In the last week, Australian Ethical Investment (AEI) announced they have taken a 9% stake in the Atlantis Resources new tidal stream energy project, based out of Scotland. This is a world first ocean power project that will see the construction of our planet’s first multi-megawatt tidal stream project to create a clean energy source for domestic use in Scotland. The MeyGen project aims to supply power to 86,000 homes (once at full capacity), with the second phase potentially powering 16% (398,000 homes) of Scottish domestic demand by 2023.
Watching Australian Ethical Investment grow has been a fantastic journey from its inception in 1986, when it was created as a superannuation and retirement fund for those looking to support environmental and socially responsible investing. Whilst many funds are now moving away from ‘dirty energy’ investments, there is a small number of organisations taking this mandate further and actually leading the investment charge towards renewables technology. It is understandable why there is a general malaise around action in this regard. For trustees of superannuation funds, a high level of pessimism and cynicism around impact investing is fuelled by corporate and legal obligations – those set out in the Superannuation Industry (Supervision) Act 1993 for instance. The smaller risk appetite of these members and trustees leads many to stay with the historically tried and tested strategies that yield sound financial returns and act as a safe place to park their wealth.
Australian Ethical Investment (an ASX-listed company mind you) however, is carrying out a well-executed impact investment strategy that is intrinsically linked to their executive strategy, and falls in line with their corporate and legal requirements. The ESG-risk appetites of its members – who have invested their own capital for exactly these sorts of projects – is greater than those that have invested with more traditionalist funds managers. AEI is showing us that it is not impossible for other large institutional investors to create shareholder wealth through impact investing; rather it is this cultural malaise – this traditionalist mindset that is preventing any real change.
This is not to say that nothing is being done by other players. In July this year for instance, the Clean Energy Finance Committee (CEFC) announced a partnership with Colonial First State Asset Management (CFSGAM) to build the CFS Australian Clean Energy Infrastructure Fund; this will see the CFSGAM (the consolidated asset management division of Commonwealth Bank Australia) raise and directly invest up to $600 million over the next five years in clean energy infrastructure. According to the CEFC Chief Executive Oliver Yates, this is an industry that currently garners around $40 – $65 billion in investment dollars. Still the difficulty is getting the majority of investors to think of their financial investment as a way of build future gains for society, rather than just for their retirement. There is no easy answer and no way of really incentivising individual trustees/members without making it personal, which, given that impact investing creates social and environmental returns on a global scale, is near-impossible to do.
Commercial decisions like the ones discussed above should at least place higher in our 24 hour news cycle. These are decisions that are leading an energy industry often quagmired by stagnated corporate thinking. These decisions pave the way for renewable/clean energy and need to be applauded – they should be more of a talking point than those that reach the heights of our most esteemed publications and news programs. The should be front and centre Page One rather than relegated to the ‘Business’ or ‘World’ sections.
Sustaining People congratulates Australian Ethical Investment on its involvement in a world class, world first project. It is clear that one step to changing the hearts and minds of our corporate leaders is to expect more from those that manage our finances and our financial futures – and for AEI, they are making this a reality.