Why AMP will pay a price for its conduct

The controversy surrounding AMP Limited over its internal culture and its handling of sexual harassment allegations against one of most senior executives may have long-term implications for its ability to attract investment and raise capital. 

That was one of the key bottom lines of a Money Management ESG/Ethical Investment webinar with senior fund managers and financial advisers making clear that there was a price to be paid by companies when their conduct failed to meet investor and community expectations. 

Money Management directly cited the controversy which had surrounded AMP Limited and AMP Capital and asked whether, in the minds of investors, the products of a company were able to be separated from the company’s own behaviour. 

While not wishing to directly comment on AMP the panellists made clear that there were going to be significant consequences for companies who were perceived to be doing the wrong thing. 

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This was exemplified by Nanuk Investment Management chief investment officer, Tom King who said that while he was not going to speak specifically about AMP Capital, he believed conduct was becoming increasingly important for investors and consumers and “can’t be ignored when looking at individual investments as a manager or as an advisor or as a user of those products”. 

“We’re seeing a shift there and it’s a very sensible shift,” he said. “It may not be the time now but there are a set of issues that go a little deeper in terms of how risks around governance, ethical behaviour and the nature of products that companies are offering is measured and that is a complex facet of understanding responsible investment products.” 

“AMP is an example of a large white collar company with a relatively small environmental footprint operating out of concentrated offices in CBDs and with a governance structure which befits its age and maturity as a business which would score well in terms of assessing ESG risks,” King said. “But there is the question of how you treat businesses that score well on conventional ESG frameworks but don’t align with what people are looking to have their money invested in.” 

Australian Ethical chief investment officer, David Macri said it was difficult to separate the product from the company. 

“And when we do our ethical assessment of companies, generally, we’re looking not just at the product that is being offered but also the culture and how they go about their business,” he said. “It is difficult to assess culture but we have a lot of information at hand – we look at company conduct, we use different types of sources.” 

“Regardless of what the product is, if there is severe enough concerns about the conduct of the company we won’t invest in it.” 

State Street Global Advisers head of investment, Australia, Jonathan Shead said he was not going to comment on AMP Capital but made clear that companies operating in the ESG space needed to expect scrutiny as to their conduct. 

“State Street manages about $4.5 trillion in assets and we’re quite well aware that if you’re vocal in the ESG space, which we have been for many years in the institutional market, you’ve got to expect the spotlight to turn on your firm,” he said. 

“However, we’re also of the view that particularly with a large global firm like ours if you wait until there is no hint of controversy for anyone anywhere in your business you are not fulfilling your fiduciary responsibility to your investors.”