The Fund aims to provide a return (before fees, costs and taxes) that exceeds the S&P/ASX 300 Accumulation Index over the medium to long term. The suggested investment time-frame is five years or more. This fund is an actively managed portfolio of Australian shares which seeks to ensure that funds are invested in an ethical or socially responsible manner.
The investment process for the BT Wholesale Ethical Share Fund is the same process used for BTIM’s flagship Australian equities products. The only difference is the addition of sustainability screens which screen companies in and out of the Ethical Fund on the basis of sustainability criteria.
Our process is designed to deliver consistent, repeatable alpha. Fundamental research is at the heart of our process, given our expertise and experience in stock selection. The key features of this process are research, transparency and accountability.
Key proprietary systems include Analyst Analyser, a research database that captures analyst financial models, valuations and recommendations. Portfolio construction is focused on risk management – embracing risk, but ensuring that we are “taking the risks that we get paid for”. Key features of the portfolio construction process include: Harmony Tracker and a series of analyses including risk, style and thematic. Harmony Tracker ensures that the analysts’ best ideas are reflected in portfolio construction, in this process. We also use Barra and Style risk modelling to aid in portfolio construction
The ethical screen, used to screen out negative stocks and identify positively screened stocks, is the single addition to the model portfolio construction process for the BT Wholesale Ethical Share Fund.
The negative portion of the screen effectively determines the investment universe of the BT Wholesale Ethical Share Fund.
Negative screens are used to exclude companies as follows:
- Uranium: companies which directly mine uranium for the purpose of weapons manufacture
- Alcohol and tobacco: producers of these products
- Gaming: manufacturers and providers of gaming facilities
- Weapons: manufacturers of weapons and armaments
- Pornography: manufacturers and distributors of pornography are excluded if revenues from manufacture or distribution of pornography represent greater than 10% of revenues
- Environment: companies that have committed significant or recurrent breaches of environmental regulation
- Workplace and business ethics: companies that have committed significant or recurrent breaches of workplace health and safety, anti-discrimination, equal opportunity, trade practices, or industrial relations legislation
The positive portion identifies companies that should be actively considered for investment, given their focus on the production of sustainable goods and services or leadership on sustainability criteria. The ethical screen is provided by Regnan Governance Research & Engagement (Regnan). For example: companies that derive greater than 20% of their revenue from sustainable technologies, products and services. Regnan provides BTIM with a list of companies that rate well on ethical and sustainability criteria, and which should be considered.