Australian Ethical

Greenwashing is still the biggest barrier to uptake of responsible investment strategies, but this and other challenges the ESG sector are facing now are also signs of a proliferating market that’s just picking up speed.

Slowing inflation, peaking interest rates and a renewed interest in companies with consistent earnings have sparked a rotation back into quality names in 2023. Sustainable investment strategies lend themselves to these types of businesses, according to Australian Ethical, which also sees a “massive gust of tailwind” from the net-zero push.

As Australia’s energy transition ramps up, spurred by a greater government commitment, the ethical investment manager says investors risk getting saddled with “stranded assets” if they don’t limit their exposure to fossil fuels.

The ethical money manager says Lendlease failed to provide information required to independently assess the impact of its planned development in Mount Gilead, an area deemed critical to the survival of a resident koala colony.

The clean-energy transition represents a huge opportunity for investors to earn good returns from investments that have a positive environmental impact – and ethical investors in Australia have particularly good cause for optimism, according to Australian Ethical.

The ethical investment house believes consumer credit can be positive for society if it is used to buy useful items. But companies like Afterpay focus on impulse purchases that are more likely to push vulnerable Australians into financial over-commitment.

While 2022 was a tough year for ethical and sustainable investors, the multiple compression that occurred – and a possible moderation of inflation – means they have plenty to look forward to in 2023.

What investors often misunderstand is that despite having ‘environmental’ in its description, ESG integration screens often don’t exclude companies that damage the environment according to the 2022 Sustainability Report.

It now sits aside recycling, reducing energy consumption and using biodegradable products as one of the most common methods of making a positive impact according to research from Australian Ethical and Investment Trends.

Despite a backdrop of weaker returns and uncertainty, Australian Ethical has continued to grow via great engagement and ‘consumer love’.