Ethical Investing | A Message from our Founder

Firstly, thank you for your interest in Elm Responsible Investments, and for giving us the opportunity to assist you in managing your and your clients’ savings. I started Elm Responsible Investments believing that we could in fact invest successfully and profitably in Australian and New Zealand publicly listed companies that operated in an ethical and sustainable manner. More specifically, I wanted to direct my focus and capital to companies that were making a positive impact on the world we live in.

Currently, the common practice for ethical investment managers is to exclude certain problematic industries from their investable universe. This is called Negative Screening. Another common practice is for managers to consider the environmental, social and governance (ESG) risks associated with investing in a particular company. If the return on offer still outweighs the risks even after accounting for the ESG risks, then the investment manager will continue to invest in that particular company.

Although these are good initiatives, I thought that we could do better by being more sophisticated in measuring the sustainability of each company and then investing in the ones that were actually making a net positive impact. Our process incorporates the 17 United Nations Sustainable Development Goals (UN SDGs) and relies on thoroughly researching companies so that we consider the complexities of organisations and account for both the positive and negative impacts they inevitability have on society and the environment. The UN SDGs are the blueprint agreed upon to ensure a more sustainable future for all, and although it initially applied to countries, I thought that we could apply the same standards to companies in which we invest.

The focus on local companies for our fund was also very important, particularly in the current environment where many investors are seeking offshore opportunities. I believe however that here in Australia and New Zealand we do in fact have compelling investment opportunities in industry leading companies that are making a positive impact on the global scale. I wanted the fund to invest in and be part of the success of those local companies addressing global markets, whilst supporting the local economy.

Sustainable and responsible investing still needs to be profitable for investors. As such we have a very specific investment criteria, focusing on the culture, the operations and people. We conduct financial due diligence on every investment, but we believe that it is the culture, the operations and people that drive the current and future financial metrics, which in turn drives shareholder returns. Furthermore, we know that investment management fees are a significant drag on long term investor returns, particularly given the underwhelming performance of active fund managers on the whole. As such, we strive to keep our fees low and aligned with our philosophy of long term and merit based investing with client interests at heart.

We never invest expecting short term gains, but instead always invest with a long term horizon. We believe that the best action today in order to maximise long term returns is to invest only in our best ideas. This means that our portfolio is concentrated, and at times can be highly volatile over the short term. Before investing in our fund, we need you to be comfortable with this volatility.

Our investment strategy commenced in early 2019 but only as a model portfolio which we tracked. We refined the investment process over the course of the year and finally set up a unit trust, ELMRI ANZ Conviction on September 2019. I look forward to presenting to you fund updates every month and audited performance figures every quarter.

Thank you again for your interest in Elm Responsible Investments, and if you have any questions about the sustainability or investment processes, or any other matter, please do not hesitate to contact us.

This note has been prepared by ELM Responsible Investments (‘ELMRI’) ABN 70 607 177 711 AFSL 520428, for Australian wholesale clients for the purposes of section 761G of the Corporations Act 2001 (Cth).

The information is not intended for general distribution or publication and must be retained in a confidential manner. Information contained herein consists of confidential proprietary information constituting the sole property of ELMRI and its investment activities; its use is restricted accordingly.

This note is for general informational purposes only and does not purport to be comprehensive or to give advice. The views expressed are the views of the writer at the time of preparation and presenting and all forecasts, assumptions, opinions, data and other information are not warranted as to accuracy or completeness and are subject to change without notice. This is not an offer document and does not constitute an offer or invitation of investment recommendation to distribute or purchase securities, shares, units or other interests to enter into an investment agreement. No person should rely on the content and/or act on the basis of any material contained in this note. Any potential investor should consider their own circumstances and seek professional advice.

ELMRI funds, its directors, employees, representatives and associates may have an interest in the named securities.

Past performance is for illustrative purposes only and is not indicative of future performance.