Navigating Ethics and Investment

Throughout September and October 2020, the La Trobe PPE Society ran a free webinar series, ‘Navigating Ethics and Investment’. We hosted the series in order to better understand the link between investment and ethics, and the role of the individual in ensuring the accountability of financial institutions.

In planning this series, we engaged with several stakeholders in the industry, ranging from private equity firms to financial journalists and received an overwhelming number of responses.

So here are the top three things we learnt from each presenter:

Rachel Alembakis – FS Sustainability

Our first presenter, Rachel, is the Managing Editor of FS Sustainability (formerly The Sustainability Report), a news outlet dedicated to transparency of financial institutions and governments globally, specifically issues of (Environmental, Social and Corporate Governance (ESG). Rachel’s passion for Corporate Social Responsibility (CSR) and transparency within the financial industry has resulted in notoriety within the industry, Rachel is considered a unique and important voice in Australia’s financial industry.

  • An Ethical Revolution: The end of the Shareholder v Stakeholder model. The traditional model of Shareholder supremacy is seeing a decline as social pressures force companies and governments to adopt a more holistic business model. People are no longer happy to let actors pursue profit without consideration of the greater society, businesses are now being held to account and punished where appropriate (see: Rio Tinto’s destruction of Juukan Gorge).
  • While the concept of Ethical Investment is often used as a catch-all, there are facets and levels to their ethicism, and it is important to know what you’re investing in. When looking at investment opportunities, you should ensure there are strong Environmental, Social and Corporate Governance (ESG) policies, responsible investment opportunities (will you make an impact, and grow your wealth?), strong moral and ethical foundations for the organization, and specific social/ environmental targets laid out.
  • According to research from Rainmaker Information (Rachels own organisation), four of the top five best performing Superfund investment options for 2019-2020 were ESG! Proof you can have your ethical cake, and eat it too.

Suzanne Young – La Trobe Business School

As head of the LTU Business School, Suzanne is considered an expert in her field, and was an excellent second presenter for our series. Her work in the Private Sector, as well as the Education Sector give her a unique perspective by which to address Ethical Investment

  • The evidence is out there, Ethical Investments are not just environmentally sustainable but economically sustainable. Actors who are adaptable and forward thinking tend to have longevity.
  • In the words of Michael Solomon (2009), ‘poor social, ethical and environmental corporate practices can represent an excessive fiduciary risk for institutional investors as companies attract law suits, negative media attention, loss of reputation and financial impacts from fines and taxes’, in that, companies who do the right thing socially and commercially, are often a safe bet.
  • The concept of Corporate Social Responsibility is ever-changing, and corporations who cannot adapt will lose their community standing. No longer can organisations hand out an annual good-will cheque, they need to engage with their community and be responsive to the needs of the day.

Vivek Kotak – Sustainability Victoria

With a long history of social activism and community engagement, Vivek presents to us a new aspect to consider in our endeavour to learn about Ethical Investment – the link between the public and private sectors. Sustainability Victoria is a government agency aimed at providing sustainability practices to community and corporations, helping us all to live more sustainably.

  • Sustainable Finance is often a concept less addressed in the sustainability revolution, but it plays one of the most important roles. Specifically, investment in renewable energy sources is accessible, low cost and low risk, but rarely do small businesses and non-profits invest.
  • The biggest priority of Small Business is to reduce operating costs – specifically related to energy consumption, but ‘Energy Efficiency’ does not rank in the top 10 priorities of SME’s. This counter-intuitive mindset means that small businesses are reliant on the big energy corporations to both provide affordable services and act sustainably, but this doesn’t suit their bottom line. There is definitely a certain level of proactivity required.
  • Activism needs to be respected and engaged with at all levels of business and government. Speak up, be the advocate for change in your workplace.

Corin Millais – UniBank and Teachers Mutual Bank

As the Manager of Ethical Business Strategy for Teachers Mutual Bank (UniBank exists alongside Firefighters Mutual Bank, Health Professionals Bank and Teachers Mutual Bank as a part of Teachers Mutual Bank LTD (TMBL)), Corin was our insight into the banking sector from a current expert. With more than $8Billion in assets, TMBL is one of the largest Mutual Banks in the country. Sustainability is at the forefront of UniBank’s operations, they are now certified Climate Neutral and have been recognised as one of the world’s most ethical companies, 5 years in a row.

Here’s our top three lessons from Corin:

  • Many financial institutions operate primarily in pursuit of profit and providing a considered and appropriate service was a secondary concern. These findings, from the Royal Commission into the Financial Services Industry, also highlighted the lack of regulation appropriate punishment within the industry.
  • The Insurance Industry represents a massive growth industry
  • Traditionally, the Banking Industry is complicated and rarely transparent, and they operate on this model

Adam Verway – Future Super

As the Co-Founder and Managing Director of Future Super, Australia’s first Fossil-Fuel free Superfund, Adam Verway is somewhat of an expert in the field of Ethical Investment. Having started his career at a grassroots level, advocating for large-scale institutional and government change. Future Super is unique in its foundations, it was built to serve both its members, and the greater society – a truly ethical operation.

These are some of the many pearls of wisdom from Adam:

  • There is a lot of room for legislation in ensuring the integrity of the Ethical Investment industry. Adam has found, in his many years in the industry, that the concept of ‘ethical investment’ could be used and abused by the industry in the same way the term ‘natural’ has been used in the food industry – there is no minimum standard require to use this term, and no real consequences for misleading customers.
  • While greenwashing is a common theme in the industry, with a lot of large conservative funds, there are ways to cut through the crap. There are resources out there to help you identify how ethical your investments are, and easy ways you can make a change for the better.
  • You can have a greater impact on carbon emissions by changing to an ethical superfund than you would by going vegan, giving up your car, only wearing second hand and giving up all single-use items combined. Future Super estimates that in 2019 alone, their members abated 62,000 tCO2e, the equivalent impact of 60,000 people adopting a vegan diet.

Adam O’Connor

As the Director of Capital Markets and Adviser Business for BetaShares Australia, Adam offers huge insight into the Share Market. BetaShares provides Exchange Traded Funds to the other financial institutions and the general market. We considered BetaShares uniquely ethical because they operate traditionally but offer strong ethical options. BetaShares offers two Ethical ETF’s, who screen for ESG policy and climate initiatives, ASX: ETHI and ASX: FAIR.

Adam left us with these lessons to ponder over:

  • 1 in $4 is invested ethically. There is immense growth in the ethical investment industry, and this trend is only set to increase as Gen X and Gen Z grow their wealth.
  • The biggest barrier to Ethical Investment is the myth that they have to sacrifice financial gains for ethical values, this no longer holds true. BetaShares Ethical ETF (ETHI) has outperformed the MSCI World Index by a considerable margin for the past 8 years (to September 30, 2020).
  • Investing platforms are becoming increasingly more accessible and affordable. While BetaShares do offer personalised financial advice and investment portfolio options, they also offer access to their ETF’s (Exchange Traded Funds) through the general market. All you need is a smart phone and some spare change, and you can create your micro-investing plan – it all adds up!

If you are interested in joining the LTU Politics, Philosophy and Economics Society, you can find us on Facebook! We host social and academic events throughout the year and are always happy to take on new members.