Manufacturers of tobacco, cluster munitions, landmines, biological and chemical weapons to be excluded from portfolios
AMP Capital is furthering its commitment to responsible investing by introducing a new decision-making framework where, in exceptional circumstances, it may exclude companies or sectors on ethical grounds within its entire investment portfolio.
The new framework has been incorporated into AMP Capital’s existing Environmental, Social and Governance (ESG) and Responsible Investment Philosophy, which is applied across the business.
Under the framework, AMP Capital considered all sectors in which it invests and has concluded that manufacturers of tobacco, cluster munitions, landmines, biological and chemical weapons do not meet the minimum ethical standards required and will be excluded from its investable universe.
Approximately A$440 million worth of tobacco manufacturing-related equity and fixed income holdings will be divested from AMP Capital’s portfolios.
This is the largest divestment of tobacco securities to date in Australia.
Approximately A$130 million is invested in manufacturers of cluster munitions and landmines, and will also be divested. There are no companies with known exposure to chemical or biological weapons in AMP Capital’s portfolios but going forward they will be excluded from the investable universe.
AMP Capital will be one of the largest investment managers in Australia to implement exclusions on tobacco, cluster munitions, landmines, biological and chemical weapons across all of its portfolios where it is responsible for the investment management.
No other sectors are being considered for exclusion.
AMP Capital CEO Adam Tindall said: “AMP Capital has a long-term focus on responsible investing supported by an integrated approach to considering ESG factors across all asset classes. This provides greater insight into the potential risks and opportunities that may impact the value, performance and reputation of companies we invest in on behalf of our clients. It is consistent with AMP’s commitment to building a sustainable future and creating long-term, shared value for our customers, shareholders, employees, the community and the environment.
“The new framework complements our existing approach to addressing ESG investment risks by helping us to resolve complex ethical issues as they arise. It reflects the changing attitudes of our investors, who increasingly do not want to be invested in harmful products.”
AMP Capital has been working on the development of a principles-based framework that establishes minimum ethical standards to be applied across the portfolio since September 2014. Previously, AMP Capital dealt with ethical issues as part of its ESG analysis on a case-by-case basis and by offering responsible investment options to customers.
The new framework recognises and applies degrees of ‘harm’ or the ‘denial of humanity’ of another person as determining factors. It also takes into account other factors such as whether there are international conventions that prohibit or control the use of a company’s products.
Tobacco manufacturers have been excluded under the framework because their products are highly addictive, cannot be consumed safely and impact non users via second-hand smoke. Cluster munitions, landmines, biological and chemical weapons manufacturers are excluded because their products indiscriminately kill through normal use (including during peacetime) and their use leaves a legacy of significant and specific danger for civilians.
Mr Tindall noted: “We are not prepared to deliver investment returns to customers at any cost to society. This position has been affirmed through consultation with major institutional clients and engagement with retail customers. We also engaged with recognised experts in the field of business ethics to develop the framework including Dr Simon Longstaff from The Ethics Centre.
“It’s important to note we are only excluding certain companies or sectors by exception. AMP Capital still firmly believes in company engagement in order to effect meaningful change. In the case of tobacco, cluster munitions, landmines, biological and chemical weapons manufacturers, however, no engagement can override the inherent dangers involved with their products.
“We can meet our fiduciary obligations to investors and our obligations to be a responsible fund manager, delivering strong investment returns that continue to meet client objectives. Our analysis has found that our funds can continue to be managed effectively under this new framework without compromising investment objectives.”
Exposure of all excluded companies is held within the global equity and global fixed income funds managed by external fund managers on behalf of AMP Capital’s Multi-Asset Group.
Divestment will begin once AMP Capital updates the product disclosure statements (PDSs) for the impacted funds. Updating the PDSs will occur progressively over the course of 2017.
The external fund managers with impacted portfolios will be instructed to progressively sell down their holdings of excluded securities in a reasonable manner. This may take up to 12 months from time of formal notification.
Impacted investors will be notified prior to the changes being made to the portfolios.
About AMP Capital
AMP Capital is a specialist investment manager with more than A$165 billion in funds under management as at 31 December 2016 and more than 250 investment professionals. AMP Capital has a heritage and strength in real estate and infrastructure, and specialist expertise in fixed income, equities and multi-asset solutions. It is a subsidiary of AMP Limited, which was established in 1849, and is one of Australia's largest retail and corporate pension providers.