Ausbil Active Sustainable Equity Fund ‘recommended’ by Lonsec

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Research house Lonsec has given a ‘recommended’ rating for the Ausbil Active Sustainable Equity Fund.

The rating indicates that Lonsec believes the fund has substantial potential to outperform over the medium to long term and that management is of a high calibre.

Lonsec stated it considered the fund to be suitable for inclusion on most approved product lists (APLs).

Paul Xiradis, Executive Chairman, Chief Investment Officer and Head of Equities at Ausbil Investment Management, said: “We believe ESG performance is a lead indicator of operational performance, and the way companies deal with these types of issues is also a good proxy for management and earnings quality, and future growth.”

“Furthermore, we believe the ESG integration in our investment process, and our strong active company engagement on ESG issues, helps improve these businesses, and reduces our investment risks.

“We’re prepared to back our ESG view through active allocation of capital and in actively exercising our voting rights when needed.”

The Lonsec report said that the Ausbil Active Sustainable Equity Fund investment philosophy had a true to label ‘active ownership’ approach that engenders a substantial degree of ESG integration and that Ausbil’s dedicated internal ESG research team provided considerable depth and consistency.

Ausbil is a leader in ESG, with a dedicated in-house research department, which it believes makes a difference to capturing investment returns.

Måns Carlsson-Sweeny, Head of ESG Research at Ausbil, said that while the market was saturated with discussion about ESG issues, many investors were missing a crucial point about this increasingly important aspect of investing.

“Investors whose sole focus is on identifying the ESG leaders of each industry are likely to develop a portfolio of expensive stocks and miss the potential for growth that comes with the early identification of improving ESG momentum,” said Mr Carlsson-Sweeny.

He said investing in companies with positive momentum in their ESG performance could also help to capture alpha through rising valuations as the market recognised improved performance. Likewise, this principle could apply in reverse if a company began to slip in their ESG performance. ESG issues and companies are dynamic, and experience and complete focus was essential to actively keep ahead of the curve in this area.

“Investors are also increasingly recognising that among similar companies, one with a good ESG profile should be valued with higher earnings multiples and trade above that of a similar company with a poor ESG profile,” said Mr Carlsson-Sweeny.

He added that ESG integration in Ausbil’s investment analysis and decision making was about making better informed investment choices for superior risk- adjusted returns. Investors looking at ESG factors were also looking at more variables than just earnings and valuations. “Companies that do better in terms of ESG tend to do better in terms of risk-adjusted investment returns – it is that simple,” he said.

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