AMP Capital has updated its ethical superannuation funds, giving the division a rebrand, a tightened fossil fuels investment screen and launching a youth advisory committee.
The funds previously known as the AMP Capital Responsible Investment Leaders funds, have been renamed as AMP Capital Ethical Leaders. The company said the rebrand reflects its increased focus on ethical investment considerations as it has seen growing demand from investors in the super sector.
The adjusted fossil fuels exclusion screen will now bar companies that make more than 10 per cent revenue from a number of fossil fuels including mining thermal coal and brown coal generation, reducing the threshold from its prior 20 per cent.
The fund will continue its exclusion of all companies that make a material amount of money from the most carbon-intensive fossil fuels, which AMP has previously listed as thermal coal, oil sands, brown coal, coal-fired power, and the conversion of coal to liquid fuels or feedstock.
As many institutional investors have moved toward restricting coal funding and some investors have even chosen to divest entirely, Dr Ian Woods, co-head of sustainable investment and ESG research at AMP Capital said investment decision making around fossil fuels can be complex and nuanced.
“Probably most investors would say coal has had its day and it's time to move on,” Dr Woods said.
“But they will have a view that ‘I understand that metallurgical coal is used for making steel and there’s all of Asia in the number of two billion, three billion people in Asia who have got the right to want to grow their economy.’ And they’re going to need resources to have the same set of standards.
“And so it’s perfectly legitimate and appropriate that you support those countries by providing resources that help them grow and improve their standard of living. I certainly agree that we need to be carbon neutral by 2050 or more earlier, but there's a process to get there and you want to be part of the process to get there.”
The company has made the move following AMP’s annual general meeting earlier this year, where a number of shareholders asked chairman David Murray about his views on climate change. Mr Murray had publicly denied it was occurring in the past.
However, AMP Capital is Australia’s largest responsible investment manager according to the Responsible Investment Association Australia (RIAA) with more than $2.8 billion in funds invested across seven ethical and ESG strategies. Its updated ethical fund range has been certified by the RIAA.
Transparency in ethical investing
The AMP Capital Ethical Leaders have an allocated new website listing their holdings, as well as outlines of the company’s stances on a number of ethical issues.
Kristen Le Mesurier, Responsible Investments Leaders fund portfolio manager at AMP Capital said there is a lack of clarity across the sector around ethical and ESG investing.
She commented there is an absence of “not just transparency on the exclusions or the approach to ESG but also, transparency about the investment objective.”
“I don't see a lot of that, particularly in the retail funds on the fees that they’re charging as well,” she said.
Dr Woods said clients can have more issues with responsible investing when companies aren’t clear on their investment approach – leaving investors with differing values uncertain about how certain holdings have passed funds’ ethical screens.
“I think the key to it is transparency and being what you say you are on the box,” Dr Woods said.
“As long as you’re clear and transparent about what it is, a member or a client can make an informed decision on it. I think that’s because clients can have a range of options and views so the marketplace can then offer what the client wants to reflect their values.”
An ‘industry first’ youth committee
The company added its youth advisory committee, consisting of individuals from around second year university students up to the age of 30, which will give further insights on client values and opinions.
“The establishment of a youth advisory committee, which we believe is the first of its type in the industry, ensures we’re giving an equal voice to younger Australians on how their superannuation is invested and brings new perspectives to sustainable and ethical issues,” Ms Le Mesurier said.
“At the first meeting, which is going to be held in August, they will be discussing where to draw the line on animal welfare.
“The institutional clients, the ethics committee can have their quite rigorous and debate about the issue. But we're also inviting young Australians to share their thoughts as well.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].