The growth of ethical investment over the past 10 years is something to behold

The growth of Ethical investing sees InvestSMART launch a new Ethical Growth Portfolio through their Professionally Managed Accounts (PMA).
By · 15 Nov 2021
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15 Nov 2021 · 5 min read
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We as investors, are becoming savvier to the behaviours and actions of the firms we invest in. We know that these behaviours and actions have had outcomes on the environment, the social relationships with shareholders and the governance needed to run a firm in the new world.

This growth has seen increasing numbers in ethical investment options. This is why we are launching our new Ethical Growth portfolio through InvestSMART’s Professionally Managed Accounts.

Here are 5 things you need to know about the Ethical Growth Portfolio.

How is it ‘Ethical'?

The portfolio is made up of 5 Exchange Traded Funds (ETF), which either use ethical mandates or are deemed ‘not-unethical’.

The ethical ‘mandates’ do the following:

  • Excludes companies with significant business activities involving fossil fuels, nuclear energy, alcohol, tobacco, gambling, weapons, and adult entertainment.
  • Conducts screening based on ‘severe controversies’. For example, Rio Tinto’s actions at Juukan Gorge is a ‘controversy’.

The companies identified from this process are then excluded from the fund.

This screen process is known as a ‘negative screen’ methodology as it avoids certain business rather than seeking out good businesses which is known as ‘positive screening’.

This process is regulated by certified organisations such as the Responsible Investment Association of Australasia (RIAA). In the Ethical Growth portfolio, we look to use as many RIAA certified holdings as we can.

How did we select the holdings in the portfolio?

Like with all our portfolios on our PMA platform the Ethical Growth portfolio uses the same methodology we use to make each one.

This means the ETF must be:

  1. ‘Liquid’ - has high amounts of capital invested and easily traded on exchange.
  2. Has a low ‘Management Exchange Ratio’ (MER) - the fee to run the ETF.
  3. Closely replicates its underlying market - the ETF should be almost identical to its market of choice.
  4. Priced appropriately – the price of the ETF on the exchange should allows us to easily buy and sell the ETF to achieve the correct diversification.

And an additional point for the Ethical Growth

       5. The ETF has an ethical mandate or an ‘not-unethical’ rating

How has the Ethical Growth Portfolio performed?

There is only a small window of time to evaluate the performance of the Ethical Growth. Therefore, we think the best way to evaluate the performance is to compare it to our Growth Portfolio.

As the tables show the returns of the Ethical Growth is similar to that of Growth portfolio. For reference, long-term performance of the Growth portfolio is 7.66% per annum since inception.

Is the portfolio diversified?

The portfolio is invested across domestic and international equities, domestic and international fixed interest and cash giving you a level of diversification that can withstand market fluctuations but also takes advantage upside movements.

Further to this, to achieve a ‘Growth’ diversification profile, the portfolio is weighted more towards Australian and international equities over bonds and cash.

Here is what the inaugural portfolio looks like.

What are the Fees?

We believe this portfolio achieves both the diversification you need but also the ethical mandate you want.

The Ethical Growth portfolio is part of our Professionally Managed Account platform. The fees on the portfolio fall under our capped fee program which starts at just $99 per annum for $10,000 balances. For those with higher balances of $82,000 and over, fees are capped at $451 per annum (including all administration costs).

The portfolio fee excludes the indirect costs such as ETF MER and brokerage, which are the lowest in the industry at $4.95 or 0.099% (whichever is greater).

But that is all you will pay for your ethical portfolio.

Click here for more information on the portfolio and current offer.

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Evan Lucas
Evan Lucas
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