Sustainable Investing at Alphinity

Our sustainable funds strive to not invest in companies whose activities we consider to be incongruent with the achievement of the SDGs. Climate action (SDG13) is one of the SDGs and climate risk hampers the achievement of many of the other SDGs including SDG7 Affordable and Clean Energy, SDG11 Sustainable Cities and Communities, and SDG14 Life Below Water. Fossil fuels (coal, oil and gas) are by far the largest contributor to global climate change, accounting for the majority of global greenhouse gas emissions.

These funds therefore exclude fossil fuel producers, or utilities generating energy from fossil fuels with a 5% revenue threshold for the Global Sustainable Equity Fund, and a 10% revenue threshold for the Australian Sustainable Share Fund.

If an individual company has a clear and credible commitment to divest from the use of fossil fuels within a reasonable timeframe we may consider including it in the investable universe. This divestment commitment would need to be supported by clear emissions reduction targets and commitments which are compatible with the Paris Agreement (i.e. net zero by 2050).

We will also not invest in 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 (the same revenue thresholds apply).

Any company with an indirect link to fossil fuel production, for example fossil fuel transport or engineering services, is considered closely by the respective Sustainability Compliance Committee before inclusion in the fund.

Our sustainable funds strive to not invest in companies whose activities are incongruent with the achievement of the SDGs. SDG3 (Good Health and Wellbeing) includes a range of targets covering issues related to illness or injuries linked to additions. For example, non-communicable diseases, mental health and wellbeing, substance abuse and access to healthcare. Addictions also hinder the achievement of other related SDGs including SDG1 (No Poverty), SDG4 (Quality Education) and SDG10 (Reduced Inequality).

We therefore do not invest in companies which generate material revenues from gambling, tobacco or alcohol production. There is a zero revenue tolerance for tobacco products. Gambling and alcohol production has a 5% revenue threshold for the Global Sustainable Equity Fund, and a 10% revenue threshold for the Australian Sustainable Share Fund.

In light of this, we support the extraction of:

• Iron Ore and Metallurgical Coal: These materials are used in steelmaking and support the development of more sustainable cities (SDG11), new industries and technology (SDG9), and construction of renewable energy projects such as wind farms (SDG7, SDG13). We are aware  that technology might change this at some point.
• Copper, Nickel, Aluminium and Lithium: A growing population requires affordable and reliable energy systems that are smarter and offer efficient power delivery. Transition metals such as these play a critical part in enabling renewable energy storage and the electrification of our economy. These raw materials are essential to support new industries and infrastructure (SDG9), sustainable cities but also enable climate action (SDG13).

We do not invest in companies that extract:

• Gold when that is the primary purpose of the company. Gold is primarily used to make jewellery and to store wealth, neither of which support any of the SDGs, yet its extraction can cause significant damage to the environment and surrounding communities. For companies that produce other minerals in addition to Gold, there is a 5% revenue materiality threshold for pure Gold mining in their portfolios for the Global Sustainable Equity Fund and a 10% threshold for the Australian Sustainable Share Fund. We do not exclude companies which produce Gold as a by-product of their other mining activities.
• Oil, Gas and Thermal Coal see Fossil Fuels section above.
• Uranium and any other controversial fuels.

The production of animals for food supports the achievement of SDG2 (Zero Hunger), however presents with it significant risks and ethical concerns related to animal welfare and overall wellbeing.

Alphinity’s Sustainable funds seek to avoid investing in companies which generate revenues through factory farming, animals used in entertainment, live exports and animal testing for cosmetic products, as well as other activities which are associated with animal welfare concerns.

Agriculture: Whilst we accept that animals are a source of food for many, we are against factory farming in which animals are kept in confinement with limited ability to move freely. This exclusion applies to primary industries and direct animal producers. We are also opposed to the live export of animals.

Health Care: 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 that policies related to animal testing are in place.

We will not invest in companies that engage in the manufacture of controversial weapons such as cluster bombs, landmines, and chemical and biological weapons. 

The use of weapons does not align with SDG16, to promote justice and peace, and impede on others including SDG3 (Good Health and Wellbeing), SDG10 (Reduced Inequalities), SDG16 (Peace, Justice and Strong Institutions) and SDG17 (Partnerships for the Goals).

We are opposed to predatory lending especially as it tends to exploit the lowest income portion of society, the marginal and the vulnerable. 

We consider predatory lenders to be those who provide loans which charge usurious interest rates, or dollar-amount fees on small, short-term loans. However, we do not consider the vast majority of bank lending to be predatory.

Banking is an essential element of society. Banks provide many services, many of which facilitate positive activities like individuals buying a house, companies investing in projects, sole traders managing cash flows, and so on. Society would simply not grow and prosper without an effective banking sector. Banks and financial institutions are able to expand access to services that align with SDG1 (No Poverty)  and SDG8 (Decent Work an Economic Growth) and underpin the financing of companies that support the climate transition (SDG7, SDG13) and other goals such as SDG9 (Industry, Innovation and Infrastructure).

We do, however, acknowledge that it is essential that financial services be provided in a responsible and ethical manner. The 2018 Royal Commission highlighted many dark spots in the banking industry. We are carefully monitoring how banks are responding to the issues raised and correcting their practices. We also take into account the extent to which a bank does, or does not, support activities excluded from the Fund Charter (for example, thermal coal financing).

Forests are nature’s carbon sinks and support significant amounts of biodiversity which underpins our critical ecosystem services.

Harvesting of old growth forests negatively aligns with a number of SDGs, including SDG13 (Climate Action) and SDG15 (Life on Land), but does not support any of the other Goals.

We therefore do not invest in companies which generate material revenues from old growth forest logging (i.e. more than 5% revenue for the Global Sustainable Equity Fund, and 10% revenue for the Australian Sustainable Share Fund).

We also do not invest in companies which generate material revenues from the production of non-RSPO palm oil (revenue thresholds are consistent with old growth forest logging).