Melior sees bigger role for corporates to improve social and environmental outcomes

Australian public companies are increasingly embracing the need to play a more active role in ensuring a sustainable future for all, according to a report issued by impact investor Melior Investment Management.

Melior’s inaugural Australian Impact Report highlights a growing recognition among corporates that improved performance on sustainability through positive impact is not only good for the planet but good for business.

“There’s probably never been a more important time for public companies to step up and help contribute to solutions that support positive environmental and social outcomes,” Melior chief executive Lucy Steed said.

“We are definitely seeing, from the discussions we are having with companies, greater acceptance that social and environmental considerations need to be paramount in their decision making.

“Not only are investors demanding more positive action, there is a sense from many companies now that they should deploy their capital in a manner that helps meet the challenges we face as a society.”

The report highlights the work of Wesfarmers on gender inequality, noting the company has targets in place for female executives and board members and a gender pay gap target of +/‐5%.

“Our analysis of ASX300 companies has found that there is a significant lack of disclosure around gender pay gap data and pay equality targets and Wesfarmers demonstrates strong leadership in this area,” it says.

Property group Dexus is applauded for its positive impact regarding sustainable infrastructure and green buildings and New Zealand energy groups Meridian and Mercury for their work on reducing inequalities.

Melior’s engagement with corporates during the year, however, identified some glaring inadequacies, such as a poor level of basic data reporting on workforce inequalities and lack of disclosure of Greenhouse Gas Emissions by nearly two thirds of ASX300 companies.

Melior was launched in 2019 by Ms Steed and chief Investment officer Tim King after the duo identified a gap in the market for an investment product that delivered positive social and environmental impact as well as competitive returns.

Backed by Adamantem Capital founders, Rob Koczkar and Anthony Kerwick,  Melior invests in Australian and New Zealand companies that deliver outcomes aligned with the UN Sustainable Development Goals (SDGs).

In its first year, the Melior Australian Impact Fund outperformed the benchmark ASX300 by 9.4 per cent with an absolute return of 1.8 per cent and was ranked by Rainmaker in the top 10 Australian large cap equities managers.

Melior’s performance has since strengthened, with figures for the year to August showing the fund outperforming the index by 11.2% with an absolute return of 6.4%.

“These figures prove that investing for impact does not come at the expense of financial performance,” Ms Steed said. “In fact, we are increasingly seeing evidence that there is a strong alignment between outperformance and socially and environmentally responsible investment practices.”

Last week Melior was named by the Responsible Investment Association of Australasia as one of 29 funds (out of 165 assessed) recognised as practicing a leading approach to responsible investing.

Melior differs from other responsible investment funds in that it does all of its research inhouse. Companies must pass a four‐step process for portfolio selection to be considered for the fund. As part of this process, Melior has developed several proprietary tools, including a carbon calculator that allows it to estimate the carbon emissions of ASX300 companies.

In its first year, Melior conducted 67 advocacy meetings with a range of companies including Brambles, BlueScope, Sims, Telstra, A2 Milk, Wesfarmers and Meridian.

The Impact Report details three key themes aligned to the SDGs pursued by Melior through its engagement with corporates during the year ‐ gender equality, reduced inequalities and climate action.

“Gender equality and broader inequalities such as modern slavery, inadequate workplace safety and lack of indigenous reconciliation are key societal issues which we believe Corporate Australia has a critical role to play in addressing,” the report says.

“We also estimate that the Scope 1 greenhouse gas emissions of the ASX300 are equivalent to approximately one third of Australia’s national emissions, highlighting the critical role that ASX companies have in driving forward emissions reduction and therefore climate action.”

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