Message from the Chief Investment Officer

Summary

• Australian Ethical funds have performed well against their respective benchmarks despite volatile financial markets.

• Market cycles are not new to us – we are well placed to navigate uncertainty.

• We are allocating capital towards the global energy transition, a trend we believe will continue to transform financial markets.

• We believe this transition can be achieved without compromising your investment returns or our ethical standards.

Full transcript

Hello, my name is Ludovic Theau and I am the Chief Investment Officer at Australian Ethical. I joined Australian Ethical 9 months ago after previously being the CIO at the Clean Energy Finance Corporation, Australia’s Green Bank.

I am pleased to report on investment performance and discuss the market outlook for 2024.

It’s been a challenging 24 months for many investors globally, but we believe we are well placed to navigate the risks and take advantage of the opportunities ahead.

The way Australian Ethical invests makes us well-placed to protect and grow capital over the long term, which is what superannuation and retirement savings are all about.

So, I would like to talk to you about:

• Our recent investment performance
  
  
• The outlook for 2024
  
  
• My views on climate change, a topic close to my heart
  
  
• What makes Australian Ethical unique

1. Investment Performance

Overall, in spite of volatile market conditions, our performance for the last calendar year has been reasonable.

During this time we are focusing on our performance over the medium to long term, and we are pleased to report over 5-10 years our investment performance has continued to be better than benchmark.

Balanced Accumulation Option 5 year 7.2% p.a.; 10 year 6.8% p.a. (Returns net of fees and tax, 12 months to December 31. Benchmark CPI +3.25%)¹

Australian Shares Accumulation 5 year 9.9% p.a.; 10 year 10.1% p.a. (Returns net of fees and tax, 12 months to December 31. Benchmark ASX 300 Monthly Index Accum.)¹

2. Investment outlook for 2024

We are in a “more normal” interest rate environment compared to where we were at the start of 2023.

The market is pricing in interest rate cuts from here – potentially lower interest rates is a good thing for the future-focused companies we are invested in.

There are some variables that could make a bumpy ride – geopolitical tensions like the conflict situations we’ve seen in Gaza and Ukraine. Also there are a number of elections in 2024, including in the US, so political uncertainty will be a factor.

Having said that, we are well placed to optimise performance for a number of reasons:

We have a strong legacy – through our 36 year history, we have seen many, many cycles.

Our investment strategies are broad and diversified.

We have a dynamic approach to managing assets because we are able to both invest in potentially positive scenarios at the same time as protect against downside risk.

We are an ethical investor with deep level of ethical conviction. We are squarely focused on the largest trends transforming our societies and planet.

3. The climate transition

It’s the biggest trend impacting our societies and financial markets, and it will stay this way for the foreseeable future:

• More than 140 countries have signed up to net zero carbon commitments by 2050, covering more than 90% of global GDP
  
  
• In this context, Australian Ethical is continuing to provide capital and financing to renewable technology
  
  
• We are investing in renewable energy generation and we have recently funded two large Australian wind farms.

Generally, we are using our capital and influence to support companies making a commitment to a lower carbon future.

4. What makes Australian Ethical unique? 

I would like to highlight what makes your investment with Australian Ethical unique. This goes directly to our investment beliefs.

We believe ethical investing can deliver both attractive investment returns while also influencing progress towards a better future for the planet and all its inhabitants. We aim for Australian Ethical to be the benchmark for ethical and responsible investing.

Our ethical and financial goals cannot be achieved without addressing climate change, because of the systemic threat posed to the continuing good health of the planet and society.

That’s why we believe accelerating the transition to net zero carbon is an urgent priority for us to pursue and critical to the financial best interests of those that invest with us.

We believe this transition can be achieved without compromising your investment returns or our ethical standards.

And we believe that this strong partnership between Australian Ethical and you, our members and investors, is essential. The more people who invest in this way, the more influence ethics will have in investment markets.

Thank you for your ongoing support, we look forward to a successful 2024 together.