Understanding the definition of responsible investments

A combination of strong fundamental analysis capabilities, an experienced research team and a highly stable and successful Australian equities responsible investment approach has provided the Alphinity Sustainable Share Fund with what it takes to take out the Responsible Investments award.

The fund has been also praised for its positive performance over multiple timeframes.

Alphinity’s principal and portfolio manager, Bruce Smith, said his fund looks to invest in undervalued companies with earnings upgrades, which are “particularly good performers from the environmental, social and governance (ESG) point of view” while avoiding investing in companies from certain industries.

According to Smith, one of the key challenges in the responsible investments space is the clear definition of what constitutes accepted practice: “We are looking for the companies that are good performers but also good performers from the social point of view.”

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“One of the key challenges is just coming to a common understanding of what it [accepted practice] is, as everyone has a different idea about what is accepted practice and what’s not. You have to come up with the list of what you are investing in to what would suit as many people as possible,” he said.

“We want to be a good investment fund, not just the fund that makes you feel good but that also provides good returns,” Smith said.

The Candriam Sustainable Global Equity Fund, which has been nominated for the award for the second year in a row, has adopted a two-step strategy, which combined socially responsible investment (SRI) analysis with a quantitative investment approach.

Ausbil Investment Management’s head of distribution, Mark Knight, said of the fund’s strategy: “The SRI analysis takes both micro and macro into consideration before applying norms-based analysis and a controversial activities check. The company engagement is also important and this results in sustainable investment results.”

Head of equities, Crispin Murray said the success of the BT Wholesale Ethical Share Fund, now rebranded as the Pendal Wholesale Ethical Share Fund, should be attributed to the quality of its investment team which offered remuneration structure encouraging retention and stability.

“Our key advantage lies in the quality of our team. Investment research is like assembling a puzzle to see the bigger picture – and the team’s size, experience, contacts and stability can provide the insight that gives us those couple of extra pieces which can help drive conviction in a view.”