Fund manager Portfolio Partners is the latest investment company to get more serious about going green, having signed a research partnership with the Sustainable Investment Research Institute (SIRIS).
As part of the arrangement, Portfolio Partners intends to launch a new long/short sustainability fund in the near future.
Portfolio Partners deputy head of equities Nick Pashias said the SIRIS research will not be used as part of the formal investment process for the manager’s other funds.
“But that information will still be available to us and could be used as another source of alpha,” he added.
Subjects to be included in the SIRIS research include climate and energy, sustainable consumption, governance and quality of life, and employee management.
Pashias said Portfolio Partners had decided to commit further to the adoption of socially responsible investment (SRI) principles so it could make more informed decisions about their ability to generate consistent returns above benchmark.
“We’re in the early stages of determining whether there is any alpha to be generated from these types of screens in the longer term. Over time we’ll be in a better position to answer that.”
SIRIS chief executive Mark Bytheway said the relationship with Portfolio Partners was unique because they were providing specific portfolio recommendations as well as research.
“It’s not about generating an ethical list per se, it’s a recommendation as a consequence of a company’s exposure to a particular risk and whether it represents a significant investment risk or a substantial investment opportunity,” he explained.
A report late last year by the Ethical Investment Association (EIA) said the number of SRI managed funds in Australia had increased substantially in the past decade, up from 10 funds in 1996 to 46 in 2001, and to 89 by November 2004.
According to Mercer, the average Australian equities SRI fund has returned 11.2 per cent a year since 2002, compared to 12.4 per cent for mainstream funds — a result attributed to SRI funds’ reluctance to invest in the strongly performing materials sector, which includes mining and oil companies.
The last Australian fund manager to make a major SRI play was Select Managed Funds, which purchased a 13 per cent stake in Australian Ethical Investments earlier in the month.
