Author Topic: Ethical Investing in Australia  (Read 2041 times)

Fresh Bread

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Ethical Investing in Australia
« on: January 11, 2022, 03:38:46 PM »
My spouse and I have made the decision to divest from fossil fuels and have been looking at our options.

Currently our investment mix is across property, P2P, cash accounts and index funds, and all the index funds are with Vanguard. We have half our international $ in the Vanguard Ethically Conscious Fund.

If we wanted, we could move all our international $ to that fund, no problem. With the AU $, unfortunately, I found out yesterday that we aren't able to add a new product (AU Ethically Conscious) to our account, and instead need to withdraw, open a new account and re-invest. There was some change to the rules in 2020. I think that means a tax event, but I can't see how we can avoid that though if we are to go ahead and divest, unless we went 100% global (hard no).

The other factor in play is that Vanguard's ethically conscious funds don't score too well according to these guys (scroll down to investment funds):
https://www.leafratings.org/all-funds.html#super

So if we have to withdraw anyway, why not buy into one of the higher rated ones? The Pengana WHEB has a retail option and the Betashares Sustainability Leaders options are ETFs, so all very straightforward. The fees would be a little higher than Vanguard (we're paying wholesale rates so 0.17-0.20%) but that's ok with us if they are "better".

Does anyone have any experience with the Pengana WHEB Fund or Betashares Sustainability Leaders ETFs? They are fairly new but all ethical funds are fairly new!

Apart from the higher fees, the only other negative I can see in moving away from Vanguard is that Vanguard is a little safer since the funds are held by a custodian/trust. I guess this should be quite a drawcard for staying put?


Not looking for any discussion on the merits of divesting or otherwise, thanks.

Zhiantara

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Re: Ethical Investing in Australia
« Reply #1 on: January 12, 2022, 12:18:35 AM »
I'm in Sandhurst's Socially Responsible fund, which isn't on the list that you linked (dunno if I should be concerned about that).

It is certified by these people https://responsibleinvestment.org/ri-certification/

Having a search on here https://www.responsiblereturns.com.au, I can see I could probably do better in terms of how ethical the fund actually is. I think the returns are decent. My biggest problem with Sandhurst is that they don't have any kind of online portal. I get paper statements twice a year and hard copy receipts when I put money in. Just seems a bit weird to me.

I'm only a few years in to this investing thing and am still figuring things out (like what to look for in a fund). Look forward to hearing other peoples experience with ethical investing!

Fresh Bread

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Re: Ethical Investing in Australia
« Reply #2 on: January 12, 2022, 12:35:46 AM »
Maybe you can ask the Ethical Advisers Co-op to review it. I don't really know much at all either.

I do know that the Vanguard funds and the others I listed above have tracked very well against the overall index.

Dropbear

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Re: Ethical Investing in Australia
« Reply #3 on: January 12, 2022, 12:38:08 AM »
With the AU $, unfortunately, I found out yesterday that we aren't able to add a new product (AU Ethically Conscious) to our account, and instead need to withdraw, open a new account and re-invest. There was some change to the rules in 2020. I think that means a tax event, but I can't see how we can avoid that though if we are to go ahead and divest, unless we went 100% global (hard no).

My understanding of the situation with Vanguard is that:
  • Vanguard's "old platform" - Vanguard originally hosted managed funds directly, and had different funds for retail and wholesale.  At the time, ETFs were only available through brokers (not with Vanguard directly).  Anyone who had old platform accounts when the new platform came in could either keep these accounts, or swap them to the new platform.   If they kept them on the old platform, you can add money to the existing funds, but you can't add any new funds that you didn't already hold.
  • Vanguard's "new platform" - since around 2020 sometime, Vanguard brought in "Personal Investor" accounts, and retired the old platform.  These accounts originally had a new account fee attached, but this was removed as of August 2021.  (They still have typical fee types of buy/sell spreads, management fees, and brokerage for ETF transactions).  But they also enabled one to hold any of managed funds, ETFs, or any other direct shareholdings via Vanguard.

So call Vanguard, as they'll explain the situation more easily than I can, but it appears that an option for you could be to:
  • Keep whatever funds you want in your old platform account since you can keep this indefinitely, and
  • Set up a new Personal Investor account to hold any new funds that you want to add.

The only drawback with that is having 2x different accounts with 2x different logins.

However, it does sound like if you wanted to withdraw from any accounts, then this would indeed be a taxable event.  I'll leave it up to you and others as to whether that's worthwhile or not, as I too am not experienced in ethical investing, hence my query about these ratings below...

The other factor in play is that Vanguard's ethically conscious funds don't score too well according to these guys (scroll down to investment funds):
https://www.leafratings.org/all-funds.html#super

What are these ratings based on?  Are there two different kinds of ethical investing here?

Type 1 - Funds that select for the most ethical investments (solar farms, etc) - funds that get high ratings
Type 2 - Funds that filter against the most unethical investments (coal mining, etc) - funds that get low ratings, but are still more ethical than a standard index?

That doesn't appear to get into the relative merits of each type of fund.  So does it come down to whether one is looking to invest in "Sustainable Impact" (type 1) funds or "Ethically Conscious" (type 2) funds?

Fresh Bread

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Re: Ethical Investing in Australia
« Reply #4 on: January 12, 2022, 01:32:23 AM »
With the AU $, unfortunately, I found out yesterday that we aren't able to add a new product (AU Ethically Conscious) to our account, and instead need to withdraw, open a new account and re-invest. There was some change to the rules in 2020. I think that means a tax event, but I can't see how we can avoid that though if we are to go ahead and divest, unless we went 100% global (hard no).

My understanding of the situation with Vanguard is that:
  • Vanguard's "old platform" - Vanguard originally hosted managed funds directly, and had different funds for retail and wholesale.  At the time, ETFs were only available through brokers (not with Vanguard directly).  Anyone who had old platform accounts when the new platform came in could either keep these accounts, or swap them to the new platform.   If they kept them on the old platform, you can add money to the existing funds, but you can't add any new funds that you didn't already hold.
  • Vanguard's "new platform" - since around 2020 sometime, Vanguard brought in "Personal Investor" accounts, and retired the old platform.  These accounts originally had a new account fee attached, but this was removed as of August 2021.  (They still have typical fee types of buy/sell spreads, management fees, and brokerage for ETF transactions).  But they also enabled one to hold any of managed funds, ETFs, or any other direct shareholdings via Vanguard.

So call Vanguard, as they'll explain the situation more easily than I can, but it appears that an option for you could be to:
  • Keep whatever funds you want in your old platform account since you can keep this indefinitely, and
  • Set up a new Personal Investor account to hold any new funds that you want to add.

The only drawback with that is having 2x different accounts with 2x different logins.

However, it does sound like if you wanted to withdraw from any accounts, then this would indeed be a taxable event.  I'll leave it up to you and others as to whether that's worthwhile or not, as I too am not experienced in ethical investing, hence my query about these ratings below...

The other factor in play is that Vanguard's ethically conscious funds don't score too well according to these guys (scroll down to investment funds):
https://www.leafratings.org/all-funds.html#super

What are these ratings based on?  Are there two different kinds of ethical investing here?

Type 1 - Funds that select for the most ethical investments (solar farms, etc) - funds that get high ratings
Type 2 - Funds that filter against the most unethical investments (coal mining, etc) - funds that get low ratings, but are still more ethical than a standard index?

That doesn't appear to get into the relative merits of each type of fund.  So does it come down to whether one is looking to invest in "Sustainable Impact" (type 1) funds or "Ethically Conscious" (type 2) funds?

Yes we'd end up with two logins if we want to invest in another product.

You can click on any of the funds and see a one-pager on why they scored like that. Vanguard scores 'disappointing' because it invests in for example, a gold mine known to be unethical, financiers of the fossil fuel industry and oil & gas service industries. It's possible that you only get five stars if you do impact investing, but I think it would still be possible to rate very well by just avoiding all fossil fuel industries, supporters of fossil fuel industries, and companies with ethics breaches. If an ethical fund that just does a basic screening without in depth analysis, they won't score well. I know someone that works at one of the well rated funds and their screening is intense. They fly internationally to check worker conditions etc.

LonerMatt

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Re: Ethical Investing in Australia
« Reply #5 on: January 12, 2022, 03:30:10 AM »
I'm following this. Not too keen on the ins and outs but just where people land. If I see myself 'cashing out' at 60 I'd rather it be in a world I recognise, rather than the extinction and climate events I see unfolding. Makes no sense to 'have mine' when I won't even be able to show koalas to my kids.

Gremlin

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Re: Ethical Investing in Australia
« Reply #6 on: January 12, 2022, 06:51:29 PM »
We have ETHI, VESG and VETH in addition to VGS and VAS ETFs.

We are slowly transitioning away from VGS and VAS.  We've switched off DRP for them - any distributions are reinvested into one of the others.  New investments go to the ethical funds.  If we need to sell, we will sell VGS and VAS as a preference to selling the others.  But it's slow going.

EDIT:  Actually, I've just looked back at my 'net worth over time' spreadsheet and it's not as slow as I first thought.  Pleasingly so...
« Last Edit: January 12, 2022, 06:58:03 PM by Gremlin »

Fresh Bread

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Re: Ethical Investing in Australia
« Reply #7 on: January 12, 2022, 07:08:15 PM »
Thanks @Gremlin ! We are new to ETFs so just reading up on how we do it... What platform do you personally use to invest?

Gremlin

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Re: Ethical Investing in Australia
« Reply #8 on: January 12, 2022, 07:56:23 PM »
Thanks @Gremlin ! We are new to ETFs so just reading up on how we do it... What platform do you personally use to invest?

Nabtrade.  I bank with nab, which doesn't sit great with me and Mrs G given their greenwashing history, but I can't structure my business and personal banking the way I want with any of the others overly easily.

Fresh Bread

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Re: Ethical Investing in Australia
« Reply #9 on: January 12, 2022, 08:24:32 PM »
Thanks @Gremlin ! We are new to ETFs so just reading up on how we do it... What platform do you personally use to invest?

Nabtrade.  I bank with nab, which doesn't sit great with me and Mrs G given their greenwashing history, but I can't structure my business and personal banking the way I want with any of the others overly easily.

My bank is a credit union and they don't have a platform so I guess I'm free to use whichever. There's a cheap one with $8 trades and 10 free ones called ThinkMarkets but I have no idea if it's any good!

Dropbear

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Re: Ethical Investing in Australia
« Reply #10 on: January 15, 2022, 12:23:55 AM »
I used this fund rating list to do a brief comparison of 11 ethical funds, and they all sound great, but most are rather expensive in fees.

Looking at Vanguard and what I took to their next cheapest competitor...

Australian
VETH / Vanguard Australian Shares Ethically Conscious ETF / Fee 0.16%
GRNV / VanEck MSCI Australian Sustainable Equity ETF / Fee 0.35%

International
VESG / Vanguard International Shares Ethically Conscious ETF / Fee 0.18%
ESGI / VanEck MSCI International Sustainable Equity ETF / Fee 0.55%

Performance wise, Vanguard looked very good compared to the others too, if only over the 3 years that most of these funds have been operating...

ETHI / Betashares Global Sustainability Leaders ETF had better performance than VESG, and a fee of 0.59%.

So I like to ask you all please - where does ethical investing currently sit in regards to economic AND sustainable outcomes?  Are the cheaper and simpler options the best, or are there any other options that challenge this idea?

Dropbear

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Re: Ethical Investing in Australia
« Reply #11 on: January 25, 2022, 03:55:29 PM »
Anyone care to weigh in with opinions on these various ethical options, please?

Fresh Bread

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Re: Ethical Investing in Australia
« Reply #12 on: January 25, 2022, 06:30:33 PM »
I have made a spreadsheet but have yet to go through and look at our best options. The Betashares was looking good though.

I think we are going to go something like 75% in the Vanguard options (low cost, but a bit less ethical) and then 25% in non-index funds that are more ethical and do impact investing but higher fees and more risky since it's not an index fund.

marty998

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Re: Ethical Investing in Australia
« Reply #13 on: January 25, 2022, 11:41:15 PM »
Applaud you guys for taking an active decision to do this. It takes a little bit of courage, and a willingness to "complicate" your investment life.

Dropbear

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Re: Ethical Investing in Australia
« Reply #14 on: January 26, 2022, 03:13:27 PM »
In my case, as I hold VAS and VGS and add new deposits according to my asset allocation, I'm thinking of stopping new deposits into VGS and to put those portions into VESG instead.  The intent is that it's both environmentally AND economically beneficial to do so - which is less about courage and more about being clear sighted.

I'm also interested in looking at VETH instead of VAS, but don't know yet what is screened out of VETH to justify it being considered a better option?

I would happily invest in more ethical options if the cost was more competitive with passive index funds, or alternatively to consider putting a small proportion in an active fund that seeks to outperform by investing in green revolutionary things that have good potential for economic returns.  So on these ideas, I'm interested but not yet convinced, and am keen to hear more about it...

Ultimately, with environmental causes being served with capital and also with conscious consumption, it's not just investing but also purchasing decisions that matter.  We can all support sustainability by voting with our wallets.

Fresh Bread

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Re: Ethical Investing in Australia
« Reply #15 on: February 14, 2022, 10:03:43 PM »
So we divested! Well, mostly. We'll move the rest next tax year maybe.

Withdrew almost all of our Vanguard International and then put most of that into the ethical version. In hindsight I would have done this in a few lumps as it's a bit frightening having $$$ in the ether for 5 days.

Then we put the remainder plus some cash we needed to rebalance into:
- Betashares Aussie ETF
- eInvest Future Impact Small Caps ETF*
- Pengana WHEB Sustainable Impact Fund*
- Australian Ethical International Fund

The starred ones are impact investing. There were a couple of others that looked good in our review but just missed out:

- Betashares International ETF
- Australian Ethical Emerging Companies

EDIT to add: The vast majority of our funds in Vanguard as we find the other funds, particularly the impact investing, a bit more risky.

The first two additional funds are AU or AU/NZ and the second two are international. We have a 70/30 international/Aussie split overall.
« Last Edit: February 14, 2022, 10:07:23 PM by Fresh Bread »

Dropbear

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Re: Ethical Investing in Australia
« Reply #16 on: February 24, 2022, 05:04:28 PM »
This article is very relevant:

From human rights to recycling bins: how can you define ‘ethical investing’?
https://www.theguardian.com/money/2022/feb/21/from-human-rights-to-recycling-bins-how-can-you-define-ethical-investing

Particularly this bit...

Sustainability investing
This is a specific environmental approach, and it means actively seeking out funds or investment opportunities in clean-water programs, renewable energy, infrastructure, recycling, waste management and more.


It gets to the heart of my question - can sustainability investing be done in a low-cost, passive, mustachian way?  Or are there only higher-cost active avenues to sustainability investing?

Fresh Bread

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Re: Ethical Investing in Australia
« Reply #17 on: February 24, 2022, 06:00:55 PM »
I think impact investing would always be active because someone has to seek and analyse the opportunities. I can't see a way that it could be cheap. I guess you could look for opportunities yourself but a lot of the companies are not publicly owned so I guess there would be a few more hoops to jump through. There's always the crowdsourcing fundraising platforms to look at though and they are easy. High risk though. I think I'd rather pay someone 1%. 

We've put only a minor % in the active high fee funds for now.

With the current political climate it will be interesting to see how we do since weapons will be in high demand and fossil fuel supply is being disrupted. 

MustacheAndaHalf

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Re: Ethical Investing in Australia
« Reply #18 on: February 26, 2022, 06:39:29 AM »
Keep in mind when you invest only in Australian public companies, you're missing 98.3% of the world's market cap.  You can view Vanguard Total World on etfdb to view the per country percentages.
https://etfdb.com/etf/VT/#charts

That said, I found a list of funds with the highest ESG (environmental, social, governance) scores according to Morningstar Australia.  The data is from Aug 2021, so relatively recent:
https://www.morningstar.com.au/funds/article/3-top-rated-sustainable-equity-funds/214699

Their "gold" fund is quoted in GBP, so I skipped it.  The only "silver" fund is:

AXA IM Sustainable Equity (0.35% annual fees, +15.36%/yr for 5 yrs)
(Which seems like a global fund headquartered in Singapore with offices in Australia ... only available to "wholesale clients")

Fresh Bread

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Re: Ethical Investing in Australia
« Reply #19 on: February 26, 2022, 12:24:02 PM »
@MustacheAndaHalf The title means "Ethical investing while living in Australia" ie what funds/ETFs are available to us, not "Ethical Investing in Australian companies". Personally my split is 70/30 Int/Aus but I know some people are the exact opposite.

I think the Gold one is Stewart Investors. That was on the list from earlier in the thread. It's an excellent fund and would be my first choice but you can't access it directly. I think you have to have super or other investments at Colonial First State, it's not clear though.

@Dropbear I wonder if the AXA fund is more impact investing-y but also low fee? I've done my divesting now so I haven't the motivation to read the fact sheet properly! 

MustacheAndaHalf

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Re: Ethical Investing in Australia
« Reply #20 on: February 26, 2022, 04:09:06 PM »
If you're doing additional investing outside your super, could you use IBKR Australia?  They provide access to stock markets around the world, so you might be able to buy US ETFs with lower annual fees?

Xtrackers MSCI USA ESG Leaders Equity ETF
https://etfdb.com/etf/USSG/#etf-ticker-profile

Vanguard ESG International Stock ETF
https://etfdb.com/etf/VSGX/#etf-ticker-profile

Looks like every 200 shares cost $1 of commission, so:
USSG $40.35/sh x 200 = $1 commission per $8,000 invested
VSGX $58.41/sh x 200 = $1 commission per $11,500 invested

stashgrower

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Re: Ethical Investing in Australia
« Reply #21 on: June 22, 2022, 02:22:49 AM »
Congrats to everyone making this move. Not sure if this is the best place to ask this. Is there any disadvantage with selling ethical ETFs down the track if they have lower volume than regular ETFs?