Disclaimer: Information in this blog is general in nature only. What is right for me might not be right for you. Any mention, or opinion, of a company is not a recommendation to buy or sell. You should do your own research or seek personal financial advice before investing to ensure you make decisions that are right for you.

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I’ve been called the most cynical person in ethical investment. After spending many years researching the ethics of big companies and talking to millionaire CEOs, it’s easy to be cynical. Even more so if your starting point is being a part of the woke anti-capitalist, anti-growth brigade like me. 

A few hot takes from Australia’s most cynical ethical investment analyst: 

• No company is perfect, no matter how well intentioned they are. But many big companies do things that are at odds with most people’s expectations, and launder their reputations through their PR and lobbying (you wonder how they respond to the “what do you do?” question at a social event)
• Beware of ESG ratings, certifications, industry awards, and other nonsense that isn’t regulated by the government. These are often pursued by companies that do the worst things
• If I had a dollar for every time a big investor said “but everyone’s ethics are different” as justification for not having adequate ethical screens, or to justify staying invested in fossil fuel companies to change them, while not using their influence to do that, I’d be much richer
• Sure, there are many ethical worldviews with nuances, but most people – not just ethical investors! – have no tolerance for very harmful activities like fossil fuel mining, gambling, weapons and tobacco
• People don’t have the time for extensive research themselves. They trust the finance industry to invest it according to specific ethics and communicate that clearly. My role at SIX is to try to do this for you

But doing this job has given me trust issues. That’s why it’s important to me that I invest in companies and funds that do what they say. 

I care mostly about climate change and social inequality, which means I don’t want to invest in fossil fuels or unnecessarily harmful products like tobacco and gambling. SIX lets you use ethical filters as a good place to start to build out a shortlist for your portfolio. However, the breadth of ethical issues is so wide that filters can’t and don’t capture everything. That’s why SIX also has long-form ethical company profiles to get down to the nitty-gritty. (Please read them as me and my team have spent a lot of time writing them.)

Here are some cheeky things I found that snuck through the gaps and so these companies are out of my portfolio.  

What could be more ethical than child care? Well, maybe not-for-profit or community-run child care according to the Australian competitor regulator. It turns out private equity run child care isn’t such a great idea because they may sacrifice care for profit. The publicly owned for-profits aren’t much better, including G8 Education (ASX:GEM) which was "inadvertently non-compliant with relevant awards” for years. Translation: it underpaid 27,000 staff, who are already low-paid, over $38 million over 6 years. 

Look I get it. Sometimes you just forget to pay your staff, just like you forget to tell the regulator you stand to profit from your company’s low-ball offer to buy another company and end up in jail. We all have those “the sticky note fell off my monitor” moments. 

G8 Education did eventually pay those staff back, a show of solidarity the CEO at the time of the failed takeover bid, Gary Carrol, didn’t show to his under-fire Chairperson Jenny Hutson. When asked by reporters about the allegations he replied, “All the allegations are about her”. 

Speaking of lacking solidarity, CSL (ASX:CSL) is an ASX-listed company that develops vaccines and other treatments for patients with rare diseases. This is a very good thing. However, CSL has been accused of being a notorious tax dodger, allegedly shifting $5 billion of revenue to Switzerland over 5 years. In fact, CSL was the only company that came out publicly to oppose Australia’s world leading tax transparency legislation last year. I think we can all agree that when the elite decide paying tax is just for everyday people, not them, it’s not great for social cohesion. It also deprives the Australian Government of funds to address major problems like climate change, inadequate hospital staff and the aforementioned lack of government funded child care. 

Once the ethics are sorted, my financial goals are to get a decent return on my investment to build some wealth for the future. The core of my portfolio is in two ETFs: ETHI and FAIR. 

Betashares Global Sustainability Leaders ETF (ASX:ETHI) invests in hundreds of large companies, mainly in the US and Western Europe. It has strict ethical screens which remove companies involved in fossil fuels, gambling, tobacco, weapons and other nasties. It goes further than most ethical ETFs by removing the biggest fossil fuel bankers and human rights abusers, which due to their complexity are usually overlooked even by ethical ETFs. This is why Amazon is in some ethical ETFs despite its union-busting and poor treatment of workers. 

‍BetaShares Australian Sustainability Leaders ETF (ASX:FAIR) invests in big Aussie companies and uses almost identical ethical screens to ETHI. Betashares is the manager of these two ETFs, and they have used shareholdings to push companies to go green and treat its workers better. They were an early supporter of SIX’s campaign to Save the Skate from Woolworths and Coles’ toxic salmon supply.  

This is very uncommon as, like ethical screening, many ETF providers exaggerate how much they positively influence the companies they invest in. Worse, sometimes the big ETF managers even obstruct efforts to improve them! 

Investing in companies I don’t like feels a bit uncomfortable, but it can be very rewarding when pushing them to improve. So far I've invested in Coles (ASX:COL) & Woolworths (ASX:WOW) to get them to dump their toxic salmon that’s killing the Maugean Skate, and G8 Education to pressure them to pay their childcare workers paid parental leave. (If you’re from G8 and you’re reading this before our next meeting…hi! Don’t take it personally.)

Australian Ethical Investment (ASX:AEF) is Australia’s oldest ethical money manager. On behalf of their investors (mainly super members) they avoid industries such as fossil fuels, gambling, and tobacco and aim to invest in companies making a positive contribution to society. They use their ownership of companies to stop banks funding fossil fuels and deforestation, and they donate 10% of their profits to charities addressing climate change, such as indigenous-led groups protecting nature. ‍

Vulcan Energy (ASX:VUL) directly extracts lithium from underground geothermal brine in Germany. The excess heat is fed into the grid to power nearby homes and businesses, white the water is reinjected into the ground. This process minimises land clearing and water pollution that traditional lithium mining involves.