Our approach to ESG

We recognise the important role that investment managers can play in promoting responsible investment practices. We are cognisant that large investors have a responsibility beyond managing the financial value of their own investment, and have an obligation to try to positively influence the way business is conducted, for the greater good.

We believe that by investing in our ethical products, investors entrust us with the job of managing their capital in a way that aligns with their values. This means that our funds invest in companies (or exclude companies) in accordance with clear ethically focused rules and guidelines.

We can also make an impact by ensuring our underlying portfolios participate in proxy voting and engaging with companies, for the long-term benefit of our investors.

Our Australian business, Betashares Capital Limited, maintains a Responsible Investment Committee (RIC) for the two ethical ETFs through which the Betashares ethical NZ funds gain their exposure.

The purpose of the RIC is to:

• provide Betashares with general input and advice in relation to responsible investment policies and investments
• provide expert assessment of whether the companies in the portfolio satisfy the negative and positive screens incorporated into the indices that these ETFs aim to track
• provide oversite of proxy voting and engagement activities for these ethical ETFs.

The policy of each fund is to vote on all resolutions in a way that is consistent with the values embodied in the index rules for the fund.

Engagement refers to how we seek information from companies about their business practices, and how we communicate our views and expectations.

If an issue arises in relation to a portfolio holding where the RIC believes there is a potential conflict with the fund’s values, or where the RIC believes a company could improve its ESG performance, delegates from the RIC will engage with the company to try to understand the situation in more detail and, if necessary, advocate for improvement.

If an investee fails to engage, or fails to commit to improvement, the RIC will consider additional actions, with the final point of escalation being potential removal of the holding from the relevant fund. The approach depends on factors including the company’s track record, how proactive it is in response to the issue, and how willing it is to engage with us.

We understand that one of the biggest concerns for investors in ESG funds is the issue of ‘greenwashing’ – the misrepresentation of the extent to which a fund is environmentally friendly, sustainable or ethical. Betashares’ focus is to ensure that our funds are transparent and rules-based in terms of security selection and the application of ESG factors.

On the relevant fund page, you can find the screening process and exposure limit guidelines the fund applies.

For the two ethical ETFs through which the Betashares ethical NZ funds gain their exposure, we disclose impact metrics and alignment to the UN Sustainable Development Goals compared to the relevant benchmarks as part of our reporting.

On annual rebalance of our ethical equity funds, we publish a detailed summary of the results of the rebalance, including the reasons for exclusions and inclusions directly linked to the index screening methodologies.