US-based sustainable investment manager Etho Capital and Future Super, Australia’s first fossil fuel-free superannuation fund, are to launch an index – the Global Sustainability Leadership Index – tracking the performance of 100 of the world’s most sustainable and efficient companies that are leaders in their sectors.
Etho Capital and Future Super are to launch an index tracking the performance of 100 of the world’s most sustainable and efficient companies that are leaders in their sectors.
The index is due to underlie an exchange-traded fund which will be launched at the end of October 2016. Future Super investors have agreed to commit AU$35m to the ETF.
Conor Platt, Co-Founder of Etho Capital, commented: “We are proud to partner with Future Super and form what we believe is a ground-breaking relationship to create a suite of actively and passively managed investment products, starting with the Global Sustainability Leadership Index.”
“Our objective is to provide our investors with Australia’s first highly customized fossil fuel free index composed of some of the world’s top performing and sustainable global companies to meet the performance and sustainability criteria of the Australian marketplace,” added Simon Sheikh, Managing Director, Future Super.
“Etho Capital is really the only investment company today that brings the proven track record and the depth of analysis we need. We are excited to partner with Etho Capital on this Global Sustainability Leadership Index and look forward to working together to create other sustainable investment solutions for our fund.”
The announcement coincides with increasing demand among institutional investors in Australia and around the world for investment products that seek to mitigate the inherent risks of companies with poor sustainability track records.
Historically, companies with positive environmental, social and governance (ESG) characteristics have produced enhanced risk-adjusted returns. Analysts investigating this phenomenon have attributed the outperformance to factors such as reduced risk of litigation or reputational costs, as well as positive factors such as a more loyal customer base and greater productivity from employees.
“Future Super and Etho Capital are acting on what many investors are beginning to realize: sustainability can substantially impact investment performance, and is therefore a core component of fiduciary duty,” said Platt. “There’s a price on climate pollution, poor governance and poor business practices, generally, and the more a business is connected to this supply chain, the more it is going to hurt their performance.”
“Global investors are realizing that sustainability and supply chain efficiency metrics can be very material for financial risks and returns, particularly when connected to economy-wide shifts towards climate pollution regulations and disruptive technology trends, like the potentially rapid transition from oil to electrified transportation,” added Ian Monroe, Co-Founder, President and Chief Sustainability Officer of Etho Capital.
The index will utilize Etho Capital’s proprietary Smart Sustainability Process analytics, which applies the most rigorous sustainability screening standards focusing on supply chain efficiency, governance and business practices of a broadly diversified universe of nearly 6000 companies.
Last November, Etho Capital launched the ETHO ETF (NYSE: ETHO), which excluded all fossil fuel companies and selected equities based on climate efficiency while simultaneously screening for overall sustainability and social responsibility.