Listed Equity Review 2024

How do values-driven investors navigate the ever-increasing universe of responsible investment strategies across Australian and international listed equity funds?

Listed equities typically command a material weighting in any diversified investment portfolio, either directly or via funds. The products, services, and operations of these listed companies can have positive or negative social and environmental impacts, and investors are increasingly conscious of their portfolio exposures in the listed equity market.

A challenge persists, however, for investors to identify which companies, and which funds, may best suit their needs when it comes to responsible investment practices. There are now more products than ever that are labelled as ‘ethical’, ‘sustainable’, ‘ESG’, and more, all with varying strategic approaches with reporting information.

Now in its fourth year, our Listed Equity Review (Review) applies our proprietary Responsible Investment Matrix (RIM) to the growing universe of ‘responsibly positioned’ funds.

Developed in 2021, with similar guidelines arising in 2023 from the United Nations Principles for Responsible Investment (UNPRI) and the Global Impact Investing Network (GIIN) affirming our approach, our RIM can be applied across our clients’ portfolios to help them navigate the responsible listed equity market and identify best-practice approaches.

When assessing a fund, we look at the intentionality of the fund manager and the strategy of the fund itself to determine a Manager Classification. We then assess and classify every holding within its portfolio to generate a Portfolio Classification. The Manager and Portfolio Classifications are each assessed against our Impact Spectrum.

Additionality activities such as shareholder advocacy, impact measurement and reporting, and participation in primary capital, are then highlighted as Recognition Pointers to arrive at an overall fund assessment

This year our Shortlist highlights 21 funds that we consider to be taking a best practice approach to responsible investment, while we have a watching brief on a further 11 funds on our Watchlist.

aii Responsible investment matrix

*Note that under the Manager and Portfolio Classifications, ‘Contribute to Solutions’ and ‘Catalyse & Contribute’ are greyed out. We do not use these impact classes for listed equities, given the difficulty of meeting the three criteria of an impact investment (intentionality, additionality and measurability).

The Review also extends to providing broader insights and unique research on the financial returns of these funds, and data from our surveying of fund managers on carbon reporting and gender diversity metrics.

Highlights and key insights from this year’s Review include:

• 88 funds assessed from 71 fund managers against our Responsible Investment Matrix
• Over 6,000 underlying holdings of funds reviewed against our Impact Spectrum
• 21 Shortlist funds, consisting of 15 international equity and 6 Australian equity funds
• 11 Watchlist funds, consisting of 2 Australian equity and 9 international equity funds
• Average annualised financial returns from Shortlist and Watchlist funds of 8.9% (domestic equity) and 11.0% (international equity) over a 5-year period
• 88% of Shortlist and Watchlist funds providing market-rate returns over a 5-year period
• 89% of funds monitoring and reporting on portfolio emissions, indicating carbon reporting by funds is advanced
• 21% of portfolio management positions held by women, highlighting significant room for improvement in gender diversity

For the first time, we have made the Review publicly available (with Shortlist and Watchlist fund profiles redacted for clients only).

If you would like to download a copy of the report, please use the form below.

If you would like to learn more about our public markets research, access our Shortlist and Watchlist, or see your own portfolio measured against our RIM as part of a Portfolio Impact Assessment (PIA), we encourage you to get in touch with us by e-mail or through this website to start the conversation.