“It is not simply a case of making a moral decision,” Mr Lambert told InvestorDaily. “It has to actually pass an economic test as well.
“We track the economic performance of the decisions we make and if, over a reasonable period, we find that it was costing us returns, we really have to consider whether or not we are doing the right thing by our members.”
LGS has been ranked the top Australian low carbon asset owner for two consecutive years in the AODP Global Climate Index, which ranks the performance and disclosure of practices of asset owners in relation to climate change.
“We like to think that it’s not mutually exclusive, that you can adopt a sustainable policy and cost your members' returns,” Mr Lambert said.
“Let’s say there are companies that you believe have a poor [environmental, social and governance] ranking and you exclude them from your stock because of that. You’ve got to give that a reasonable period to see whether that exclusion is the right decision because generally the exclusion is on the basis of a long term risk that we see,” he said.
“You need to allow it to play itself out, but if it doesn’t, then you need to reconsider whether that risk you see is there or not.”
