Sustainability Investing
Investors in Australia, New Zealand and around the world are increasingly aware of how certain business practices may affect the environment and how those practices may impact on future generations.
As a result, many individuals and institutions are asking how they can align their investment decisions with their views on sustainable development, which the United Nations describes as meeting “the needs of the present without compromising the ability of future generations to meet their own needs”.
The challenge is in how to adopt a sustainability approach without compromising sound investment principles. For over a decade, our preferred investment manager (Dimensional) has managed sustainability−focused strategies that aim to deliver this dual objective for our clients.
Dimensional uses a data−driven approach to evaluate companies on a focused set of sustainability issues whose impact can be readily measured and reported.
The primary sustainability consideration of this approach is environmental impact from company emissions, including greenhouse gas emissions and potential emissions from fossil fuel reserves. The strategies also seek to reduce exposure to a select list of other key sustainability considerations Dimensional utilises a combination of security selection and weighting within and across sectors to reduce exposure to companies with less sustainable business practices and increase exposure to companies with more sustainable business practices, while still maintaining broad diversification.
Dimensional’s sustainability approach
- aligns sustainability values and investment goals without sacrificing expected returns
- employs a patented approach, designed to combine focused screens with broad diversification
- applies Dimensional’s time-tested, systematic investment process across both shares and bonds
- offers transparent reporting on metrics that matter to sustainability investors.
Dimensional sustainability strategy considerations
Emissions variables:
- greenhouse gas emissions intensity
- potential emissions from reserves
Other environmental and social sustainability variables:
- land use and biodiversity
- toxic spills and releases from reserves
- operational waste
- water management
- factory farming
- child labour
- cluster munitions and landmines
- nuclear weapons systems
- tobacco
- alcohol
- gambling
- adult entertainment
- personal firearms
By integrating sustainability considerations within a well−diversified and cost−effective investment framework, we believe our clients can pursue their goals without compromising on investment principles or accepting lower expected returns.