MASU Group – ADVISING -Ethical investment – An oxymoron? It need not be

Did you know there is a range of managed funds specifically designed in accordance with ethical principles?

They range from ‘zero tolerance’ style funds such as Australian Ethical, which removed Woolworths from its portfolio upon Woolworths’ acquisition of poker machines, to those with more lenient ethical standards, such as the BT Wholesale Ethical fund, which will not invest in directly ‘unethical’ ventures. For instance, it won’t invest in companies that directly mine uranium or manufacture weapons, produce alcohol or tobacco, or manufacture or provide gaming facilities.

The major difference between the types of ethical funds is that more purist funds, such as Australian Ethical, emphasise positive as well as negative screening of investments. This means that as well as avoiding gambling stocks and the like, it actively seeks to invest in companies that positively contribute to the economy in environmental and social ways. For example, it is heavily invested in clean energy production and biomedical research companies.

TIPS AND TRICKS

Why not ‘gift’ your money to a not-for-profit organisation overseas, then get your money back tax-free knowing it’s been put to good use?To find out which companies are sustainable, visit the Dow Jones Sustainability Indices (DJSI, www.sustainability-index.com) and The Australian SAM Sustainability Index (AuSSi, www.transcap.com.au)

Mythbusting

Whilst it may seem illogical, if not fiscal irresponsible to make investments due to ethical rather than financial concerns, this is a misconception; there is no evidence to show that these investments yield lower returns than traditional ones. In fact, David Macri of Australian Ethical maintains that limiting a fund’s portfolio to ethical investments potentially enhances returns, as it hedges against more ethically-dissociated, volatile investments, such as those in the ‘dirty’ energy sectors.

More concrete evidence of this is provided by Hunter Hall, a dedicated ethical fund manager whose fund has yielded one of the best results in the country over the last 15 years.

The only potential monetary drawback of ethical funds is that some outsource their research, which can increase client costs. However, they extend a platitude in defense of this: ‘you get what you pay for’ and suggest that truly ethical customers would be prepared to pay a premium for a sound ethical offering.

Should any of this pique your investment interest, please contact us. We would be more than happy to steer you in the right, ethical direction.

 

[1] Sources: www.moneymanagement.com.au; www.bt.com.au.