We invest in companies aligned with our public Ethical Charter (www.australianethical.com.au/australian-ethical-charter). The 23 Charter principles guide us to investments which support people, animals and the environment (positive screening) and which do not cause them unnecessary harm (negative screening). 

The consistent, rigorous application of our Charter principles defines a sustainable investment universe which we believe produces good outcomes for both the planet and the financial interests of our clients.

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, 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.

Our Ethical Charter applies to all our investment strategies. It guides us to invest in a way which minimises dangerous climate change, including to invest in sectors and companies which are aligning their businesses with the urgent transition needed to limit warming to 1.5 degrees. Key features of our approach which are relevant to climate risk and opportunity include:

Negative screening

We don't invest in fossil fuel companies or other companies assessed to be obstructing the action needed to limit warming in accordance with the Paris Climate Agreement. When we invest in the energy sector we require a positive contribution to the transition to a renewable energy system, and any fossil fuel revenue of a company must be below our thresholds (5% to 33%).

Positive screening

We invest in companies producing renewable energy and increasing energy efficiency, and otherwise supporting the urgent economic transition needed to limit warming to 1.5 degrees.

Investment management

Our assessment of investment opportunity and risk and our decisions to buy and sell individual investments and to otherwise manage our investment portfolios is informed by our ethical assessment of the climate impacts of companies and industry sectors - including impacts from the way products and services are produced, supplied, consumed and disposed of.

Targets

We have a zero emissions target for our investment portfolio, by 2050. This target date has been set in line with the recommendations of the Australian Climate Change Authority, but we will continue to work to move more quickly.

Influencing companies

We engage with companies to influence alignment of their businesses with the urgent transition needed to limit warming in line with the Paris Climate Agreement. This includes better management of the climate impacts of the way the company's products and services are produced, supplied, consumed and disposed of. We encourage, for example, better measurement and reporting of direct and indirect greenhouse gas emissions; emissions reduction target setting; and analysis of the resilience of the company's business strategy to different climate scenarios. Through our influence we aim to reduce companies' contribution to global warming as well as reducing climate-related harm to their business prospects.

We exercise positive influence on companies through private engagement, voting, public praise or criticism, shareholder resolutions and divestment.

Investment industry influence

We encourage other investors to use their influence to support the net zero emissions transition. We do this by sharing our experience of the opportunities and challenges presented by responsible investor climate action.

Public policy advocacy

Through policy submissions, consultation with government and our public voice we encourage more effective climate policy, including in relation to energy and other industry policy, carbon pricing and corporate climate disclosure.

Measurement and transparency

We measure and report our climate performance, including the emissions intensity of our share investments (carbon footprinting); the alignment of investments in the power and auto sector with the changes in power generation and car production needed to transition to net zero emissions; the emissions avoided by our investment in selected renewable and energy efficiency companies.

Our organisational Code of Conduct and Conflicts Management Framework extends to conflicts of interest arising in all our activities, including our investing activities. Any conflicts which arise are to be managed so that the interests of our clients and shareholders are not adversely affected by the conflict. The Conflicts Management Policy includes specific provisions relating to arrangements with service providers and advisors; related party dealings; personal investments; and gifts and benefits received by Australian Ethical or its employees.