healthcare, renewable energy, energy efficiency, recycling and social welfare.
The fund consists of around 40 shares listed on the ASX and EIA publishes all of those shares online, so that investors can see what exactly they have invested in. It means that the fund is very transparent and the investor can be sure that the fund is ‘true to label.’
So why an SMA?
Instead of buying units in a managed fund or trust, when you purchase an SMA you are actually purchasing each individual investment. This gives you more transparency over the assets you own, as well as more control over capital gains tax and switching investments.
If an investor dislikes a particular company or group of companies in the SMA then he/she can ask that those shares be excluded from his/her account. In that way the investor has a unique fund which exactly matches their particular ethical values, whilst still investing the SMA.
This situation is not possible with standard managed funds, you either invest in all the shares in the fund or not at all. And if you object to a particular share, you only option is to appeal to the fund manager to disinvest. Also, managed funds often don’t publish the full list of underlying investments, and when they do, the published list can be out of date.
Because there often aren’t large fund managers running the SMA, fees can be lower than the general market and advisers can negotiate the fees with the client.
When compiling a fund many commercial fund managers start with a top down approach. They have a certain number of shares that they would prefer to have in their portfolio. These shares are generally the larger cap stocks and would be closely tracking the ASX 200. Then they would have to screen out some of the shares and their screens can be very fluid. So you are very dependent on the managers interpretation of what is ethical and whether they will compromise ethics for perceived security.
The SMA is generally built from the bottom up, that is the shares are selected on merit and do not necessarily track any particular index (although the EIA SMA is benchmarked against the All Ordinaries Accumulation Index). The SMA is also willing to invest in stocks that the commercial managers will disregard due to size. Quite often smaller companies have more growth potential and are in greener and in newer industries.
If you want to have greater transparency in your investments and greater control, then investing in an SMA gives you those opportunities.
SMAs give you the ability to have a spread of shares across many industry sectors without outlaying a huge amount of money. The spread of companies also gives you diversity and makes the fund less volatile.
Does it cost a lot?
SMAs tend to be cheaper to run and therefore lower cost to the investor. When shares are bought and sold they are averaged by the brokers, so that the brokerage on the sale of a share can be just a few cents per investor. SMA’s must be run on a platform (for example, Praemium, Hub24 or Netwealth) and they charge a fee for that service. As an example of fees, if you invested $10,000 into an SMA via Praemium, the fee would be approximately $48 per annum. The management fees charged by the SMA providers vary, but can be as low as 0.11% or as high as 1.5% per annum.
Do SMAs make Money?
Since its inception (22 November 2013) until 31 August 2016, the EIA SMA has returned 12.84% per annum (before fees), with the All Ordinaries Accumulation returning 6.09% per annum. Over 2 years the EIA SMA returned 15.63% per annum while the All Ords returned 3.64%, and over the past year EIA SMA returned 19.01% compared with the All Ords return of 10.72%.
Can I have an SMA in my Superannuation?
It depends on your super fund. If you have a self managed super fund, then yes, and if your super is on one of platforms which offers SMAs. We recommend that you consult with your financial adviser prior to investing in a SMA.
For more information about the EIA SMA go to:
http://www.ethicalinvestment.com.au/resources/12-articles/35-ethical-sma
SMAs are funds that are being created by advisory groups to more closely represent their client’s financial goals. Effectively a SMA allows ethical advisory groups to put together what they see as an ideal fund for most of their clients. SMAs can hold a lot of different investments that can be easily tailored to suit individual clients.
For example, Ethical Investment Advisers (EIA) has a SMA that is ‘fossil fuel free’ and that obviously suits a lot of our clients. In the fund are companies of varying sizes, although mostly medium to small, that are not directly involved in the extraction, exploration, production, refinement, marketing or storage of fossil fuels.
It also avoids investments in areas such as tobacco, gambling, mining, alcohol and weapons manufacture. Instead, the fund targets companies which are involved in positive environmental activities or that provide benefits to society, such as healthcare, renewable energy, energy efficiency, recycling and social welfare.
The fund consists of around 40 shares listed on the ASX and EIA publishes all of those shares online, so that investors can see what exactly they have invested in. It means that the fund is very transparent and the investor can be sure that the fund is ‘true to label.’
So why an SMA?
Instead of buying units in a managed fund or trust, when you purchase an SMA you are actually purchasing each individual investment. This gives you more transparency over the assets you own, as well as more control over capital gains tax and switching investments.
If an investor dislikes a particular company or group of companies in the SMA then he/she can ask that those shares be excluded from his/her account. In that way the investor has a unique fund which exactly matches their particular ethical values, whilst still investing the SMA.
This situation is not possible with standard managed funds, you either invest in all the shares in the fund or not at all. And if you object to a particular share, you only option is to appeal to the fund manager to disinvest. Also, managed funds often don’t publish the full list of underlying investments, and when they do, the published list can be out of date.
Because there often aren’t large fund managers running the SMA, fees can be lower than the general market and advisers can negotiate the fees with the client.
When compiling a fund many commercial fund managers start with a top down approach. They have a certain number of shares that they would prefer to have in their portfolio. These shares are generally the larger cap stocks and would be closely tracking the ASX 200. Then they would have to screen out some of the shares and their screens can be very fluid. So you are very dependent on the managers interpretation of what is ethical and whether they will compromise ethics for perceived security.
The SMA is generally built from the bottom up, that is the shares are selected on merit and do not necessarily track any particular index (although the EIA SMA is benchmarked against the All Ordinaries Accumulation Index). The SMA is also willing to invest in stocks that the commercial managers will disregard due to size. Quite often smaller companies have more growth potential and are in greener and in newer industries.
If you want to have greater transparency in your investments and greater control, then investing in an SMA gives you those opportunities.
SMAs give you the ability to have a spread of shares across many industry sectors without outlaying a huge amount of money. The spread of companies also gives you diversity and makes the fund less volatile.
Does it cost a lot?
SMAs tend to be cheaper to run and therefore lower cost to the investor. When shares are bought and sold they are averaged by the brokers, so that the brokerage on the sale of a share can be just a few cents per investor. SMA’s must be run on a platform (for example, Praemium, Hub24 or Netwealth) and they charge a fee for that service. As an example of fees, if you invested $10,000 into an SMA via Praemium, the fee would be approximately $48 per annum. The management fees charged by the SMA providers vary, but can be as low as 0.11% or as high as 1.5% per annum.
Do SMAs make Money?
Since its inception (22 November 2013) until 31 August 2016, the EIA SMA has returned 12.84% per annum (before fees), with the All Ordinaries Accumulation returning 6.09% per annum. Over 2 years the EIA SMA returned 15.63% per annum while the All Ords returned 3.64%, and over the past year EIA SMA returned 19.01% compared with the All Ords return of 10.72%.
Can I have an SMA in my Superannuation?
It depends on your super fund. If you have a self managed super fund, then yes, and if your super is on one of platforms which offers SMAs. We recommend that you consult with your financial adviser prior to investing in a SMA.
For more information about the EIA SMA go to:
http://www.ethicalinvestment.com.au/resources/12-articles/35-ethical-sma
Board diversity makes dollars and sense
10/10/2016
Corporate boards and executive teams that lack gender and cultural diversity risk missing out on opportunities to generate long-term value.
For decades, responsible investors around the world have advocated for greater diversity on corporate boards and on executive teams. The rationale has been simple: it’s the ethical thing to do for organizations to include more women and visible minorities in leadership to reflect the markets they serve and provide advancement opportunities for the full range of skilled people within their organization.
It also makes good business sense. A growing body of evidence links diverse leadership with stronger financial performance compared to more homogenous boards and executive teams. A working paper released in March 2016 by the International Monetary Fund examined the link between gender diversity in senior corporate positions and financial performance of 2 million companies in Europe. It found companies with a higher share of women in senior positions had a higher return on assets, especially for firms in sectors that employ significantly more women in their labour force, and have greater demand for higher creativity and critical thinking.
According to MSCI’s Women on Boards report released last November, companies in the MSCI World Index with strong female leadership had a 36.4 percent higher return on equity compared to companies without and also had a 12.8 percent higher price-to-book value. The report defined companies with strong female leadership as one with three or more women on its board, having a percentage of women on the board above its country average, or a company with a female CEO and at least one woman on the board.
A McKinsey & Company report released in early 2015 also found that there was “a statistically significant relationship between a more diverse leadership team and better financial performance.” In its analysis of hundreds of companies in the U.K., Canada, Latin America and the U.S., organizations with higher gender diversity were “15 percent more likely to have financial returns that were above their national industry median. Companies in the top quartile of racial/ethnic diversity were 35 percent more likely to have financial returns above their national industry median.”
There are several reasons why companies with diverse leadership are linked to stronger corporate performance. Various studies have linked gender and cultural diversity to greater capacity for creativity and innovation, greater employee productivity, commitment and satisfaction, and a stronger focus on responding to customer needs - all of which contributes to a company’s bottom line. In an increasingly interconnected and globalized economy, a diverse leadership with broad, international experience could also tap new opportunities that less diverse leadership may not realize exists, or has the ability to exploit.
While there has been progress with respect to leadership diversity, there is still significant room for improvement. Various studies have found that unconscious bias against diverse candidates remains one of the strongest hindrances to increasing leadership diversity. A Catalyst report on gender diversity on boards in Canada suggests there is a need to consider various strategies to recruit and retain women in the corporate sector given that women are twice as likely as men to choose a non-corporate job as they progress in their careers. To ensure that businesses tap the benefits of cultural diversity, there is also a need to encourage women of diverse backgrounds since it’s estimated that nearly a third of women in Canada will belong to a visible minority group by 2031.
Various jurisdictions have employed different means to address board diversity. A number of European countries, including Germany and Norway, have established quotas to increase the percentage of women on boards. Other countries, such as Canada and Australia, have adopted a “comply or explain” disclosure rule where companies are required to disclose their approaches to board diversity, and if they don’t have any, explain why they don’t. Some jurisdictions, such as the U.K., and most recently Ontario, Canada, have employed voluntary targets to spur greater diversity.
Each option has its strengths, weaknesses, nuances, and track record of success. But if the evidence about the value of board diversity is any reason to spur action, the sooner company leaders embrace and champion diversity, the sooner all stakeholders can benefit.
Deb Abbey is the CEO of the Responsible Investment Association of Canada. She is the co-author of the 50 Best Ethical Stocks for Canadians [2001] and the author of Global Profit and Global Justice, Using Your Money to Change the World [2004].
For decades, responsible investors around the world have advocated for greater diversity on corporate boards and on executive teams. The rationale has been simple: it’s the ethical thing to do for organizations to include more women and visible minorities in leadership to reflect the markets they serve and provide advancement opportunities for the full range of skilled people within their organization.
It also makes good business sense. A growing body of evidence links diverse leadership with stronger financial performance compared to more homogenous boards and executive teams. A working paper released in March 2016 by the International Monetary Fund examined the link between gender diversity in senior corporate positions and financial performance of 2 million companies in Europe. It found companies with a higher share of women in senior positions had a higher return on assets, especially for firms in sectors that employ significantly more women in their labour force, and have greater demand for higher creativity and critical thinking.
According to MSCI’s Women on Boards report released last November, companies in the MSCI World Index with strong female leadership had a 36.4 percent higher return on equity compared to companies without and also had a 12.8 percent higher price-to-book value. The report defined companies with strong female leadership as one with three or more women on its board, having a percentage of women on the board above its country average, or a company with a female CEO and at least one woman on the board.
A McKinsey & Company report released in early 2015 also found that there was “a statistically significant relationship between a more diverse leadership team and better financial performance.” In its analysis of hundreds of companies in the U.K., Canada, Latin America and the U.S., organizations with higher gender diversity were “15 percent more likely to have financial returns that were above their national industry median. Companies in the top quartile of racial/ethnic diversity were 35 percent more likely to have financial returns above their national industry median.”
There are several reasons why companies with diverse leadership are linked to stronger corporate performance. Various studies have linked gender and cultural diversity to greater capacity for creativity and innovation, greater employee productivity, commitment and satisfaction, and a stronger focus on responding to customer needs - all of which contributes to a company’s bottom line. In an increasingly interconnected and globalized economy, a diverse leadership with broad, international experience could also tap new opportunities that less diverse leadership may not realize exists, or has the ability to exploit.
While there has been progress with respect to leadership diversity, there is still significant room for improvement. Various studies have found that unconscious bias against diverse candidates remains one of the strongest hindrances to increasing leadership diversity. A Catalyst report on gender diversity on boards in Canada suggests there is a need to consider various strategies to recruit and retain women in the corporate sector given that women are twice as likely as men to choose a non-corporate job as they progress in their careers. To ensure that businesses tap the benefits of cultural diversity, there is also a need to encourage women of diverse backgrounds since it’s estimated that nearly a third of women in Canada will belong to a visible minority group by 2031.
Various jurisdictions have employed different means to address board diversity. A number of European countries, including Germany and Norway, have established quotas to increase the percentage of women on boards. Other countries, such as Canada and Australia, have adopted a “comply or explain” disclosure rule where companies are required to disclose their approaches to board diversity, and if they don’t have any, explain why they don’t. Some jurisdictions, such as the U.K., and most recently Ontario, Canada, have employed voluntary targets to spur greater diversity.
Each option has its strengths, weaknesses, nuances, and track record of success. But if the evidence about the value of board diversity is any reason to spur action, the sooner company leaders embrace and champion diversity, the sooner all stakeholders can benefit.
Deb Abbey is the CEO of the Responsible Investment Association of Canada. She is the co-author of the 50 Best Ethical Stocks for Canadians [2001] and the author of Global Profit and Global Justice, Using Your Money to Change the World [2004].
Councils continue to divest from fossil fuel
19/10/2016
In October 2016, Sydney City Council became the latest in a long line of Councils from around Australia to announce their plans to Divest from fossil fuels. What is driving this rapid change? Hear the reasons driving the Councillors in this video:
Investors want the ability to invest in strong performing assets which align with their values, and this attitude extends to the investments made by local councils.
The public’s attitude to responsible investing is changing, and councils are taking note.
The City of Sydney, for instance, recently committed to divesting from fossil fuels, with Lord Mayor Clover Moore labelling climate change as the most important issue of our times, while the move follows similar commitments made by nearly 30 councils across Australia, including the City of Melbourne, Hobart City Council and the City of Fremantle, among others.
Additionally, the divestment movement is making ground in the university sector, with Queensland University of Technology (QUT) recently announcing a new responsible investment charter, joining more than 550 institutions worldwide, which 350.org says represents approximately AU$6.1 trillion in investments – no small feat!
Meanwhile, the significant progress being made in climate change policy, as well as in environmental protection, labour standards and good governance, suggests that ethically focused investments will continue to have a natural advantage over those that ignore such trends.
Ethically screened portfolios have outperformed over the long term, and we expect this trend to continue as more and more local councils, universities and other key institutions re-align their investment strategies.
Ethical Investment Services’ Mike Josephson will be presenting at Banyule Council’s Divestment and Ethical Investment Forum as part of Ethical Investment Week 2016 on Wednesday 26 October.
For more information on the event, click here.
Ethical Investment Services
Based in Melbourne, Ethical Investment Services has been providing clients with responsible investment portfolios and financial advice for over 25 years. A proud supporter of Ethical Investment Week, Ethical Investment Services views the week as a great opportunity for Australians to learn more about investing in line with their ethics.
The public’s attitude to responsible investing is changing, and councils are taking note.
The City of Sydney, for instance, recently committed to divesting from fossil fuels, with Lord Mayor Clover Moore labelling climate change as the most important issue of our times, while the move follows similar commitments made by nearly 30 councils across Australia, including the City of Melbourne, Hobart City Council and the City of Fremantle, among others.
Additionally, the divestment movement is making ground in the university sector, with Queensland University of Technology (QUT) recently announcing a new responsible investment charter, joining more than 550 institutions worldwide, which 350.org says represents approximately AU$6.1 trillion in investments – no small feat!
Meanwhile, the significant progress being made in climate change policy, as well as in environmental protection, labour standards and good governance, suggests that ethically focused investments will continue to have a natural advantage over those that ignore such trends.
Ethically screened portfolios have outperformed over the long term, and we expect this trend to continue as more and more local councils, universities and other key institutions re-align their investment strategies.
Ethical Investment Services’ Mike Josephson will be presenting at Banyule Council’s Divestment and Ethical Investment Forum as part of Ethical Investment Week 2016 on Wednesday 26 October.
For more information on the event, click here.
Ethical Investment Services
Based in Melbourne, Ethical Investment Services has been providing clients with responsible investment portfolios and financial advice for over 25 years. A proud supporter of Ethical Investment Week, Ethical Investment Services views the week as a great opportunity for Australians to learn more about investing in line with their ethics.
Ethical Investment Week 2016 - 23-30 October
19/10/2016
Ethical Investment Week is about learning what drives investors to invest in line with their ethics, and how you can too.
Dr Bronwyn King, Radiation Oncologist & CEO of Tobacco Free Portfolios
“When I found out my super fund was investing in tobacco, I had to look into the issue a lot deeper. I got the support of my hospital and its CEO, as well as the head of the lung cancer unit. After engaging with my super fund for some time, they made the decision to implement a tobacco-free mandate across their entire portfolio.“
For more information see: www.ethicalinvestmentweek.com
Dr Bronwyn King, Radiation Oncologist & CEO of Tobacco Free Portfolios
“When I found out my super fund was investing in tobacco, I had to look into the issue a lot deeper. I got the support of my hospital and its CEO, as well as the head of the lung cancer unit. After engaging with my super fund for some time, they made the decision to implement a tobacco-free mandate across their entire portfolio.“
For more information see: www.ethicalinvestmentweek.com
Thinking of Investing in Renewables?
20/10/2016
Does it make sense to invest in this sector, and what are the advantages?
Did you watch the sunrise this morning?
Here’s some interesting facts:
Yet today, only around 1% of total global electricity comes from solar power.
In 1977, the cost per watt to use solar power energy was $76.67. Even in 2003, it was believed that the cost of solar power would never get below $1 per watt due to the cost of the raw materials required to manufacture solar panels.
Today, however, solar power sits at around 0.10 to 0.30 per watt – depending on the manufacture and location. In Chile a few weeks ago, they just set a new solar price record of $0.0291 pWh.
To put all these facts into perspective, consider other fuel sources such as natural gas, which sits at around 0.07 cents per watt, while coal sits at 0.13 per watt. So it would be fair to say that traditional resources are under threat –possibly even headed towards extinction.
When it comes to technological development, most people think of a linear model extrapolating this line into the future, or a rate of curve. For example, take 1, 2, 3, 4 … You would expect the next number to be 5. The reality is that in some aspects of technology and manufacturing, the development can be exponential. Consider the miscalculation of the projected cost of solar – out by 142%!
When you think about the renewable energy sector, solar has two powerful advantages that are not applicable to other sources:
(1) Sunshine is abundant worldwide, although ironically the poorest countries on Earth are often the sunniest places.
(2) Solar has the ability to equalise the energy market from country to country and township to township.
What does this mean? Hopefully, solar has the potential to reduce the overall cost of energy and living costs in the long term.
So what are the opportunities for you, the investor? Where can you invest in solar or renewable energy listed companies within the Australian marketplace? At this stage the list is very small, but there are options, for example Meridian Energy, Redflow or Infigen Energy.
In comparison to the global markets, these Australian companies are fairly small and their journey on the development curve is still early in the business lifecycle.
If you don’t feel confident to pick and choose your investment options, you might prefer to consider an ethical or sustainable managed fund that might also have exposure to the renewables sector.
Please also remember that before embarking on any investment or strategic financial planning decisions, you should always seek professional guidance from a licensed financial planner.
Alex Jamieson
AJ Financial Planning
Did you watch the sunrise this morning?
Here’s some interesting facts:
- Every 88 minutes, 470 exajoules of energy from the sun hits Earth’s surface. That is as much energy our planet consumes in one entire year.
- Every 112 hours, which is around 4.6 days, the sun provides us with 36 zettajoules of energy. That’s as much energy as is contained in all proven reserves of oil, coal, and other natural resources on our planet.
Yet today, only around 1% of total global electricity comes from solar power.
In 1977, the cost per watt to use solar power energy was $76.67. Even in 2003, it was believed that the cost of solar power would never get below $1 per watt due to the cost of the raw materials required to manufacture solar panels.
Today, however, solar power sits at around 0.10 to 0.30 per watt – depending on the manufacture and location. In Chile a few weeks ago, they just set a new solar price record of $0.0291 pWh.
To put all these facts into perspective, consider other fuel sources such as natural gas, which sits at around 0.07 cents per watt, while coal sits at 0.13 per watt. So it would be fair to say that traditional resources are under threat –possibly even headed towards extinction.
When it comes to technological development, most people think of a linear model extrapolating this line into the future, or a rate of curve. For example, take 1, 2, 3, 4 … You would expect the next number to be 5. The reality is that in some aspects of technology and manufacturing, the development can be exponential. Consider the miscalculation of the projected cost of solar – out by 142%!
When you think about the renewable energy sector, solar has two powerful advantages that are not applicable to other sources:
(1) Sunshine is abundant worldwide, although ironically the poorest countries on Earth are often the sunniest places.
(2) Solar has the ability to equalise the energy market from country to country and township to township.
What does this mean? Hopefully, solar has the potential to reduce the overall cost of energy and living costs in the long term.
So what are the opportunities for you, the investor? Where can you invest in solar or renewable energy listed companies within the Australian marketplace? At this stage the list is very small, but there are options, for example Meridian Energy, Redflow or Infigen Energy.
In comparison to the global markets, these Australian companies are fairly small and their journey on the development curve is still early in the business lifecycle.
If you don’t feel confident to pick and choose your investment options, you might prefer to consider an ethical or sustainable managed fund that might also have exposure to the renewables sector.
Please also remember that before embarking on any investment or strategic financial planning decisions, you should always seek professional guidance from a licensed financial planner.
Alex Jamieson
AJ Financial Planning
Holiday Special: Happiness through Experiences
21/12/2016
Simple living is happy living. This holiday season instead of overdoing it on sugar, processed foods, expensive gifts and alcohol, you can instead nourish your loved ones with wholesome seasonal food and great memories and experiences.
Australian seasonal fruits are perfect for the warmer holiday weather. Summer season fruits include apricots, berries, cherries, grapes, figs, lychees, mangos and banana. Eating less processed foods will make you feel better inside and out. Eat wholesome unprocessed food will also cost the earth less in plastic wrapping and energy for processing. If you shop at local farmer’s markets and local, you will save food miles and support your local economy. They say that when you buy from a local small business, you pay for a child’s next ballet class and not a CEO’s third vacation home.
Experiences are important and often create deeper memories than material possessions. People do not remember when they got their PlayStation, they remember when they went hot air ballooning. Some great experiences to share with loved ones include picnics, games and puzzles, horse riding, bush walking, pottery or art class, stand up paddle boarding, cooking, rock climbing, camping or glamping and other outdoor activities.
Another great experience would be to give back. Donate your time with your loved ones to a cause you care about. You could cook or knit for the people in need, visit elderly, support an animal sanctuary. The benefit others can obtain, from a small effort on your part, can be immense. There are plenty of ways to be involved. Most causes have websites with details of how you can be involved. Giving back teaches children to think of others and to appreciate what they have.
Some great ideas for presents include indoor and outdoor plants, products from local markets such as locally made craft or clothing, vouchers for experiences or items from the list below. Personalised and handmade vouchers for cuddles, massages, cleaning, a trip to the beach or park, an ice cream or anything else you know the gift receiver would enjoy and value.
Another great gift idea is to donate to nature such as those from Rainforest Rescue where you can buy part of a conservation project from $25 to $1,000 as a gift for someone.
Goodonyou.org.au offer advice and information about a range of sustainable products. Including jewellery, pets, clothing, toys and beauty products. They also have a great blog called The Good Edit.
The websites below offer fair trade and eco friendly products direct from developing countries. This way you get unique gifts and the producers are paid a fair price for their work:
Oxfam.org.au
Ozfairtrade.org.au
Ethicalgifts.net.au
Also Etiko.com.au specialise in fashionable sneakers - their motto is ‘wear no evil’!
On behalf of the Ethical Advisers' Co-op, we wish you a wholesome and fun filled holiday season.
Australian seasonal fruits are perfect for the warmer holiday weather. Summer season fruits include apricots, berries, cherries, grapes, figs, lychees, mangos and banana. Eating less processed foods will make you feel better inside and out. Eat wholesome unprocessed food will also cost the earth less in plastic wrapping and energy for processing. If you shop at local farmer’s markets and local, you will save food miles and support your local economy. They say that when you buy from a local small business, you pay for a child’s next ballet class and not a CEO’s third vacation home.
Experiences are important and often create deeper memories than material possessions. People do not remember when they got their PlayStation, they remember when they went hot air ballooning. Some great experiences to share with loved ones include picnics, games and puzzles, horse riding, bush walking, pottery or art class, stand up paddle boarding, cooking, rock climbing, camping or glamping and other outdoor activities.
Another great experience would be to give back. Donate your time with your loved ones to a cause you care about. You could cook or knit for the people in need, visit elderly, support an animal sanctuary. The benefit others can obtain, from a small effort on your part, can be immense. There are plenty of ways to be involved. Most causes have websites with details of how you can be involved. Giving back teaches children to think of others and to appreciate what they have.
Some great ideas for presents include indoor and outdoor plants, products from local markets such as locally made craft or clothing, vouchers for experiences or items from the list below. Personalised and handmade vouchers for cuddles, massages, cleaning, a trip to the beach or park, an ice cream or anything else you know the gift receiver would enjoy and value.
Another great gift idea is to donate to nature such as those from Rainforest Rescue where you can buy part of a conservation project from $25 to $1,000 as a gift for someone.
Goodonyou.org.au offer advice and information about a range of sustainable products. Including jewellery, pets, clothing, toys and beauty products. They also have a great blog called The Good Edit.
The websites below offer fair trade and eco friendly products direct from developing countries. This way you get unique gifts and the producers are paid a fair price for their work:
Oxfam.org.au
Ozfairtrade.org.au
Ethicalgifts.net.au
Also Etiko.com.au specialise in fashionable sneakers - their motto is ‘wear no evil’!
On behalf of the Ethical Advisers' Co-op, we wish you a wholesome and fun filled holiday season.