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.
The tragic human rights situation currently unfolding in Myanmar holds particular significance to our Sustainability Analyst Georgina. Please read Georgie’s poignant thoughts on her visit to the camp, our expectations on our portfolio companies in regard to Myanmar, and why Ethical Partners has recently signed on to the Investor Statement on Human Rights and Business Activities in Myanmar.
As members of the Investor Group on Climate Change, Ethical Partners Funds Management strongly endorses its new roadmap released today in conjunction with the CDP and the Principles for Responsible Investment. It is entitled: "Confusion to clarity: A plan for mandatory TCFD-aligned disclosure in Australia".
During May 2021 the Fund returned 1.56% versus the S&P/ASX 300 Accumulation Index of 2.31%, underperforming the market by -0.75%. An underweight position in IT and an overweight position in Westpac contributed to relative performance while an overweight position in Consumer Staples and an underweight position in CBA detracted from relative performance.