U Ethical divests from companies reliant on fossil fuels
The evolution of our ethical investment policy.

26 February 2020.
Our ethical investment policy has continued to evolve over the years, from applying the first ethical screen back in the late 1970s to exclude nuclear mining, to the total exclusion of thermal coal and conventional and unconventional oil and gas extraction. We continue to influence and be influenced by the world around us. Within U Ethical, our concern about the use of fossil fuels has increased, and while we have up to this point viewed natural gas as a transition fuel, we’ve come to accept that the industry isn’t doing enough to realise that transition.
The Paris Agreement and commitment from countries to limit increases in greenhouse gas emissions, calls for bold action to be taken, meanwhile, the broader community advocates that more needs to be done over and above meeting our country’s targets as per the agreement.
U Ethical’s Ethical Advisory Panel met early this year to finalise an evolution in the investment policy sectors we invest in. We are pleased to announce the exclusion also of any company involved in the exploration for, and extraction of, fossil fuel reserves and combustion for power generation.

Fossil fuels: a critical global issue
Signing on to the Paris Agreement committed Australia to policies to keep the rise in global temperatures to well below 2°C beyond their pre-industrial levels. We believe directing capital towards the fossil fuel industry is incompatible with the goals of the Agreement.
Australia is the third largest exporter of fossil fuels, behind Saudi Arabia and Russia, and has the highest per capita emissions amongst OECD countries. We have a large role to play in the reduction of global emissions, despite what some media outlets and politicians would have us believe.
The role of ethical investment
Meanwhile, public concerns are at their highest ever as the impact of climate change inaction becomes clearer. Devastating bushfires, extreme heat, drought, flooding, and associated health effects, impacting all Australians and the ecosystems we depend upon.
In this context, we believe we have a responsibility to redirect capital away from the highest-emitting sectors and towards business models that are centred on minimising emissions and the impact of a rapidly warming planet. This is also in keeping with our clients’ expectations of our stewardship of their money.
The desire for less exposure to fossil fuels isn’t limited to our client base. Consumers using RIAA’s Responsible Returns online tool are predominantly searching for funds that screen out fossil fuels and human rights violations. This is in contrast to historically commonly applied exclusions being controversial weapons, tobacco and gambling.
Our stance in practice
Avoiding investment in companies that cause unacceptable damage to the natural environment is a key tenet of our Ethical Investment Policy. We have long excluded companies with operations in thermal coal and conventional and unconventional oil and gas extraction. This meant we had no exposure to international companies in these areas but left us with small exposures to two Australian companies, from which we have now divested.
We may choose not to exclude a company if their fossil fuels earnings constitute less than 5% of its revenue or earnings. In such instances, the contravention may be outweighed by significantly positive factors. This is currently an unlikely scenario for the fossil fuel majors but encouragingly, a few companies are starting to transition their extraction activities towards cleaner industries, so this threshold may become relevant in the future.
Our advocacy and engagement
We are a signatory of ClimateAction100+, an investor initiative driving corporate climate action through engaging with some of the world's largest greenhouse gas emitting companies.
We joined over 30 Australian investor signatories and there are 13 Australian focus companies including Rio Tinto, AGL Energy, Qantas, Boral and Bluescope Steel. We will begin our own engagement campaign throughout the year.
We keep abreast of global ESG investment trends including climate change from a myriad of sources in particular as a signatory to the UN Principles for Responsible Investment and a member of RIAA.
We strive to be at the forefront of ethical investment practice with regard to climate change, and to ensure our investment practices are subject to the rigour of external expertise and analysis. To do so we have two independent members on our Ethical Advisory Panel with expertise in research and advocacy on climate change backed by an integrated ethical investment process.
Market Commentary Disclosure
The market commentary reflects U Ethical’s position at the time of publication and is subject to change. U Ethical reserves the right to make any adjustments to the investment strategy or outlook for all products at any time to reflect major disruptions or changes in the financial markets, as allowed by the relevant governing documents, Product Disclosure Statement, Information Memorandum, or Offer Documents.
The information provided is general information only. It does not constitute financial, tax or legal advice or an offer or solicitation to subscribe for units / debentures in any U Ethical Fund of which U Ethical is the Manager, Administrator, Issuer, Trustee or Responsible Entity. This information has been prepared without taking account of your personal objectives, financial situation or needs. Before acting on the information or deciding whether to acquire or hold a product, you should consider the appropriateness of the information based on your own objectives, financial situation or needs or consult a professional adviser. You should also consider the relevant Product Disclosure Statement (PDS) or Offer Document which can be found on our website www.uethical.com or by calling us on 1800 996 888.
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