The real rewards of ethical investing

uca funds investor briefing

Young people are leading the way in demanding higher ethical standards from businesses, UCA Funds Management investors heard at the annual investor briefing.

In May, UCA Funds Management was certified as a B Corporation, a global accreditation recognising businesses that meet rigorous standards of social and environmental performance, accountability and transparency.

Mindy Leow, Head of Community Building from B Lab Australia and New Zealand, said an increasing number of consumers are willing to pay more for socially responsible goods and services.

Young workers in particular are also seeking employment at organisations that align with their values and make a positive impact on society.

“More people and not just millenials are demanding their workplaces consider how they are contributing to society,” Ms Leow said.

“We’re seeing a movement of entrepreneurs that are creating businesses that are driven by purpose at its core.

“It’s really encouraging that this new economy is starting to emerge, but there are still systemic challenges that impede purpose and profit from thriving.”

One of these obstacles is the lack of standards to measure companies on their social impact and performance.

“Even though consumers want to support good companies, we find that it can be really difficult sometimes to identify who are really good companies from those doing good marketing,” Ms Leow said.

“B Corp certification sets a high standard globally for companies to prove that they are walking the talk.”

Companies seeking B Corp certification undergo a rigorous impact assessment process that takes six to nine months and involves up to 400 questions.

UCA Funds Management scored a total of 125 points across the five areas of assessment – governance, workers, community, environment and customers.

“To become a B Corp 80 points is the minimum, so to have 125 points is actually a really, really high score,” Ms Leow said.

“Of the 70,000 companies that have attempted the assessment, the average score is around 50.

“Achieving B Corp certification is not an easy feat – out of the 3000 companies who have started the assessment in Australia and New Zealand, less than 10 percent have actually achieved it.”

Last year, UCA Funds Management gave $3.9 million of its operating surplus to Victorian and Tasmanian community services, including disability inclusion support, prison chaplaincy, and reconciliation programs with First Peoples.

“We haven’t actually had to change our business to achieve our aspiration to become a B Corp,” UCA Funds Management CEO Mathew Browning said.

“We’ve just done what we do and have achieved that as an outcome.

“Of course we can do better and we will be working to do better – but that is a very pleasing start.”

Earlier an investor briefing breakfast heard how climate change is a real and increasing driver of financial risk and reward.

MinterEllison special counsel on climate change risk Sarah Barker said that for investors the discussion on climate change had moved beyond debate over how real it was to the financial implications.

“When markets shift, belief becomes irrelevant,” Ms Barker said.

Ms Barker’s particular area of expertise is the litigation consequences associated with climate change.

“Because it has evolved into a financial risk it means that corporate laws apply to the management of assets in the same way that as they do to every other financial decision,” she said.

“We have investors who are starting to overtly articulate their recognition of the fact that there are material risks and financial opportunities associated with climate change.

Ms Barker believes awareness around the financial implications of climate change is “really going to really take off in the next few months” in Australia.

This will be because of the “incredibly significant” guidelines prepared by the G20 Taskforce on Climate-related Financial Disclosures.

The Taskforce is chaired by media mogul and former New York mayor Michael Bloomberg and has representatives from the giants of global finance.

“They are an industry promulgated set of standards where industry is saying this is the information we think is necessary to present a true and fair view of this risk,” Ms Barker said.

She said although the guidelines were voluntary, it would be perilous for firms not to address them.

“A disclosing business who ignores them you are placing yourself at significant risk of shareholder and stakeholder activism,” she said.

In his breakfast presentation UCA Funds Management director investments James Cook said that global economy was showing mixed signals and needed to be monitored carefully if investment decisions were to be timed correctly.

He said global geopolitics also contributed to market volatility and uncertainty.

However, the UN’s 17 Sustainable Development Goals, which UCA Funds Management aligns itself to, offered an investment framework that had demonstrated increasing returns independent of cycles of economic activity and risk.

“We are hedging against all this through our ethical and socially responsible themes,” Mr Cook said.

“Recognition and alignment to the global phenomena of impact investing will identify fantastic opportunities ahead.”


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