Alphinity Investment Management has launched the Alphinity Sustainable Share Fund (SSF), which “seeks to address the 17 UN Sustainable Development Goals (SDG) agenda in its investment.
The Alphinity SSF is a diversified portfolio of Australian stocks that have strong ESG characteristics and, “where possible” contribute towards the advancement of the UN Sustainable Development Goals, with a benchmark of outperforming the S&P/ASX 300 Accumulation Index (after fees) over rolling five-year periods. The fund will typically hold between 35-55 stocks and has a management fee of 0.95%.
The fund is designed to move beyond just negative screening and towards investing in companies that make positive impacts, says Bruce Smith, principal and portfolio manager of the Alphininty SSF.
“It’s an attempt to move the conversation a bit away from negative aspects of most of the funds, which feature a negative screen, things to avoid, risks to avoid, and generally negative things,” Bruce says. “The SDGs are a means of getting a positive aspect. We are looking at companies that are doing good, minimising negative externalise and making the work a better place via the SDGs.”
Alphinity uses internal research and external research from CAER and Sustainalytics to evaluate companies based on SDG activities. Alphinity has also appointed Elaine Prior, ESG investment pioneer and former head of ESG research at Citi, and Mark Lyster, co-founder of Action Sustainability Asia Pacific to the SSF Compliance Committee, to provide an independent external review.
Data on companies’ activities towards accomplishing the goals and targets of the SDGs are “a work in progress,” notes Stephane Andre, principal and portfolio manager of the Alphinity SSF
“By definition, external databases are blunt instruments,” Stephane says. ““That’s where the committee is really key, to ensure that we are true to label, and once that investment universe is defined, we apply the Alphinity process.”
Mark notes that information on SDG-related activities is in “early days.”
“It’s a work in process,” he says. “We rely on some of the data from the two ESG providers, CAER and Sustainalytics, and they are looking at the blunt data. We are starting to move towards defining the SDG criteria that the SSF wants to define on the revenue basis, and then also looking at what they call incorporation – their commitment to SDG type activities. “
In addition to the positive screening, Alphinity does maintain some negative screens on activities – gold mining, animal mistreatment, old growth forest logging, predatory lending and hostile debt collection, and pornography. It will however invest in some companies in extractive industries, “as the provision of certain commodities are vital if you want to achieve sustainable development,” Alphinity says.
Alphinity invests in companies that are in the process of upgrading their earnings and activities, Bruce explains.
“The Alphinity process overall looks at companies that are reasonably valued and in an upgrade cycle,” Bruce says. “If we can get companies that are doing good in an upgrade cycle, we are pretty happy with that.”
The Alphinity SSF was recently awarded the Lonsec/Money Management Fund Manager of the Year award in the Responsible Investment category. It is available on the ASX mFund platform.