Transcription of Finance News Network Interview with Australian Ethical Investments Limited (ASX:AEF) Chief Investment Officer, David MacriDonna Sawyer: Hello I’m Donna Sawyer from the Finance News Network and joining me from Australian Ethical
(ASX:AEF) is Chief Investment Officer, David Macri. David welcome to FNN.
David Macri: Thank you.
Donna Sawyer: Let’s start by introducing Australian Ethical. What’s your approach to investment and how does it differ from other fund managers?
David Macri: We are very different to other fund managers because we take ethical considerations into account. So for every investment that we do, not only do we analyse the financial merits, but we’re also looking at the ethical merits of the company that we invest in.
Donna Sawyer: So how do you go about identifying ethical investment opportunities?
David Macri: We’ve been around for a long time, so we are well known in the space. So ethical investment opportunities tend to come our way, because we are well known. And the other aspect is just general investment opportunities that we seek out like every other fund manager. There’s research out there and just on companies listed on the Stock Exchange.
Donna Sawyer: Tell me more about negative and positive screening. How does it work?
David Macri: So negative screening is when you avoid certain sectors and industries. Positive screening is when you seek out these positive sectors that you deem will be positive to the environment or society.
Donna Sawyer: So how do you decide what is ethical?
David Macri: We have an investment charter that guides us to what is ethical. It provides a series of statements that leads us to what we should be avoiding and what we should be seeking out.
Donna Sawyer: What are the key benefits to your investment approach?
David Macri: The key benefits are that our investors can be confident that we go through a rigorous process and a consistent process, on both the ethical decision making and the financial decision making. Because we think ethically we have been doing it for such a long time, that it does throw up opportunities and it helps us to identify these key themes that are coming through, before a lot of other people. So we’ve been thinking about the aging demographics for example, for a very long time. And also the environment and energy efficiency which is now a big thing around the world, but we’ve been focusing on that for the last 10 years at least.
Donna Sawyer: You mentioned trends such as energy efficiency and an aging population. Can you elaborate on that?
David Macri: So energy efficiency is a good example because clearly, we need to reduce emissions around the world. There’re two elements to that. There’s the energy supply to renewable energy replacing the fossil fuels in time, and also the energy efficiencies is actually reducing the demand for energy - using less of it. There’re a lot of ways to benefit from that theme. So for example, replacing lights with LED lights would go a long way in reducing our emissions globally.
The aging demographics, clearly we know that the world is aging, so healthcare has a big part to do with that - we’re all living longer. There are some benefits for this bigger population in the older age group, so you know, healthcare is clearly going to benefit from that. We also like to invest in the biotech companies that are developing new treatments, which will help us live a better life and a longer life.
Donna Sawyer: Your focus is on investing in opportunities that are likely to bring about social and environmental benefits. Let’s talk about your performance. Some might argue that because you’re investing in companies contributing to positive change, that there may be a trade-off in terms of returns. What do you say to that?
David Macri: Well we’ve clearly shown that there is no compromise on returns. Our long term performance is well up there with any other fund manager in the country. We’ve consistently shown this and so the proof is in the pudding really.
Donna Sawyer: What are you seeing in terms of demand for ethical and sustainable products?
David Macri: Well we are seeing a pickup in demand for these types of products, because there’s been a global shift in consciousness where people are more aware of the ethical and sustainable decision making, in their purchasing. So that does translate into investment opportunities in the sectors and the industries that we invest in.
Donna Sawyer: Are you overweight in any sectors and likewise, are you underweight in any sectors?
David Macri: Our charter does lead us to be underweight the resources sector, because of the harm they do to the environment. We are overweight healthcare and technology.
Donna Sawyer: How big is Australian Ethical and what returns have you generated over the years?
David Macri: We currently have $700 million under management; our returns have been good over the long term. Our flagship Australian Equities Fund has returned 10 per cent per annum over the last 10 years. And it has outperformed its index, which returned seven per cent per annum over the same time period. I think that clearly shows that Ethical Investment does add value for investors.
Donna Sawyer: Finally what are some of the factors that are likely to impact on your performance this year?
David Macri: Clearly global macro-economic factors will have an impact on our market. There are some risks out there with China not growing as strongly as previously thought. Europe as well, clearly has some risks and going into recession. The US market, the US economy looks to be doing well. There will be an impact from all those factors on our market.
What we try to do is identify good quality companies that are undervalued; we take a long term view. We do think that our companies that we invest in and the sectors that we are exposed to, will do well in any type of environment. But again, we do take a long term view.
Donna Sawyer: David Macri, thank you for your insights on Australian Ethical.
David Macri: Thank you for having me.
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