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James BairdMember of the Ethical Adviser's Co-Op, Adviser at JustInvest
James Baird is a director of JustInvest Financial Planning Pty Ltd, a financial planning group that specialises in giving advice to ethical investors. JustInvest is a family business, established in 1967, with two offices - Perth and Dunsborough. JustInvest's core belief is that investors don't have to compromise their ethics when investing, and that all Australians should be able to invest in line with their values. James has been in the Financial Planning industry since 2000. Having completed a Bachelor of Commerce (UWA), MBA (UWA GSM) and Foundation Diploma of Financial Services (Deakin), He is also accredited as a Certified Financial Adviser with Responsible Investment Association Australasia (RIAA). |
What is divestment?
"Divestment is the opposite of investment - it simply means selling unwanted investments from your financial portfolio. it’s a term often used when describing an investor’s action to sell a stock they find unethical or morally ambiguous.
Numerous divestment campaigns are currently taking place around the globe, many regarding investments in fossil fuels (whether direct or indirect operations). When looking at recent divestment of fossil fuels by a wide range of investors, there are often a number of reasons cited for the decision – and it’s not just the impact of divestment campaigns and investor activism.
However, divestment isn't just about fossil fuels. It is relevant to a variety of social, cultural and economic issues. In recent times, a number of super funds divested from Broadspectrum Ltd (previously known as Transfield Services), the company that operates the federal government’s detention centres on Manus Island and Nauru. The funds cited evidence of human rights violations inside the offshore detention centres run by the company. The decisions suggested that the risks associated with the company were too high.
In addition to ethical considerations, there's research that suggests fossil fuels may not be a good long term investment. Mercer is one Asset Consultant that has warned investors against portfolios based on fossil fuel investments, and recommends that portfolio managers factor climate change impacts into risk modelling - a seismic shift in investment behaviour for many. Other concerns include the issue of risk, for example regulatory risk around climate change. Also, the idea of the decreasing value of ‘stranded assets’ as well as competition from innovation in renewable energy are often cited.
The groundswell of divestment has been huge, and from a wide range of investors - including superannuation & investment funds, sovereign funds, universities & city councils. In October 2016, the Sydney City Council announced that it will divest (see: http://gofossilfree.org/how-we-got-australias-biggest-city-to-divest).
In 2015, the Church of England confirmed their divestment from tar sands oil and thermal coal, a decision applying to their £6 billion portfolio. This isn’t a new concept - for generations, religious investors whose traditions embrace peace and nonviolence have avoided investing in enterprises that profit from products designed to harm fellow human beings or the environment. In the mid-1700s, the founder of Methodism, John Wesley, gave a sermon titled "The Use of Money", which outlined his basic tenets of social investing (for example, not to harm your neighbor through your business practices). Some of the most well known applications of ethical investing were religiously motivated, with investors often avoiding companies involved in production of alcohol, tobacco, pornography and armaments.
However, divestment is only half the story! When investing according to their ethics, our clients are now looking beyond the negatives, and focusing on the positives, ie exploring sectors for reinvestment. Those investors want to understand how the long term out performance has been achieved in ethical portfolios. To quote Joe Keefe, President and CEO of Pax World Management:
"The premise underlying sustainable investing is elegant in its simplicity: companies that do a better job of integrating environmental, social and governance (ESG) standards into their business models are better positioned than their less-enlightened competitors to provide investment performance over the long term."
Numerous divestment campaigns are currently taking place around the globe, many regarding investments in fossil fuels (whether direct or indirect operations). When looking at recent divestment of fossil fuels by a wide range of investors, there are often a number of reasons cited for the decision – and it’s not just the impact of divestment campaigns and investor activism.
However, divestment isn't just about fossil fuels. It is relevant to a variety of social, cultural and economic issues. In recent times, a number of super funds divested from Broadspectrum Ltd (previously known as Transfield Services), the company that operates the federal government’s detention centres on Manus Island and Nauru. The funds cited evidence of human rights violations inside the offshore detention centres run by the company. The decisions suggested that the risks associated with the company were too high.
In addition to ethical considerations, there's research that suggests fossil fuels may not be a good long term investment. Mercer is one Asset Consultant that has warned investors against portfolios based on fossil fuel investments, and recommends that portfolio managers factor climate change impacts into risk modelling - a seismic shift in investment behaviour for many. Other concerns include the issue of risk, for example regulatory risk around climate change. Also, the idea of the decreasing value of ‘stranded assets’ as well as competition from innovation in renewable energy are often cited.
The groundswell of divestment has been huge, and from a wide range of investors - including superannuation & investment funds, sovereign funds, universities & city councils. In October 2016, the Sydney City Council announced that it will divest (see: http://gofossilfree.org/how-we-got-australias-biggest-city-to-divest).
In 2015, the Church of England confirmed their divestment from tar sands oil and thermal coal, a decision applying to their £6 billion portfolio. This isn’t a new concept - for generations, religious investors whose traditions embrace peace and nonviolence have avoided investing in enterprises that profit from products designed to harm fellow human beings or the environment. In the mid-1700s, the founder of Methodism, John Wesley, gave a sermon titled "The Use of Money", which outlined his basic tenets of social investing (for example, not to harm your neighbor through your business practices). Some of the most well known applications of ethical investing were religiously motivated, with investors often avoiding companies involved in production of alcohol, tobacco, pornography and armaments.
However, divestment is only half the story! When investing according to their ethics, our clients are now looking beyond the negatives, and focusing on the positives, ie exploring sectors for reinvestment. Those investors want to understand how the long term out performance has been achieved in ethical portfolios. To quote Joe Keefe, President and CEO of Pax World Management:
"The premise underlying sustainable investing is elegant in its simplicity: companies that do a better job of integrating environmental, social and governance (ESG) standards into their business models are better positioned than their less-enlightened competitors to provide investment performance over the long term."