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Don’t forget s in ESG investments


Although climate change dominates the conversation when it comes to investing in environmental, social and corporate governance (ESG), this is not the only story. If you are interested in investing in companies that benefit people and communities, as well as risk-based profits, you can also do so.

Investing through the social lens can mean investing in different ways – for example, companies that improve health care, companies that make sure they are diverse and inclusive, and invest in social and affordable housing, for example.

It could also mean excluding companies that have a negative impact on the community and people, such as avoiding companies that are exposed to modern-day slavery, or companies that provide services to offshore detention centers for asylum seekers.

Also, more and more attention is being paid to investment in accordance with the United Nations Sustainable Development Goals (SDGs). The SDGs are 17 activities to improve life on earth in terms of both environmental and social goals by 2030, including measures to eradicate poverty, improve health, and access to work and employment.

There are both managed funds and superfunds that have achieved the SDGs and established funds that invest in companies that contribute to these goals.

One way to invest in social themes can be your superfund – many funds integrate social themes through their investment portfolios. HESTA, for example, said it is investing under several SDGs related to social issues.

This can also be good for your long-term investment needs. The HESTA sustainable growth option also has a big impact – it returned by 23.03% for the year to June 30, 2021 and 11.28% for the 10 years to June 30, 2021. The HESTA sustainable growth option was recognized in Money The “Best of the Best” awards for 2022 as the best diversified ESG superfood.

If you are interested in an obvious social theme, you can look at examples such as the American Century Health Care Impact Equity Foundation, which is distributed in Australia by Zurich Financial Services. The fund invests in a portfolio of healthcare companies listed on global markets while maintaining positive social impact. The strategy is linked to Sustainable Development Goal 3 – Good health and well-being and focuses on several specific parts of the health and healthcare sectors.

In addition to the investment theme, American Century Investments, the fund’s chief manager, is 40% owned by the Stovers Institute for Medical Research, meaning that part of the profits goes to support medical research.

Zurich Financial Services Australia offers a local version of the strategy, the Healthcare Impact Fund, managed by American Century Investments. The fund currently has a return of 10.95% since its inception in December 2020, lower than the MSCI Healthcare Reference Index, which has brought in 12.22% over the same period.

There are other ways to invest in social resources – Australian Ethical Investments recently launched an active ethical ETF, The High Conviction Fund ETF (ticker: AEAE), which is an actively managed portfolio of 20 to 35 companies, mostly withdrawn from the ASX 300. Companies meet ethical criteria based on the strict ethical charter of the Australian Ethical.

The AEAE seeks to address “promising industries” such as renewable energy, healthcare, communications and information technology, and focuses on a highly liquid portfolio of medium- and large-cap securities, complemented by individual smaller constraints.

The AEAE is registered with CBoe Australia (formerly Chi-X) and is based on the High Conviction Unit Trust, launched in October 2021.

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