New Fund to Help Business Turn Green From the Inside Out

New Fund to Help Business Turn Green From the Inside Out

“Green” investment funds typically aim to avoid investing in polluters, but a new fund aims to attack the enemy from within. An investment vehicle claimed to be “the world’s first climate change advocacy fund” was launched by Australian Ethical Investments with the support of The Climate Institute. .

Garry Shilson-Josling for AAP ( 8 July 2010):

“Green” investment funds typically aim to avoid investing in polluters, but a new fund aims to attack the enemy from within.

An investment vehicle claimed to be “the world’s first climate change advocacy fund” is being launched on Thursday.

Australian Ethical Investments already offers a range of funds, but so far it has followed the standard model – investing as far as possible in firms which are judged to be doing the right thing socially and environmentally.

“We actively seek out investments that are positive for society and the environment and avoid investments involved in harmful activities,” it says on its website.

But the new fund marks a distinct departure.

The “climate advocacy fund” (CAF) will have no qualms about buying shares in firms judged to be ethically dubious, even those pumping greenhouse gases into the atmosphere like there’s no tomorrow.

Its aim is to use shareholder muscle to call the big polluters to account.

The Climate Institute, a non-profit group set up in 2005 to promote climate change solutions, is an enthusiastic cheerleader for the fund.

In a media release issued in support of the fund’s launch, the institute’s business director, Julian Poulter, said companies included in the S&P/ASX 200 index were responsible for about half of Australia’s carbon emissions.

“Yet few high emitters have strategies which align with what is required to support the Copenhagen accord,” he said.

In its submission to the conference convened by the United Nations in Copenhagen in December, Australia promised to reduce greenhouse gas emission by at least five per cent below 2000 levels by 2020, or as much as 25 per cent, depending on how much other nations were prepared to do.

That same month, the Senate gave the federal government’s Carbon Pollution Reduction Scheme (CPRS) its final rebuff.

But carbon dioxide and other greenhouse gases are not only opaque to radiated heat, they are impervious to politics as well.

CPRS or no CPRS, greenhouse gases continue to intercept outgoing long-wave radiation and warm the globe.

April was not only the month the Rudd government put the CPRS on ice until 2013 at the earliest.

It was also the month the global surface temperature index compiled by NASA’s Goddard Institute for Space Studies hit a record high for a 12-month period, 0.66 degrees Celsius above the 1951-1980 average.

Australian Ethical Investments sees this policy vacuum as an opportunity.

“There is a significant responsibility and opportunity for investment markets, and a fund such as this, to step into the void left by the failure of the political process,” said its executive director James Thier.

The aim is to use the fund’s status as a major shareholder to work at changing firms from within, while at the same time making money from the investments.

It’s a matter of having your low-carbon cake and eating it too.

Or, as Mr Thier said: “Investing in the CAF is about making money and making a difference”.

The fund’s initial focus will be to encourage companies to produce improved emissions disclosures, and to put high-carbon capital spending under the microscope.

There would be two stages to the process, Mr Thier said.

“The first one is we’ll actually be putting resolutions, the fund itself will be putting resolutions to the companies in regard to disclosure.”

As a result, the resolutions would be included in papers considered by company boards and the agendas of annual general meetings.

“And we’ll be then trying, in combination with other industry bodies, trying to get support for those resolutions.

“Those resolutions will be looking to get further information from the companies to identify their carbon risks, to identify whether they’re taking into account what they need to in a more carbon-constrained world, in regard to government regulations, those sorts of things,” Mr Thier said.

The Climate Institute, although not part of the funds management business, will be doing more than just shouting its support from the sidelines.

“They will, along with other organisations but in a stronger context, be assisting us with the resolutions and be working on the formulation of the resolutions,” Thier said.

Aside from its environmental aims, the fund will not be structured controversially.

The fund will invest in S&P/ASX 200 companies, with investments weighted according to a measure of their “economic footprint”, based on metrics like cash flow and dividends rather than according to their weight in the index, usually based on share market capitalisation.

“Economic footprint weighting is a low cost approach to portfolio construction, which has historically paid investors a return in excess of broad market indices,” the investment manager said in its fact sheet.

Australian Ethical said the new fund would be open to everyone, from individuals to institutional investors.

Australian Ethical had $612 million of funds under management at the end of 2009, a 21 per cent  increase from a year earlier.


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