Ethical / Socially Responsible Investing (SRI)
Investors are becoming increasingly aware of the link between a company’s sustainability focus and its long-term success and profitability. There is increasing evidence that shows a strong link between good sustainability performance and corporate profitability. Also, in terms of environmental screening, a growing body of research suggests that superior environmental management usually correlates with high standards of corporate management which requires attention to more than just short term financials. As a result, ethical fund investing combines the best of both worlds – the potential to achieve strong performance over the long term while contributing to a sustainable environment. BTIM has been at the forefront of this movement.
Good corporate governance and sustainability is a central factor to a company’s long-term success. As an investor, we have made understanding these factors part of the fabric of our research. In 2001 we created the BT Governance Advisory Service to investigate and address environmental, social, and corporate governance-related sources of risk and value for long-term shareholders in Australian companies.
In 2007 BT Governance Advisory Service became known as Regnan – Governance Research & Engagement, jointly owned by BTIM and seven other institutional investors.
Several BT Investment Management products have been certified by RIAA according to the strict disclosure practices required under the Responsible Investment Certification Program. See www.responsibleinvestment.org for details and visit www.responsiblereturns.com.au for a more information about our certified products.
Our internal Socially Responsible Investing (SRI) team works in conjunction with Regnan’s research to seek opportunities to invest in companies that implement and display sustainable principles into their business strategies. The SRI team manages or contributes to the management of the:
- BT Australian Sustainable Share Fund
- BT Ethical Share Fund
- BT Enhanced Sustainability Australian Share Fund
- BT Sustainable Balanced Fund
- BT Sustainable Conservative Fund.
Other Ethical/ SRI funds:
BTIM’s Share Funds adopt a ‘Best of Sector’ investment approach, evaluating Australian companies based on environmental and social criteria as well as financial performance. They use the same investment process as BTIM’s flagship Australian equities products with the addition of sustainability screens. The negative screen effectively determines the investment universe. The positive screen identifies companies for active consideration, given their focus on the production of sustainable goods and services. Examples of positively screened companies include those that derive greater than 20% of their revenue from sustainable technologies, products and services. BTIM offers two investment strategies in socially responsible investing: Sustainability and Ethical. The table below summarises the key aspects of these different approaches:
|Stock selection||Bottom-up, all major industry sectors represented||Bottom-up, some industry sectors not represented|
|Portfolio construction||Disciplined process including social, environmental and financial criteria||Core BT Australian Equities portfolio construction process with ethical overlay|
|Ethical preferences||Generally no specified exclusions – not setting personal ethical preferences||Avoid or promote certain areas – aligning personal or institutional values with investments|
|Rewarding companies||Rewards ‘best’ companies across all sectors – encourages all sectors to improve||Positive screens promote certain areas of investment|
For our Diversified funds we provide a multi-asset solution with a strong focus on sustainable investments, within portfolios built to maximise risk-adjusted returns. Through our affiliate BT Financial Group (BTFG), we have been a signatory to the Principles for Responsible Investment (PRI) since January 2007. Through this initiative, signatories commit to incorporating ESG principles into investment analysis and decision making processes across the entire range of investments, as well as taking an active approach to their investments and working with other investors to improve ESG performance and practices. Importantly, as ESG issues are being incorporated into our mainstream investment processes, we report on progress via the PRI Reporting and Assessment Survey. This allows us to benchmark ourselves against our peers and identify strengths and weaknesses. Our subsidiary J O Hambro Capital Management is also a signatory to the UNPRI.