Global equities boutique fund manager Alphinity Investment Management has launched a global sustainable strategy aligned with the UN Sustainable Development Goals (SDGs).
The Alphinity Global Sustainable Equity Fund is a concentrated fund seeking to invest in a diversified portfolio of leading sustainable companies that offer attractive financial returns, have strong ESG practices, and are aligned with one or more of the 17 SDGs.
"This fund is designed around the SDGs, and we are looking for stocks that are doing good, which we determine as companies that are providing an overall positive benefit to the UN SDG," said Alphinity ESG and sustainability manager Jessica Cairns. "We have a vigorous process for determining, essentially, which companies are operating well and have strong ESG management practices."
The fund is not defined as an impact fund as such, but seeks to find companies that have positive benefits that align to the 169 targets within the 17 SDGs, Cairns said.
"There are not many companies out there that have a 100% perfect track record, so we recognise the positive benefits, the negative benefits and net that scoring out to try to find companies that are overall doing good," she said.
The fund screens out tobacco and controversial weapons, as well as companies that generate more than 5% of revenue from the production of fossil fuels, controversial fuels such as uranium, gold mining where gold is the primary purpose of the mine, factory farming, live exports, predatory lending, alcohol and gambling, and old growth forestry logging, noted portfolio manager Jeff Thomson.
The fund also screens out companies that have demonstrated poor management of ESG issues such as breaching human rights principles, unnecessary pollution or avoiding a fair share of tax payments. Alphinity uses ESG research provider, MSCI for their ESG ratings.
Alphinity also uses a Sustainable Compliance Committee to assess companies where nuance is needed. That committee includes Elaine Prior, an award-winning ESG pioneer and former managing director at Citi Research in Sydney, and lawyer Melissa Stewart, a Canadian modern slavery and human rights expert.
"We do the work internally and we have a rigorous and transparent methodology, but we use that committee to do that oversight," Thomson said. "That allows us to be as transparent as we possibly can be, consistent with the way we value these investments."
Thomson noted that while Cairns and the committee define the universe of stocks that fit with the investment process, the Alphinity investment team selects stock on a bottom-up basis to create the portfolio, which will hold between 25 and 35 stocks in total.
"We can find companies that fit the criteria across most sectors, with the possible exception of the energy sector, which for obvious reasons are problematic given fossil fuel exposures, but beyond that, we have a good and wide representation of geographies and industries," Thomson said.