In the ever-evolving landscape of finance, ethical investing has carved out a significant niche. But what does it truly entail? In our recent #GetRichWithRich episode, we had the pleasure of speaking with Andy Gracey from Australian Ethical, a pioneer in the field of ethical investing. Andy provided a wealth of knowledge on how their investment process works, the sectors they focus on, and the dynamic nature of their portfolio.
**The Ethical Screening Process**
One of the standout features of Australian Ethical's approach is their rigorous ethical screening process. Andy explained that they have a dedicated team that independently evaluates each stock against their principle-based charter. This separation from the investment team ensures that financial considerations do not overshadow ethical standards. "We have an independent team that looks at the ethics and they're not really looking at the financials per se," Andy said. This meticulous process results in approximately 50% of the ASX 300 being ruled out, leaving a curated selection of investments that align with their ethical guidelines.
**Focus on Medical Technology and Information Technology**
Australian Ethical's investment portfolio is heavily weighted towards healthcare and information technology. These sectors not only offer robust growth potential but also align well with their ethical criteria. Andy highlighted their interest in small companies, which often have more focused and innovative products. "We like to see companies with recurring revenue streams and strong GP margins," he noted. This focus has led them to invest in promising stocks like Gentrak, a New Zealand-based company specializing in utility software, and Immutep, a biotech firm making strides in cancer treatment.
**Investing in Renewable Energy**
Renewable energy is another cornerstone of Australian Ethical's investment strategy. Andy discussed their significant holdings in companies like Meridian Energy and Mercury Energy, which generate power primarily from hydro and geothermal sources. These investments not only promise financial returns but also contribute to a more sustainable future. "The broader market is more focused on ESG type issues, which has moved more towards where we were positioned a long time ago," Andy remarked, highlighting the growing acceptance and importance of sustainable investing.
**Medical Devices: A Preferred Investment**
When it comes to lower-risk, high-quality investments, medical devices stand out. Companies like Cochlear, ResMed, and Fisher & Paykel Healthcare are prime examples of successful investments in this sector. These businesses not only innovate continuously but also have consumable elements that ensure recurring revenue. "Medical devices are probably our preferred space to look, lower risk and high-quality business models," Andy stated, emphasizing the stability and growth potential of this sector.
**Conclusion**
Ethical investing is not just a trend; it's a thoughtful and impactful approach to finance. Australian Ethical, with its rigorous screening process and strategic focus on sectors like medical technology and renewable energy, sets a high standard in this field. Whether you're an investor looking to align your portfolio with your values or simply curious about the intricacies of ethical investing, this episode offers valuable insights.
Watch this video to hear more from Andy Gracey and explore the fascinating world of ethical investing with Australian Ethical.
