AMP Capital has joined the trend to ethical investment, committing to drop around $600 million worth of tobacco, land mines, cluster bombs and chemical and biological weapons stocks from its portfolios.
The tobacco move alone will see it dump $440 million worth of stocks and bonds, the biggest such action in Australia. But the new rules don’t match its stance across the ditch, where AMP’s New Zealand funds are barred nuclear investments.
An armoury of A$130 million invested in manufacturers of cluster munitions and land mines, will also be divested. The bar on non-conventional weapons has no financial implications as none of AMP’s investments are exposed to those areas.
The move is significant because AMP Capital is Australia’s second largest fund manager.
AMP Capital CEO Adam Tindall said: “We are not prepared to deliver investment returns to customers at any cost to society. ”
“AMP Capital has a long-term focus on responsible investing supported by an integrated approach to considering ESG factors across all asset classes.”
“It is consistent with AMP’s commitment to building a sustainable future and creating long-term, shared value for our customers, shareholders, employees, the community and the environment.”
“The new framework complements our existing approach to addressing ESG (Environmental, Social and Governance ) investment risks by helping us to resolve complex ethical issues as they arise. It reflects the changing attitudes of our investors, who increasingly do not want to be invested in harmful products,” he said.
The investment framework recognises and applies degrees of ‘harm’ or the ‘denial of humanity’ of another person as determining factors. It also takes into account other factors such as whether there are international conventions that prohibit or control the use of a company’s products, the group’s release said.
Tobacco manufacturers have been excluded under the framework because their products are highly addictive, cannot be consumed safely and impact non users via second-hand smoke, the group observed.
“Cluster munitions, land mines, biological and chemical weapons manufacturers are excluded because their products indiscriminately kill through normal use (including during peacetime) and their use leaves a legacy of significant and specific danger for civilians.
“It’s important to note we are only excluding certain companies or sectors by exception. AMP Capital still firmly believes in company engagement in order to effect meaningful change.
In the case of tobacco, cluster munitions, land mines, biological and chemical weapons manufacturers, however, no engagement can override the inherent dangers involved with their products.
“We can meet our fiduciary obligations to investors and our obligations to be a responsible fund manager, delivering strong investment returns that continue to meet client objectives. Our analysis has found that our funds can continue to be managed effectively under this new framework without compromising investment objectives.”
Exposure of all excluded companies is held within the global equity and global fixed income funds managed by external fund managers on behalf of AMP Capital’s Multi-Asset Group.
Divestment will begin once AMP Capital updates the product disclosure statements (PDSs) for the impacted funds and will take up to 12 months from late 2017.
AMP will also give investment managers the option of excluding companies or sectors on ethical grounds where necessary.