Australian Ethical Investment Limited is a leading ethical investment specialist, managing a range of managed investment and superannuation funds. Every investment Australian Ethical makes is subject to vigorous ethical and investment tests. It currently has AUD$3bn (approx US$2.1bn) of assets under management and counts more than 40,000 Australians as customers.
Ethics and financial performance
For Australian Ethical, animal factory farming sits alongside sectors such as tobacco and armaments as an industry from which any investment is excluded by its Ethical Charter.
The firm’s Ethical Charter is widely regarded as being one the most stringent ethical investment tests in the industry, setting out the ethical considerations which underscore Australian Ethical’s investment decisions. It uses positive and negative screens to ensure Australian Ethical invests in companies that support people, animals, the environment and sustainability and avoids investments that cause harm to people, animals or the planet.
Australian Ethical estimates that only 30% of the top 200 companies on the Australian Stock Exchange are acceptable for investment under their charter. Once the Ethical Charter is passed, a company’s financial performance is assessed.Head of Ethics Research at Australian Ethical, Dr. Stuart Palmer explains, “We don’t trade off our ethics for financial performance, but we also have a responsibility to ensure that we invest only in companies where we positively assess their capacity to generate long-term value for members and investors. Our approach aligns the ethical and financial dimensions.”
Animal factory farming is one of the industries which the firm screens out because the cruelty endured by the animals is assessed as unnecessary and unacceptable by Australian Ethical.
Australian Ethical finds that the many animal welfare and environmental issues associated with the sector significantly limit ethical investment opportunities. The challenge in finding companies that meet Australian Ethical’s strict animal welfare and greenhouse gas emission requirements means that they don’t invest in any animal meat production or dairy companies.
Moving away from live transport
As well as avoiding investments in those companies that do not meet its Ethical Charter, Australian Ethical also puts resources into engaging with investees if that company does something that is not aligned with its ethical values. For example, Australian Ethical has engaged on the issue of the live transport of animals – which involves transporting farm animals sometimes huge distances and across borders for fattening and/or slaughter. The process is regarded as being extremely stressful for the animals involved – and often includes excess time in extreme heat. In 2018, the live animal export company Emanuel Exports lost its license after deaths of 2,500 sheep were reported.
Australian Ethical won’t invest in companies involved in live export of animals. it engaged with banks (who finance exporters), insurance companies (who insure livestock) and a port logistics provider, asking them to reassess their exposure to the live export trade. Two companies have stated they will not provide services to live exporters going forward, an another discontinued its membership of a live export trade association.
Not what they prescribe
While Australian Ethical are not shareholders in any of the companies involved, Australian Ethical Investment also recently joined the FAIRR collaborative engagement on antibiotics. Ethics Analyst at Australian Ethical, Amanda Richman explains, “We felt the risks that surround the overuse of antibiotics in animal agriculture, particularly for animal welfare and human health, are simply too big to ignore. Antibiotics should be used to treat sick animals, not to sustain growth promotion and factory farming. We may not be invested in any of the companies
involved, but we wanted to lend our voice to this important initiative.”
Using BBFAW as part of ESG integration
Finally, Dr. Palmer adds that both the annual Business Benchmark on Farm Animal Welfare (BBFAW) benchmark report and the investor briefings produced by BBFAW are a crucial tool to help them understand how animal welfare issues link to sustainability.
Australian Ethical uses the annual Business Benchmark methodology and criteria to help them and investee companies understand the animal welfare risks in potential investee companies. ‘We use BBFAW in the same way we use the United Nations Guiding Principles Reporting Framework to help check a company’s human rights performance. It is a great tool we can also give companies to show them how they can understand and report on their animal welfare issues.’ says Dr. Palmer.