July 2022 Investment Report

August 17, 2022
Investment Updates

It is clear that the market moved into oversold territory in the first half of 2022 based on recession fears and high persistent inflation data. The Australian equity market has rallied around 10% off its 20 June 2022 low point and our positioning has seen the portfolio outperform over this timeframe, up more than 15%. US inflation data is now coming in lower than prior months and lower than forward expectations with the July data at 8.5% yoy versus June at 9.1%. At the same time the US economic surprise index is showing some signs of stabilising and the combination will be constructive for equities in our view.

The rising price of money, this cycle, has exposed zero operating cash flow companies for their fallibility and coupled with their extreme valuations it has been a disaster for investors. The upside however, in a higher price of money environment is the discipline it instils back into markets, capital expenditure and investment decisions and also highlights the real value of high quality assets. Going forward we see our investment style continuing to benefit from these shifts. More detail, as always, in the attached report.

A lower carbon portfolio

It has been one year since we set a Net Zero 2050 target for the Ethical Partners Australian Share Fund, including an interim target of a 50% decrease in CO2 emissions by 2030.

In order to understand our progress towards the Ethical Partners Australian Share Fund’s Net Zero 2050 targets, we have developed a proprietary Ethical Partners Carbon Alignment Process (EPCAP), which helps us track progress, integrate emissions footprints into our investment decision making and valuations, utilise this information in portfolio construction and to enable dialogue within the investment and sustainability teams.

As such, we are pleased to report that the Weighted Total Emissions (Scope 1 and 2) for the Ethical Partners Australian Share Fund have decreased by 50% over the last year (since the June 2021 baseline).  The Weighted Average Carbon Intensity (WACI) has also reduced significantly. The WACI has reduced 42% over the last year, against a targeted decrease of 6%.

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