In the Ethical Partners Operational Risk Assessment which is used for the Ethical Partners Australian Share Fund, we exclude companies that have significant operations in countries that are in the bottom third of the Transparency International Corruption Perceptions Index (TICPI). The Index is an independent tool which ranks 176 countries and territories by their perceived levels of corruption. Our reasoning for excluding companies in the bottom third of the TICPI are several. Firstly, we believe that there is a higher risk of human rights abuses taking place in these countries due to their higher levels of corruption. Additionally, there are lower levels of transparency and lower standards of governance. Secondly from an investment point of view, being a bottom up stock picker who visits company assets from time to time, it can be both dangerous and sometimes impossible to gain access to company operations in these countries. This makes the valuation of assets difficult and lowers confidence in an investment case. Thirdly we believe that generally, for those companies operating in such regions, there is a less stable political and regulatory environment, more chance of encountering issues such as nepotism, bribery, raised costs, the undermining of fair prices and competition and reputational risks, that ultimately leads to higher business risk. Ethical Partners clients can feel satisfied that they will not be supporting companies that operate in such areas and that we have taken steps to avoid these identifiable investment risks.
Ethical Partners are pleased to see Australia take the next steps to implement mandatory climate reporting with the release of draft climate standards, which we provided feedback on.
Ethical Partners have continuously called for the provision of high quality, comparable data on company’s climate governance and carbon metrics, which we believe is imperative for investors to fulfil the potential of responsible investment.
Ethical Partners have been proud to have been active supporters of the TNFD Forum over the past few years, and to provide regular feedback on the development of the official TNFD recommendations, which were launched in December, as well as to be active members of the RIAA Natural Capital Working Group.