Alphinity Global Sustainable Equity Fund Charter

The Alphinity Global Sustainable Equity Fund supports Sustainable, Socially Responsible enterprises that also offer attractive prospective returns.

Society faces significant challenges to achieve sustainable development: climate change; socioeconomic issues such as growing disparities in income, wellbeing and living standards; ageing populations, gender inequalities, unemployment; global health threats; natural resource depletion; environment degradation and so on. Alphinity aims to play a positive role in helping to address these challenges through this specialised fund and, in doing so, make our earth a better place in which to live. These challenges also bring some opportunities. We are committed to supporting those companies which our research shows are doing good and avoiding those we believe are not.

We seek to invest in companies that offer attractive financial returns, have strong ESG practices and, where possible, have the capacity to make a positive impact on society in areas of economic, environmental and social development by contributing towards the advancement of at least one of the UN Sustainable Development Goals. This might include activities such as:

  • Combating poverty through enhancing food security, improved nutrition and sustainable agriculture (SDG1 No Poverty and SDG2 Zero Hunger)
  • Promoting healthier lives and well-being for all people of all ages (SDG3 Good Health and Wellbeing)
  • Providing quality education which is inclusive and equitable (SDG 4 Quality Education)
  • Promoting gender equality and diversity (SDG 5 Gender Equality)
  • Promoting sustainable cities and the development of sustainable human settlements (SDG11 Sustainable Cities and Communities
  • Promoting inclusive, and sustainable economic growth, as well as full and decent employment (SDG 8 Decent Work and Economic Growth and SDG10 Reduced Inequalities)
  • Building resilient infrastructure, promoting inclusive and sustainable industrialisation (SDG9 Industry, Innovation and Infrastructure)
  • Promoting sustainable consumption and production patterns (SDG12 Responsible Consumption and Production)
  • Combatting climate change and its impacts (SDG13 Climate Action)
  • Promoting affordable, reliable, and sustainable energy production (SDG 7 Affordable and Clean Energy)
  • Conserving biodiversity, forests, rivers, and the oceans in a sustainable manner (SDG14 Life under water and SDG15 Life on land)
  • Providing sustainable management of water and sanitation (SDG6 Clean water and Sanitation)

We seek to avoid companies that are involved in activities we consider incompatible with the objectives of the fund, as they may be harmful to society and/or inconsistent with the achievement of the UN Social Development Goals. We therefore have a zero revenue tolerance for producers of tobacco and controversial weapons. We also don’t support companies which generate more than 5% of their revenues (cumulative) from producing or operating in the following areas:

  • Fossil fuels (including extraction, production and electricity production from energy coming from fossil fuels), such as Thermal Coal, Natural Gas and Oil, unless the company has a clear and credible commitment to divest from the use of fossil fuels within a reasonable timeframe. This divestment commitment should also be supported by clear emissions reduction targets and commitments which are compatible with the Paris Agreement (i.e. net zero by 2050);
  • High-impact fossil fuels such as Coal Seam Gas, Oil Sands and those drilling in Arctic regions, regardless of any emissions commitments they might make;
  • Production of controversial fuels such as Uranium;
  • Gold mining, where Gold is the primary purpose of the mine;
  • Factory farming, animals in entertainment, live exports and animal testing for cosmetic products, as well as other activities which are associated with animal welfare concerns. For healthcare, we tolerate testing only where necessary, that is where the benefits to humans are significant and procedures meet internationally recognised standards. We also require policies related to animal testing are in place;
  • Predatory lending and hostile debt collection;
  • Addictions such as Alcohol and Gambling;
  • Old growth forest logging and non-RSPO palm oil; and

We also avoid companies which display poor practices in their management of Environmental, Social and Governance issues (for example unnecessary pollution, breaching international human rights principles, and avoiding a fair share of tax payments). We also avoid companies that are involved in, or have a history of, significant controversies which are not being adequately managed.

When faced with a ‘grey’ area, the Sustainable Share Fund Compliance Committee will assess the matter on its merits and determine whether we can support the company’s activities.

Companies which meet our stringent conditions are then assessed against Alphinity’s investment philosophy & process to ensure they are quality, undervalued companies in or entering an earnings upgrade cycle, and therefore candidates for our portfolio.

Our aim is to create a portfolio of companies which contribute towards the advancement of the UN Sustainable Development Goals agenda, have strong ESG characteristics and also display appealing investment characteristics.

As active owners we engage regularly with the management of current and prospective investee companies to better assess how they meet the requirements of the Charter and to indicate our views of where they need to improve their performance if this is required. We also vote the Fund’s shares in line with the principles of this Charter.

We measure and report the portfolio’s aggregate Sustainability Performance (i.e. ESG performance, its alignment with the UN Sustainable Development Goals, and its exposure to transitional and physical climate change risks) against the market.

2 Predatory loans are characterised by:
• Excessively high set up costs which are included in the principal of the loan
• Involvement of one or more intermediaries
• High ongoing interest rate and default interest rate
• Swift enforcement action
• False categorisation as a business or investment loan to avoid the Consumer Credit Code
• No access to alternative dispute resolution
• Reliance on assets rather than income to meet loan repayments.
(Consumer Credit Legal Centre submission to the Productivity Commission 2007).
For the avoidance of doubt, Predatory Lending does not include the issuance of mainstream credit cards. Predatory Lending refers to lending to consumers at very high annualised interest rates, which can exceed 50% p.a.