"Investment shapes the world": Q&A with Australian Ethical's Stuart Palmer

Stuart Palmer has always been interested in ethics, and the highlight of his career was discovering he could make a career out of it. Following 25 years in law and banking, he was appointed as Australian Ethical's head of ethics in 2014 and hasn't looked back. We catch up with Stuart to find out more - including his thoughts on the future of ethical investing, how the firm is engaging HNW investors, and the role of super funds in addressing climate change.

STUART PALMER

Stuart Palmer has always been interested in ethics, and the highlight of his career was discovering he could make a career out of it. Following 25 years in law and banking, he was appointed as Australian Ethical's head of ethics in 2014 and hasn't looked back. We catch up with Stuart to find out more - including his thoughts on the future of ethical investing, how the firm is engaging HNW investors, and the role of super funds in addressing climate change.

What initially drew you towards this line of work?

I've always been attracted to the idea that philosophy and ethics can help you find out what's true about life and the world, and how that knowledge can be used to make a difference. It took me a while (25 years of law and banking) to find a job doing that.

You recently outlined some reasons for increased public interest in ethical investments (rise of the conscious consumer, political frustrations and millennial engagement.) How do you maintain interest in ethical investments for the long term?

We work hard to tell our clients not only how their investments are performing financially, but also about the positive impact of the companies they invest in. We do that with active social media and website blogs, as well as our regular reporting and Good Money magazine. Our members are highly engaged with what their super is doing.

You've said that relying on a purely ESG integration process, without considering other ethical measures, was "ethically passive". What other measures need to be considered to align with an ESG strategy in order to effect positive change?

Investment shapes the world as well as reacting to it. We need capital to shift from fossil fuels to renewables; from companies which ignore human rights to companies which look after their customers, employees and communities. Through advocacy with companies and government, ethical investors also encourage more responsible business practices.

How is Australian Ethical engaging high end investors in its cause?

We not only support financial planners, who have high net worth (HNW) clients, but we also engage directly with HNW clients to address their unique needs. However, the combination of positive impact investment aligned with strong investment performance is a powerful proposition for all types of investors. Australian Ethical's super fund offering and, where relevant, our direct and wholesale managed funds, are attractive to all investors including, SMSFs, charities, and associations.

Do you think we need regulations in place to monitor corporate green wash and the use of ethical buzzwords? For example, you mentioned some of the green bonds issued by the Big Four banks which don't actually fund any renewable lending.

The key is improving measurement and reporting of both positive and negative impacts of all green investments. This encourages business innovation to create more impactful green investments, and helps investors who want to make a real difference to find the most impactful way for them to invest.

What predictions do you hold for the ethical investment space over the next 5-10 years?

Continuing rapid growth will see ethical investment become mainstream. Investors will expect the same transparency and rigour about business sustainability that they demand for short term financial performance

You've said that super funds have a really important role to play as they invest in the long term. What should be on the top of the list of priorities for Australian boards at this point in time?

Boards already understand that they need to plan for climate. The challenge now is ensuring that they have the skills at the board and executive level to understand climate risk and implement a strategy aligned with a world which limits warming to well below 2 degrees. Company culture and practices which genuinely consider the customer's long term interests should also be on the priority list.

With the success of the recent social benefit bonds in Australia, why do you think we're not seeing more?

Social benefit bonds are relatively new, and it can be hard work to fit the government, not-for-profit and private capital pieces of a social bond puzzle together. But that is becoming easier as the market grows, and we are now seeing more social benefit bonds across Australia. This year there are bonds supporting mental health outcomes, reducing recidivism of parolees and expansion of an already successful bond program helping to reunite kids with their families.

...and where do you see potential for more social benefit bonds in Australian society?

There are opportunities for innovation and private capital investment across many areas of social and environmental need. Social and affordable housing has a lot of potential.

What has been a highlight of your career so far?

Finding there's a career in ethics.

What has been the best piece of advice you have received?

Once you've read the book, get off the couch.

Is there a particular charity or cause that you support?

I've volunteered with Lifeline and worked with the Ethics Centre. They both do great work.