Alphinity: Investing in the SDGs
“We believe it is important to actively contribute to thought leadership and have a strong voice in the space, as positive change is underpinned by collaboration and shared knowledge.”
About Alphinity
Alphinity is an active equities investment manager based in Sydney. Alphinity was established in 2010 to specialise in Australian equity investments. In 2015, Alphinity expanded into global equities, applying the same investment philosophy to a larger set of opportunities outside of Australia.
Commitment to responsible investment
Stephane Andre, Co-Founder and Portfolio Manager, says Alphinity integrates environmental, social and corporate governance (ESG) considerations across all portfolios that it manages.
“We consider ESG as an essential part of our investment process and use our role as active managers to work with companies and improve ESG management and outcomes. In addition, our two sustainable funds seek to invest in companies that we assess as having a net positive alignment to the United Nations’ Sustainable Development Goals (SDGs), exceed Alphinity’s minimum ESG criteria, and which are also identified as undervalued and within an earnings upgrade cycle.”
RIAA certified funds
Alphinity’s first responsible investment fund was launched in 2010 to focus on Australian equities. It was reshaped around the SDGs in 2017 and renamed the Alphinity Sustainable Share Fund. The manager then extended its sustainable investing capacity by launching the Alphinity Global Sustainable Equity Fund in 2021. Both Funds have a Sustainable Compliance Committee that oversees universe construction and advises on key topics. These Funds have both achieved RIAA Certification.
Their defining characteristics are:
Sustainable companies: An investable universe of companies that they believe have a net positive alignment with one or more of the 17 Sustainable Development Goals (SDGs) and exceed Alphinity’s minimum ESG criteria.
Exclusions: Exclusions from the investable universe, defined by a Charter, for activities that are considered to be incongruent with the SDGs.
Sustainable Compliance Committees: To assist with oversight and governance, the Committees include two external experts in ESG and Sustainability.
Active ownership and stewardship: They engage with companies on ESG matters and vote all proxies put to shareholders.
Consistent returns: The Funds aim to provide consistent, strong risk-adjusted returns across different market cycles by applying Alphinity’s disciplined and repeatable investment process.
Style agnostic: The Funds can invest in growth, value, cyclical or defensive companies, because they aim to own them at the right point in their earnings cycle.
Benefits of RIAA Certification – brand awareness, visibility and mitigation of greenwashing risk
“We recognise the benefit of having third party certification for our sustainable funds. It strengthens our overall approach, mitigates greenwashing risk, and helps to build brand awareness within the market. Being listed on the Responsible Returns website helps with brand awareness and visibility. We are often asked by potential investors if we have achieved RIAA Certification.”
“A valuable process”
Andre says RIAA Certification is a valuable approach to validate responsible investment practices, improve transparency and demonstrate that the fund has participated in an external review.
“RIAA undertook a portfolio check and tested activity screens on current holdings to ensure our exclusions and sustainability assessments were consistent with our claims. RIAA inquired about a number of the Fund holdings and we provided documentation to support the company’s position in the portfolio. We were also asked to provide examples of proxy voting and the frequency of engagement. Once completed, we updated the Responsible Returns portal for RIAA’s final approval.”
He also says RIAA’s requirements prompted Alphinity to add more detail to its product documentation. As of 2022, RIAA requires certified funds to not only fully exclude companies involved in the production of tobacco and controversial weapons (as it required previously), but also the manufacture of nicotine alternatives such as vaping devices, and a 0% revenue threshold for companies involved in the production of nuclear weapons.
“Through the recertification process of our sustainable funds, RIAA identified that the definition of tobacco and controversial weapons required more detail in our Fund charters, in line with RIAA’s Avoid Significant Harm requirement. We are cognisant of greenwashing risks so the process was valuable to revise our disclosures.”
A word of advice for those applying for certification – “start now”
“Start collecting data and evidence on how your responsible investment policies and methodologies are implemented. This is an important part of the RIAA process and helps to demonstrate a robust approach to responsible investing.”