This report shows public data only. Is this your organisation? If so, login here to view your full report.

Australian Ethical Investment Ltd.

PRI reporting framework 2019

You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (A) Implementation: Screening

(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
Corporate (financial)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

Our positive screen leads us to support sustainable and positive impact businesses such as energy efficiency and energy storage technologies, renewable energy, recycling, efficient transport, responsible banking and other sustainable products and services.

Our negative screen leads us to avoid, for example, tobacco, weapons, fossil fuels, emissions intensive transport, irresponsible lending, discriminatory and exploitative business practices and other unsustainable products, and services and companies.

When applying our Ethical Charter to banks we assess the ‘Paris alignment’ of bank lending; sales and marketing practices; financial product design; evidence of exploitative trading activity; and ESG integration into lending decisions.

When applying our Ethical Charter to governments, we recognise that democratically elected governments play an important role in in advancing the interests of people, animals and the environment. To assess a government we therefore focus on its accountability and the general quality of its democracy, taking into account things like political rights, civil liberties and rule of law. We will not invest in undemocratic states, and democratic governments can also be excluded for militarism.

04.3. Additional information. [Optional]

FI 05. Examples of ESG factors in screening process

05.1. Provide examples of how ESG factors are included in your screening criteria.

Type of fixed income

ESG factors


Description of how ESG factors are used as the screening criteria

Development banks (DBs) established by groups of countries can be positive for alleviating poverty and otherwise contributing to human happiness. To be aligned with our Ethical Charter, a DB must meet the following conditions:

  • The DB pursues a purpose which is aligned with the Charter. An example is a purpose to alleviate poverty in developing countries and improve living standards of those who are less well off in those countries.
  • The DB integrates ESG considerations into their funding processes and decisions. This includes a requirement that DB funding processes are designed to align the DB’s lending and other activities to the economic transition needed to limit warming to well below 2 degrees.

These tests are designed to ensure that we only invest in DBs which are making a positive contribution to development i.e. if the DB did not exist, there would be poorer development outcomes in the countries which the DB seeks to benefit. We consider the following:

  • DB use of intermediaries
  • DB responsibility for harm caused by funded projects
  • climate alignment of lending
  • genuine pursuit of purpose (e.g. interests of developing countries are prioritised; don’t support authoritarian regimes or have ‘trickle down’ development focus)
  • DB transparency.

Type of fixed income

ESG factors


Description of how ESG factors are used as the screening criteria

Australian Ethical invests selectively in the banking sector. We exclude banks if they are not aligning their lending activities with the transition needed to limit warming to 2 degrees. We use a climate scorecard which assesses:

  • bank lending to the fossil fuel sector, including lending restrictions and the type of fuel and its emissions intensity
  • bank lending to renewable energy and energy storage
  • bank lending to technologies and activities which reduce energy usage or store carbon (e.g. green buildings, low-emissions transport and reforestation)
  • bank support for government climate policy aligned with the 2 degree transition (both directly and indirectly through participation in industry associations).

We also exclude banks if:

  • The bank markets and sells products in a way which encourages customers to buy products that cause them harm. For example, if the bank systematically encourages customers to over-borrow. Or the bank systematically misleads customers about fees or about the merits of investment opportunities arranged by the bank.
  • The bank systematically designs financial products which do not serve a legitimate function. For example, if the bank systematically designs investment products which facilitate tax avoidance.

05.2. Additional information.

FI 06. Screening - ensuring criteria are met

06.1. Indicate which systems your organisation has to ensure that fund screening criteria are not breached in fixed income investments.

Type of screening
Negative/exclusionary screening?
Positive/best-in-class screening
Norms-based screening

06.2. Additional information. [Optional]