Write up in SMH ...
Divesting from a company is not a threat John McMurdo wields lightly, but the boss of $5 billion fund manager Australian Ethical Investment has shown he is not afraid to drop a firm over its dodgy green credentials.Last June, the head of the ASX-listed fund manager put a marker down when it divested its $5 million holding in global insurance broker Marsh & McLennan over its links to the Indian conglomerate Adani and its Carmichael coal mine in Queensland.“When investors see the power of their money, and that they can do well for themselves, but also that they can do well for the planet ... Australians are saying they want to see the benefits of that,” Australian Ethical Investment chief executive John McMurdo. It’s a move many probably considered counter-intuitive but McMurdo says taking a hardline stance and divesting from companies who aren’t thinking decades down the track is perhaps the only strategy that makes financial sense.“I think that’s what you have to be prepared to do, you need to have the strength and the conviction,” he says. Climate pressure on finance giants is only just getting started. Steering money into environmentally sustainable ideas is by no means a new concept - but it is something McMurdo says is driving a seismic shift in how Australians build their wealth.“When investors see the power of their money, and that they can do well for themselves, but also that they can do well for the planet ... Australians are saying they want to see the benefits of that,” he says.McMurdo adds the country’s move towards ethical investing has exploded in the past 12 months, at first driven by climate-minded participants following the catastrophic summer bushfires 16 months ago, and then, of course, the coronavirus pandemic.The Sydney-based fundie says while the virus initially savaged equity markets, it also prompted investors to rethink and seek out long-term, sustainable value in a way they hadn’t before.Advertisement“There’s no doubt when we look back even two years… we thought something in the order of 15 per cent of the Australian population had at least an openness to invest ethically,” McMurdo says.“When we look at studies now .. those statistics are anything between two thirds and 80 per cent. So quite a phenomenal shift.“This interest is also translating into a strong financial performance for Australian Ethical. Despite COVID-19’s impact on global markets and the Federal Government’s changes to the early release of super scheme, Australian Ethical saw record net inflows of $660 million in the 2020 financial year, doubling from 2019, as a 20 per cent expansion in its customer base helped funds under management grow 19 per cent to $4.05 billion.Last month, Australian Ethical told its investors funds under management had grown a further $1.4 billion to $5.4 billion during the March quarter - a 33 per cent increase since the start of the financial year - thanks to record net quarterly inflows of $300 million, and a $60 million gain from a strong market performance.According to Bloomberg, the company’s Australian Ethical Balanced Fund has a one-year return of 19.9 per cent, outperforming the 4.5 per cent growth in Magellan Financial Group’s global equities fund and just under the 35.6 per cent growth at Platinum Asset Management’s international fund. Australian Ethical Investment’s stock price has jumped 58 per cent so far in 2021, outperforming both Magellan and Platinum.Mr McMurdo expects a combination of low interest rates and global stimulus measures to help the market momentum continue into the second half of the year and places great faith in the system set up by the company’s founders 35 years ago.“If you invest in companies, and sectors which are part of the future of the planet and the future of society and the future of mankind... the investment thesis should work,” he says.“It was never purely altruistic… they actually had the foresight to say so this is just smart investing. And that has proven to be the case.”‘I’m concerned that Australians are laggards. ’While interest in his company has accelerated, McMurdo notes Australian Ethical is not a new story.“I sort of smile when occasionally people in the media ask us ‘how did you become an overnight success’,” he says.“And the truth is you know there’s been 30 years of hard work, sticking to what we believe.”The company’s investment strategy is pretty simple: There’s no exposure to tobacco, nuclear, gambling or fossil fuels, with the current investment mix favouring financials, biotechs, and information technology.While Australia’s big miners continue to perform strongly to bolster the commodity-heavy ASX, McMurdo is adamant any business that bases its worth on the extraction of fossil fuel will be the type that ends up declining.John McMurdo says says while the virus initially savaged equity markets, it also prompted investors to rethink and seek out long-term, sustainable value in a way they maybe hadn’t before. They most likely will have stranded assets at some point, and so won’t be part of the go-forward economy,” he says.McMurdo adds he’d like to see harder regulation come into play that punishes companies who use greenwashing or carefully worded press releases to distract from their lack of action on sustainability.But, ultimately, he’s hoping for Australian governments to steer away from exploiting finite resources, and more widely embrace principles of ethical development.“I am so convinced this is a huge opportunity for Australia,” he says.”We are an investment firm, so we are pro-jobs and we are pro-business... but I’m concerned that as a country we are laggards, and that may continue to be the case.“I would love to see things become more unified and more coordinated from a Federal Government level down, because I think the opportunity is so large.“And, you know, not getting it right has significant consequences.”
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