Sustainable investing is rapidly gaining traction in Australia as more investors seek to align their financial goals with their values and contribute to a better future.
This approach considers environmental, social, and governance (ESG) factors alongside traditional financial metrics when evaluating investment opportunities.
By investing in companies and funds that prioritise sustainability, Australian investors can drive positive change while potentially achieving competitive returns.
With the growing demand for ethical and responsible investments, sustainable investing offers a way to make a meaningful impact while building a diversified portfolio.
At Medici Invest, we provide access to a sophisticated sustainability-focused investment portfolio, typically reserved for full-service clients.
In this comprehensive guide, we’ll explore how to invest in sustainable companies in Australia by evaluating sustainable investment opportunities to find the right companies for your goals and values.
We’ll also discuss our Green Horizons portfolio as well as 6 Australian companies that we believe are at the forefront of the sustainability movement.
How to Invest in Sustainable Companies
To get started:
- Step 1: Click this get started link
- Step 2: Create an OpenWealth account
- Step 3: Go to our products tab and select the Green Horizons portfolio
- Step 4: Enter the amount of money you’d like to invest
- Step 5: Choose your account type
- Step 6: Answer the onboarding questions – it should take less than 5 minutes
- Step 7: Transfer your funds through BPAY or via direct bank transfer
- Step 8: You’re good to go! Monitor your sustainable investment portfolio through the app or online portal
It’s that simple!
Evaluating Sustainable Investment Opportunities
Understanding Sustainable Investing vs Ethical Investing
For first-time investors looking to invest in sustainable companies, we recommend that you take the time to clearly define your personal values, ethical principles, and investment goals before deciding on an individual company, ETF or portfolio to invest in.
Establishing your priorities will help guide your investment decisions and ensure alignment with your beliefs.
For example, while sustainable investing and ethical investing are often used interchangeably, there are some key differences between the two approaches:
Sustainable Investing
Sustainable investing takes a broader approach by considering environmental, social, and governance (ESG) factors alongside traditional financial analysis.
The focus is on identifying companies and investments that are well-positioned for long-term success by effectively managing ESG risks and opportunities.
Some key aspects of sustainable investing:
- Uses positive and negative screening to evaluate companies based on ESG criteria
- Aims to generate competitive financial returns while driving positive environmental and social impact
- Emphasises long-term sustainability and the transition to a low-carbon economy
- Employs strategies like ESG integration, thematic investing, and impact investing
Ethical Investing
Ethical investing, also known as socially responsible investing (SRI), is primarily values-based. The goal is to align investments with an investor’s ethical principles, moral values, or religious beliefs.
Key points about ethical investing:
- Focuses on excluding companies or sectors that are deemed unethical or controversial (e.g., tobacco, weapons, gambling)
- Uses negative screening to avoid investments that conflict with the investor’s values
- Can be highly subjective, as ethical standards vary from investor to investor
- May prioritise avoiding harm over driving positive change
While there is some overlap, the main distinction is that sustainable investing takes a more comprehensive approach by evaluating ESG factors, while ethical investing is primarily guided by an investor’s personal values and ethical exclusions.
However, many investors employ a combination of both strategies, using ESG analysis to identify sustainable investment opportunities while also applying ethical screens to avoid misalignment with their core values and beliefs.
Ultimately, this decision is subjective to your personal values, ethical principles, and investment goals and taking the time to self-evaluate will help immensely when evaluating new companies, ETFs or portfolios.
Analysing ESG Ratings and Reports
As sustainable investing continues to gain traction, numerous organisations such as MSCI and Sustainalytics have emerged to provide independent assessments and ratings of companies’ environmental, social, and governance (ESG) performance.
While the specific methodologies and criteria may vary across providers, ESG ratings generally assess a company’s performance across a range of factors, such as:
- Environmental: Carbon emissions, energy efficiency, waste management, resource depletion, and environmental policies.
- Social: Labor practices, human rights, product safety, community relations, and employee engagement.
- Governance: Board composition, executive compensation, shareholder rights, business ethics, and anti-corruption measures.
These ESG ratings and reports can be valuable tools for investors seeking to evaluate potential investments through a sustainability lens.
Beyond the numerical ratings, ESG reports often provide valuable qualitative insights into a company’s sustainability practices, risks, and opportunities.
These reports can highlight areas of strength or concern, as well as identify potential controversies or incidents that may impact a company’s ESG performance.
You can use these ratings to compare which companies are meeting key metrics and which ones are falling short.
Researching Companies’ Sustainability Practices and Policies
While ESG ratings can provide a helpful overview, investors should dig deeper to gain a comprehensive understanding of a company’s sustainability approach and performance.
Here are some key areas to investigate when researching a company’s sustainability practices:
Sustainability Reports
Most large public companies publish their own annual sustainability or ESG reports detailing their policies, initiatives, goals, and performance metrics related to environmental, social, and governance issues.
These reports can offer valuable insights into a company’s sustainability strategy, commitments, and progress over time.
Compare these findings with whichever 3rd party ESG organisation you used to research in the last step to find potential inconsistencies.
Corporate Policies and Codes of Conduct
Review a company’s publicly available policies and codes related to areas like environmental management, human rights, labour practices, ethics, and corporate governance.
These documents outline the principles and standards the company aims to uphold.
Regulatory Filings and Disclosures
Public companies are required to disclose certain ESG-related information in their annual reports, proxy statements, and other regulatory filings.
These can reveal details about a company’s governance structure, executive compensation, environmental compliance, and potential risks or controversies.
Industry Initiatives and Certifications
Investigate whether a company participates in relevant industry initiatives or has obtained certifications related to sustainability, such as the UN Global Compact, Science Based Targets initiative, or ISO 14001 for environmental management systems.
Media and NGO Reports
Monitor news coverage, NGO reports, and other external sources for information about a company’s sustainability performance, controversies, or areas of concern.
This can provide a more balanced perspective beyond the company’s self-reported data.
By thoroughly researching a company’s sustainability practices and policies from multiple credible sources, you can make more informed decisions about whether a particular investment aligns with your values, risk tolerance, and long-term sustainability goals.
Why Sustainable Investment Funds and Portfolios can be the better choice
While some investors may choose to build their own sustainable investment portfolios by individually researching and selecting companies, investing through professionally managed sustainable funds or pre-built portfolios can offer several advantages including:
- Diversification to mitigate risk and volatility, which is particularly important when investing in emerging sustainable industries or technologies.
- Dedicated teams that conduct in-depth research and analysis to identify companies with strong ESG practices and promising sustainable business models.
- Access to a wider range of asset classes that may be difficult for individual investors to access directly.
- Ability to sustainably invest without the need for extensive individual research and monitoring.
At Medici Invest, our Green Horizon portfolio has a dedicated committee team that carefully combines in-depth research, forward-thinking analysis, and continual risk mitigation.
We actively monitor new sustainable trends, technologies, and industry developments to ensure the Green Horizons Portfolio’s asset allocation remains well-positioned based on evolving market conditions.
Please note: Green Horizon isn’t an ESG portfolio. We invest in industries and organisations that are at the forefront of the transition to renewable energy and best positioned to benefit from this industrial evolution.
6 Companies From Down Under We’re Invested In
As part of our commitment to sustainable investing, we’ve carefully selected a diverse range of Australian companies that are driving innovation and progress towards a cleaner, more sustainable future.
Here are six companies in our Green Horizons portfolio that we view as leaders in adopting and innovating sustainable change while still offering attractive investment opportunities:
Boss Energy Ltd. (ASX: BOE)
Boss Energy Ltd. (ASX: BOE) is an Australian uranium exploration and development company focused on the Honeymoon Project in South Australia.
With a commitment to sustainable mining practices, minimising environmental impact, and engaging local communities, Boss Energy provides exposure to uranium – a low-carbon baseload energy source.
Their share price has grown 96.73% in the past year (as of April 16, 2024), and as nuclear power plays a role in the energy transition, Boss Energy is well-positioned to benefit from growing demand while adhering to strict ESG standards.
Lynas Rare Earths Ltd (ASX: LYC)
Lynas Rare Earths Ltd (ASX: LYC) is the only major producer of refined rare earth materials outside China.
These critical minerals are essential for renewable technologies like electric vehicles and wind turbines.
Lynas has implemented industry-leading environmental standards and aims to establish a sustainable rare earths supply chain.
With rising demand for clean energy solutions, Lynas offers exposure to a key enabling resource while prioritising responsible operations and environmental stewardship.
Santos Ltd (ASX: STO)
While a traditional fossil fuel company, Santos is taking significant strides towards cleaner energy and sustainability.
The company has committed to achieving net-zero emissions by 2040 and is investing heavily in carbon capture and storage (CCS) technologies.
Santos is also pursuing growth in cleaner fuels like hydrogen and has set ambitious targets for reducing operational emissions.
Meridian Energy Ltd (ASX: MEZ)
Meridian Energy is New Zealand’s largest renewable energy generator, with a portfolio focused on wind farms and hydroelectric power stations.
With its exclusive focus on renewable generation assets, Meridian Energy offers investors pure-play exposure to the global transition towards clean energy sources.
The company has an unwavering commitment to sustainability and renewable energy and 100% of its electricity generation is through renewable sources.
The company has experienced 33.67% growth over the past 5 years (as of April 16, 2024) and has been included in our portfolio due to its strong financial performance backed by long-term renewable energy contracts.
Genex Power Ltd (ASX: GNX)
Genex Power (ASX: GNX) is an Australian renewable energy company developing a portfolio of pumped hydro, solar and wind projects.
Its flagship Kidston Clean Energy Hub integrates large-scale solar with pumped hydro storage, supporting grid stability.
Genex is pioneering pumped hydro technology and offers exposure to critical energy storage solutions needed for transitioning to higher renewable penetration.
With an experienced team and strong project pipeline including a revenue deal with Tesla for its Bouldercombe big battery in Queensland, Genex provides sustainable investors access to innovative clean energy assets.
This company has seen a 66.88% increase in share price in the last 12 months (as of April 16, 2024).
Origin Energy Limited (ASX: ORG)
Origin Energy is one of Australia’s leading integrated energy companies, with operations spanning electricity generation, natural gas production, energy retailing, and renewable energy development.
While Origin has a significant fossil fuel portfolio, the company is taking meaningful steps towards sustainability and the energy transition.
The company has invested heavily in growing its renewable energy portfolio, including large-scale wind, solar, and battery storage projects.
They’ve also invested heavily in Octopus Energy to establish a leading global renewable energy retailer and are developing the Hunter Valley Hydrogen Hub to produce green hydrogen using renewable energy.
For investors seeking exposure to the energy transition within a diversified sustainable portfolio, Origin Energy offers a mix of traditional energy assets providing funding sources, combined with an increasing focus on renewables and low-carbon solutions for the future.
The company has also seen a share price growth of 28.54% over the past five years (as of April 16, 2024).
How to Invest in Sustainable Companies
While researching and selecting individual sustainable stocks can be time-consuming, Medici Invest provides an accessible solution through our Green Horizons portfolio.
Unlike our other portfolios, Green Horizons focuses on industries and organisations that are at the forefront of the transition to renewable energy and best positioned to benefit from this industrial evolution – a fusion of financial wisdom and environmental consciousness.
To get started:
Step 1: Click this get started link
Step 2: Create an OpenWealth account
Step 3: Go to our products tab and select the Green Horizons portfolio
Step 4: Enter the amount of money you’d like to invest
Step 5: Choose your account type
Step 6: Answer the onboarding questions – it should take less than 5 minutes
Step 7: Transfer your funds through BPAY or via direct bank transfer
Step 8: You’re good to go! Monitor your sustainable investment portfolio through the app or online portal
It’s that simple!
By investing in Green Horizons, you’ll gain exposure to a diversified portfolio of companies at the forefront of the sustainability revolution without the hassle of individual stock picking.
Our team of experts continually monitors emerging trends, technologies, and industry developments to ensure your portfolio remains optimally balanced and positioned for success.
Ready to invest in sustainability?
Ready to align your investments with your values and contribute to a more sustainable future?
Explore our Green Horizons portfolio and let our team of experts guide you towards responsible investing opportunities.
If you’re ready to invest, click this get started link, create an OpenWealth account and answer the onboarding questions.
If you’d like to speak directly with the Medici Invest team, give us a call on (03) 9637 1608 or contact us online to learn more about how this portfolio is a must-have as a part of your overall investment strategy!
