The purpose of the Inspire Australian equity funds is to help deliver, accelerate, and scale the positive social and environmental impacts of businesses listed on the ASX.
The Fund only invests in Positive Impact Themes – there are currently 10 themes the following and include the impact on their respective SDGs:
- Renewable energy (SDG 7: Affordable & Clean Energy; SDG 13: Climate Action)
- Land and resource management (SDG 6: Clean Water & Sanitation; SDG 12: Responsible Consumption and Production; SDG 15: Life on Land)
- Well-being: Health care services (SDG 3: Good Health and Well-being)
- Well-being: Medical devices (SDG 3: Good Health and Well-being)
- Well-being: Pharmaceuticals (SDG 3: Good Health and Well-being)
- Care and support (SDG 3: Good Health and Well-being; SDG 5: Gender Equality; SDG 11: Sustainable Cities and Communities)
- Affordable housing (SDG 10; SDG 11: Sustainable Cities and Communities)
- Education (SDG 4: Quality Education)
- Healthy living (SDG 3: Good Health and Well-being; SDG 14: Life Below Water; SDG 15: Life on Land)
- Financial inclusion (SDG 8: Decent Work & Economic Growth; SDG 10: Reduced Inequalities).
These themes have been determined through a rigorous process.
Investment Universe and Portfolio Construction
We have built a proprietary universe of Positive Impact Companies based on our assessment of their business activities. Importantly, this universe was built “bottom-up” through a positive impact screen rather than using negative screens. From a universe of 2000+ companies on the ASX, we have identified 216 companies whose core business is having positive impact for our universe. This can change over time as new companies list on the stock exchange or if companies are taken over. From the universe we have invested in over 40 companies in our portfolio, that have both a positive impact and the prospect of delivering good financial returns.
If a company’s core business changes and we deem that it no longer has a positive social or environmental impact, then it will be divested (if held) and excluded from our universe of Positive Impact Companies. To make an investment into a Positive Impact Company, it must meet two key criteria:
1) There must be a non-financial measurable metric that relates to the positive impact (typically this is a core output of their business)
2) The investment case must be attractive with the potential for the shares to outperform the benchmark index over the next 3 – 5 years
We only select from companies where we believe that their core business has a positive social or environmental impact, that is, their core product and/or services (the “What”). We also look at how they produce and deliver these goods and services (the “How”), and examine their environmental, social and governance factors – both standard ESG factors that are relevant to all companies (e.g. diversity) and industry and company-specific factors. The companies that pass through this screening, we deem to be Positive Impact Companies.
In addition, the financial returns that drive the investment case should be aligned with the outputs that drive the positive impacts. This means that the impacts are expected to grow over time.
However, for clarity we explicitly exclude several industries and behaviours. This means that we do not invest in a company that has exposure to the following industries, even if their core business activity is positively impactful:
- Fossil fuel production
- Logging of old forests
- Nuclear and Uranium mining
- Predatory lending
Note - zero percent thresholds for the exclusions above.
*RIAA has received written undertaking from product issuer to update ESG-criteria, assessed as part of certification, either at:
- Next roll of product collateral, Internal policy update and/or
- Next reporting/disclosure cycle
* Inspire AE: PDS to be rolled by 30/6/2022.