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Australian Ethical Investment Ltd.

PRI reporting framework 2019

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Innovation

SG 18. Innovative features of approach to RI

18.1. Indicate whether any specific features of your approach to responsible investment are particularly innovative.

18.2. Describe any specific features of your approach to responsible investment that you believe are particularly innovative.

Our Australian Ethical Charter (unchanged over our 32 year history) requires us to assess all positive and negative impacts of human activity on people, animals and the environment. The Charter applies to all our investing and other business activities. These characteristics of our Ethical Charter have wide ranging implications for our innovative responsible investing approach.

  1. We carefully balance impacts on people, animals and the environment, including balancing the interests of current and future generations.
  2. We exercise our public voice on important societal issues, recognising our responsibility to contribute to constructive public debate and policy.  We communicate our analysis of important social, animal and environmental issues through diverse channels, including our website, magazine, emails and social and mainstream media. Our Facebook page has over 100,000 followers, more than any other Australian superannuation fund.
  3. Our ethical screening, engagement and advocacy applies to all our investments and asset classes.
  4. In our day to day operations we take care to treat our customers, employees, shareholders and all other stakeholders fairly. This informs our assessment of companies and our engagement with them.
  5. In our ethical assessment process we consider impacts on the welfare of people, animals and the environment, independently of implications for financial performance (which we also consider in our ethical investment process). As a result we:
  • take a long term view
  • investigate deeply all material social, animal and environmental factors when assessing sectors and companies
  • take careful account of systemic risks and impacts
  • exercise our power as an investor to actively influence future economic, social and environmental conditions, rather than simply reacting to them
  • mitigate bias in our decision making, such as anchoring and confirmation biases. Because of the independence of our ethical and financial analysis processes, there is reduced scope for bias to enter decisions when translating ethical considerations to financial risk.
  • take proper account of lower probability / high impact risks.

As practical examples of the consequences of this approach, in our ethical screening we assess the alignment of a company’s business with the transition needed to limit warming to well below 2 degrees, independently of financial risk to the company. We contribute to improvements in climate performance measurement, management and reporting through our own research and disclosure, for example on measurement of avoided emissions. At the portfolio level we have set a public target to reduce the emissions footprint of our investment portfolios to net zero by 2050.


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