Australian Ethical launches climate index fund

Firm plans to influence company policies

By Wouter Klijn
Thu 08 Jul 2010

Australian Ethical has launched a shareholder activist index fund.

Australian Ethical Investment (AEI) has launched an index fund that seeks to engage with companies about their policies on climate change and improve their disclosure.
 
The Climate Advocacy Fund (CAF) invests in Australia's largest companies by economic footprint, which is measured by sales, cash flow, book value and dividends.

The fund's composition is based on the RAFI Australian share index, which has been compiled by Colonial First State index fund subsidiary Realindex Investments, and the fund aims to outperform the ASX 200 index.

"According to back-testing data, this [RAFI] index should perform about 2 to 3 per cent better than a conventional index," Australian Ethical executive director James Thier said.

"On top of that, we will provide the climate advocacy resolution process," he said.

The resolution process is a form of shareholder activism and will put forward resolutions at shareholder meetings to improve how companies address issues such as carbon emissions and energy use.

There have not been any resolutions put forward to companies in Australia relating to environmental or social responsibility in the last five years, according to AEI.

AEI has partnered with The Climate Institute on this process.

"Superannuation funds manage over a trillion dollars of retirement money, which is at risk from climate change," Climate Institute business director Julian Poulter said.

"Super funds have a responsibility to be more active owners and encourage their investee companies to reduce climate risk and drive better emissions management," he said.

The fund is available as a managed fund, superannuation retail option and as an institutional mandate.

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