Ethical aspects of the investment process are overseen by our Ethical Advisory Group (EAG). The EAG’s responsibilities include development and ongoing review of policies and systems implementing the Ethical Charter. For example, the EAG approves frameworks which govern how the principles of our Ethical Charter are applied to different industry sectors and key ethical issues such as human rights and animal welfare. The EAG also sets priorities for our advocacy and engagement activities, and resolves any contentious ethical issues regarding specific investments (current or prospective).
The EAG comprises our Managing Director, Chief Investment Officer (CIO) and Head of Ethics Research, with external input as appropriate. The Head of Ethics Research reports to the board quarterly on responsible investment activities including activity of the EAG. This board reporting includes updates on new or revised frameworks and policies adopted to implement the Charter as well as ethical assessments for individual companies and ethical engagement and advocacy activity.
Before an investment is made or an external manger is appointed, they are assessed for alignment with the Ethical Charter. The CIO can authorise a limit when they are satisfied the investment is aligned with the Ethical Charter. Our internal ethics research team comprises our Head of Ethics Research and two Ethics Analysts. They conduct the ethical assessment and review of potential and current investments as well as any external managers and funds, with the input of the applicable portfolio manager and investment analyst from our investment team. Our Ethical Charter requires us to assess the impacts on people, animals and the environment of a company's products and services (including impacts from the way those products and services are produced, supplied, consumed and disposed of). This process draws on data and analysis from company, industry, government, responsible investment, broker, scientific and civil society sources. This broad and deep research of short and long term social and environmental impacts of companies and sectors builds a more complete understanding of the prospects and risks of the companies and sectors in our universe. As well as defining a sustainable investment universe, this enables more impactful engagement with companies. For our ‘active-fundamental’ equities portfolios, this research also contributes to the way that ESG considerations are integrated into our financial evaluation or portfolio weighting of companies.
In addition to the initial ethical screening, all investments undergo periodic ethical review. If any serious issues are detected through the review process Australian Ethical will engage with the company with a view to resolving the issue. If the issue cannot be resolved and is sufficiently serious we will divest.
Engagement and advocacy on ESG issues is conducted by members of the ethics research and/or investment team, selected as appropriate for the applicable issue and company.