The rise in ethical investment delivered good news in spades last week for investors with Australian Ethical, but what was interesting amid the news of close-to-spectacular performance was that ethical was not enough.
According to managing director Phil Vernon, investors want it all.
“Offering a product that is focused purely on ethics or activism without addressing all the others needs of clients won’t cut it,” he said. “Nor will a tokenistic sustainable product that is not authentic in its ethical commitment.
“Based on our research, the majority of this group do not want to compromise on price, features or performance. They want it all,” he said.
And deliver much of all, the fund did. In spades.
Net flows were up by 78 per cent jump in net flows, with funds under management growing to $1.5 billion in FY 2015-16 and an after tax profit of $3 million.
Chairman Steve Gibbs told stakeholders at the fund’s annual general meeting that this translated to a 27 per cent return on equity, $2.82 in earnings per share and $3 in dividends a share. In just 16 months the share price grew from $59 to around $89 today.
“It’s great to think that a couple of years ago, we had been celebrating reaching the $1 billion FUM milestone – something that took us the best part of three decades to reach,” Mr Gibbs said.
“In just one year, we added more than half a billion dollars to that total.”
The result also reflects the fund’s focus on clients, shareholders, employees and the community.
The end goal was to reach $5 billion in FUM by 2020, he said.
Not just growth for growth’s sake
However, this was not about “chasing growth for the sake of it”. Achieving that kind of scale will enable it to deliver more services, have a greater positive impact on society and the planet and continue to deliver strong returns for shareholders.
Phil Vernon told the AGM that the growth in new superannuation members has underpinned the financial results.
“We are a net beneficiary of movement throughout the system due to improved ease of transfer following the introduction of Superstream,” he said.
In terms of achieving the future growth goal, the fund’s target market is the 1.5 million “ethically conscious investors”, he said, of which the fund had 27,000 so far.
Mr Vernon said there are a number of trends emerging that are informing the fund’s thinking. They include the rise of the conscious consumer, an increasing savings pool, digital disruption, fee pressure driven by both regulatory and competitive dynamics, volatile markets and a long term low interest rate environment.
Overall, he said, the ethical investment market had doubled in the past two years, increasing its share of the overall market from 2.7 per cent to four per cent.
And the growth can be better over long periods
“Moreover the message is increasingly getting out that returns can outperform the broader market over extended periods of time.”
Mr Vernon said the most recent quarter to the end of September continued showing the growth trend, with funds under management for superannuation increasing by 12 per cent over the previous quarter, and managed funds growing by six per cent.
The total increase of FUM was $155 million, comprising $102 million in net flows and $53 million in asset movements.
Community grants program
Mr Vernon also announced the recipients of the fund’s annual community grants program. Projects to be supported include $20,000 for an RSPCA animal shelter in Brisbane to install solar panels to reduce operating costs, $20,000 for Taronga Conservation Society’s Plastic Free Oceans campaign, and a $20,000 to Enterprise Learning Projects to help establish Speargrass Bike Tours, a youth-led Indigenous enterprise in the Katherine region.
In all, 18 projects across social benefit, community development, human rights, animal welfare and environmental causes will receive funding of between $5000 and $20,000 per project. Two initiatives have also secured three year funding commitments, the Orangutan Project, and Free to Shine, a not-for-profit acting to combat sex trafficking in Cambodia.
“The people who invest with us are supportive of our fundamental belief that investing can generate returns and do good, in ways that go beyond traditional financial measures,” Mr Vernon said.
“All of our investments and operations are governed by our ethical charter, and that’s what drove us to establish the Community Grants program.
The funded projects were voted for from a shortlist by shareholders, employees, managed fund investors and super fund members.
“The community grants have always been a great way to engage our members and stakeholders, but now they have an even greater sense of involvement. It’s also an effective way to get the stories behind these fantastic organisations out in front of a broader audience,” Mr Vernon said.
Founder and chief executive of Enterprise Learning Projects, Laura Egan, said, “We’re thrilled to have the Ethical Super community join us in fostering grassroots enterprise in remote Australia!”
The organisation also received a second $20,000 grant to help establish an op shop in Kalumburu, NT, which will be run by the local Tramalla Women’s Group.
“The Aboriginal communities we partner with are bursting to share their stories and their culture with wider Australia and the world. These grants will enable us to support them to do this through the creation of sustainable ventures,” Ms Egan said.
Mr Vernon said the variety of causes being funded by the grants is testament to the innovative work being done in the not-for profit sector.
“There are so many passionate people dedicating their vision, creative thinking and hard work to solving some of the toughest issues facing the planet and its people. Australian Ethical is proud to support these organisations through the Community Grants program,” he said.
- Read more about all the grant recipients here