With a new name and logo, UCA Funds Management is looking to double its impact for good causes.
The not-for-profit social enterprise has become U Ethical in a bid to reach a wider market beyond the church and affiliated bodies.
U Ethical CEO Mathew Browning said the new name was “carefully chosen as a contemporary statement of our ethical heritage from the Uniting Church, while also placing our values boldly front and centre”.
“With ambitious targets to increase our surplus, it is important that prospective investors instantly understand what sets us apart from other investment managers,” he said.
In the next five years, U Ethical aims to double the $3 million operating surplus UCA Funds Management gave to Synod last year. This means doubling the almost $1.2 billion of funds under management.
“For a long time we have been the ‘quiet achiever’ of the ethical investment sector,” Mathew said.
“However, the time has come for us to lead by example in demonstrating that investing with purpose is not only profitable, but in fact essential for tackling today’s social and environmental challenges.”
Ethical investing is the fastest growing field of finance.
The Responsible Investment Association of Australasia (RIAA), which is the peak body of ethical investors, reported last year that “the responsible investment industry … now makes up the majority of the overall investment market in Australia”.
In 2017, total assets under responsible investment management totalled $147.7 billion, which was an increase of 340 per cent on the previous year.
However, what is meant by “responsible investing” can vary widely.
U Ethical Director Investments James Cook says the first requirement of investing ethically could be summed up by the doctors’ oath of “First do no harm”, which in the sector is known as negative screening.
“If the activity of the company or its product is overtly egregious we put them on the negative list, meaning we don’t invest” he said.
Examples include uranium mining and processing, unconventional coal and gas (fracking), environmentally harmful activities, gambling and weapons.
Some investors employ general Environmental, Societal and Governance (ESG) criteria to help screen out the corporately culpable.
U Ethical supplements this with investigative work done by the Synod’s Justice and International Mission unit into areas such as modern slavery.
“As an investor you would want to make sure the fund manager who is picking stocks for the portfolio has looked into companies to make sure their supply chain has minimised exposure to companies that might be using child labour in Bangladesh to make garments,” James said.
However, James said it can sometimes be a more effective advocacy approach to be a vocal investor.
“This allows us to sit down with the company as a shareholder and say these are our concerns,” he said.
Last year this led, somewhat remarkably, to the CEOs of Westpac and ANZ and senior representatives from the Commonwealth and NAB banks meeting with U Ethical representatives.
The Goliaths of the financial world called on the ethical investing David after U Ethical wrote as a shareholder in the four major banks expressing concerns about the findings of the Hayne Royal Commission into financial practices.
The next, less commonly employed, layer of ethical investing is positive screening, or what is sometimes called “investing for impact”.
“You direct your investment and capital into a certain area that will have a very direct and demonstrable positive outcome,” James explains.
Areas U Ethical looks to invest in include clean energy, recycling, employment, healthcare, water sanitation and community services.
As a result, companies such as biotechnology researcher CSL, healthcare providers Ramsay and Sonic, recycler Bingo Industries and jobs advertiser Seek sit in U Ethical portfolios.
But differentiating between “good” and “bad” companies isn’t always clear.
“One we grapple with is Amcor, because it adopts green sustainable practices in its packaging and manufacturing, but one of its largest clients is the tobacco industry,” James said.
In what is an increasingly competitive field, James said he believed the UCA heritage would help U Ethical stand out.
“As an ethical investment manager we have traditionally been values-driven and geared towards social justice,” he said.
“As an example, in recognition of shifting community and investor expectations, we shall be increasing our environmental focus.”
James also cites the advocacy work U Ethical has done to promote greater gender equality in boardrooms, curb excessive executive pay, fight credit-fuelled gambling and predatory lending.
Also, as a not-for-profit, the operating surplus back to Synod, to help support social welfare programs and advocacy.
Whether this will allow U Ethical to double its investments is a billion dollar question but there’s good reason to put some smart money behind it.