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Edition 5 - Sustainable Investment Insights

Darkness and light: our watch list for 2020

If 2019 is anything to go by, the global shift in awareness and action with ESG-focused investing is set to pick up pace in 2020. Some inclusions on this list may be playing a big part in your life right now – like your tap water, your clothes, and your social media account.

Interest in sustainable investment continued to grow throughout 2019 as several topical issues unfolded. We’ve been pleased to see our clients become increasingly engaged with the broader impacts of their investments, beyond their immediate financial returns, and worked to take meaningful action in response to several issues that were prominent throughout the year.

Some of those prominent issues are closer to home than most of us would care to think, and can be as personal as our social media profiles and newsfeeds. 

The use of social media

Social media remained in the spotlight following 2018’s Cambridge Analytica scandal, where the broader population became aware of the potential misuse of personal information by global technology giants.

The dark possibilities of social media platforms further shook the world in March when a series of shootings in Christchurch, which killed 51 people and injured many others, were live-streamed online by the shooter. This tragic event horrified the public across the globe, and sparked widespread calls for social media companies to strengthen controls and prevent the streaming and distribution of objectionable content. AMP Capital joined one such collaboration of global investors seeking to engage these companies and achieve these changes, holding the likes of some social media giants accountable for what appears on their platforms.

New Zealand’s subsequent ban on semiautomatic weapons also put guns back in the spotlight, causing many Environmental, Social and Governance investors to revisit and tighten their ethical screens on civilian firearms.

Climate change

Climate change was undoubtedly the most significant sustainability topic of 2019. In September, the World Meteorological Organisation released its latest report on the global climate, showing the recent five-year period to be the warmest of any equivalent period on record. The report also identified a long list of concerning environmental changes associated with this finding, including continued increases in carbon emissions, rising ocean acidity, and an abrupt decrease in Antarctic sea ice to name just a few.

We have seen record-breaking wildfires in the Arctic, widespread fires in the Amazon, and catastrophic bushfires in Australia. Parts of Australia are also experiencing some of the most severe droughts on record.

Investors are becoming more aware that climate change presents a material risk to portfolios. Events such as the UN Climate Change Summit, COP25 in Madrid, the 'Greta effect' and global climate change demonstrations have drawn attention to this risk. As a result, the number of shareholder resolutions concerning climate change has risen significantly this year, challenging companies to do more with their disclosures, commitments and real actions.

At AMP Capital, we’ve worked closely with companies and other large investors to improve reporting and disclosures, set emissions targets and develop strategies to achieve them, align capex and divestment planning with the Paris Agreement, plan for climate adaptation and resilience, and lobby governments for climate-friendly business settings. We’ve made good progress to date through direct engagement work and collaboration with global investor initiative Climate Action 100+, but there is still a long way to go and we will continue to drive more change in 2020 and beyond.

While it is saddening to reflect on each of these events, we can find hope in the positive actions that arose from them and work towards increasing the accountability of companies operating around the world.”

Tailing dams

Concerns also grew around tailings dams, which are built to contain toxic mining waste and prevent environmental contamination. Unfortunately, in recent years a number have proven to be vulnerable to failure, and in January at least 250 people were killed and the local ecosystem severely affected when a one such structure collapsed in Brazil. We’ve been probing mining companies about the safety of their dams for several years now, and with the UN PRI leading a global engagement agenda on industry safety standards and transparent records of tailings dams, we’re seeing steps in the right direction.

Modern slavery

The Commonwealth Modern Slavery Act will come into full force next year, making human rights and the manufacturing supply chain another hot topic in Australia. The fashion industry is a prime example: consumers are demanding cheaper products, sooner, but as the retail price of clothing continues to fall, the human and environmental costs have increased dramatically. Suppliers have been known to cut corners by skipping the necessary social and environmental checks, putting vulnerable people at risk of exploitation.

Earlier this year we received another reminder of the risks in this sector after the media exposed a mass internment camp in the Chinese province of Xinjiang, and the forcible detainment of over one million Uyghur Muslims in what the government calls a vocational training camp. Women in the camp had been forced to work in factories which supplied some of the world’s largest clothing brands.

At AMP Capital, we’ve been asking companies to consider the Modern Slavery Act, dig deep into their supply chains, and be open and transparent about any concerning findings. Ideally, we’d like to see this type of reporting used to disclose a wide range of social and environmental risks that could still be occurring in supply chains, in order to put a definitive end to these unethical and dangerous practices.

A final thought

While it is saddening to reflect on each of these events, we can find hope in the positive actions that arose from them and work towards increasing the accountability of companies operating around the world. We will continue to take a stand on these issues and make an impact where we can, as we work with our clients to support a better future.

Important Notes

While every care has been taken in the preparation of these articles, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) makes no representation or warranty as to the accuracy or completeness of any statement in them including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. Performance goals are merely goals. There is no guarantee that the strategy will achieve that level of performance. The information in this document contains statements that are the author’s beliefs and/or opinions. Any beliefs and/or opinions shared are as at the date shown and are subject to change without notice. These articles have been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. They should not be construed as investment advice or investment recommendations. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

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