We seek to invest in companies which can have a net positive alignment with one or more of the 17 United Nations Sustainable Development Goals (SDGs), exceed Alphinity’s minimum ESG criteria, and which are also identified as undervalued and within an earnings upgrade cycle. This includes activities such as:

• Combating poverty through enhancing food security, improved nutrition and sustainable agriculture
• Promoting healthier lives and well-being for all people of all ages
• Providing quality education which is inclusive and equitable
• Promoting gender equality and diversity
• Promoting sustainable cities and the development of sustainable human settlements
• Promoting sustained, inclusive and sustainable economic growth, full and decent employment
• Building resilient infrastructure, promoting inclusive and sustainable industrialisation
• Promoting sustainable consumption and production patterns
• Combatting climate change and its impacts
• Promoting affordable, reliable and sustainable energy production
• Conserving biodiversity, forests, rivers and the oceans in a sustainable manner
• Providing sustainable management of water and sanitation

A company’s alignment with the SDGs is assessed using an in-house assessment methodology. This methodology aligns the positive and negative contributions that the company’s products and services makes towards the SDGs to arrive at a net score.

• Fossil fuels (including extraction, production and electricity production from energy coming from fossil fuels), such as Thermal Coal, Natural Gas and Oil, unless the company has a clear and credible commitment to divest from the use of fossil fuels within a reasonable timeframe. This divestment commitment should also be supported by clear emissions reduction targets and commitments which are compatible with the Paris Agreement (i.e. net zero by 2050);
• High-impact fossil fuels such as Coal Seam Gas, Oil Sands and those drilling in Arctic regions, regardless of any emissions commitments they might make;
• Production of controversial fuels such as Uranium;
• Gold mining, where Gold is the primary purpose of the mine;
• Factory farming, animals in entertainment, live exports and animal testing for cosmetic products, as well as other activities which are associated with animal welfare concerns. For healthcare, we tolerate testing only where necessary, that is where the benefits to humans are significant and procedures meet internationally recognised standards. We also require policies related to animal testing are in place;
• Predatory lending and hostile debt collection;
• Addictions such as Tobacco, Alcohol and Gambling;
• Armaments manufacturers;
• Old growth forest logging and non-RSPO palm oil; and
• Pornography.

We also avoid companies which display poor practices in their management of environmental, social and governance issues, and are involved in significant controversies which are not being adequately managed. This is assessed using our in-house ESG assessment methodology and process.

Companies must be approved by the Sustainable Compliance Committee to be included in the Fund. The role of the committee is to provide oversight and governance of the investable universe for the Fund and to help ensure compliance with the Fund Charter. When faced with a ‘grey’ area, the Sustainable Compliance Committee will assess the matter on its merits and determine whether we can support the company’s activities.

Companies which meet our stringent conditions are then assessed against Alphinity’s investment philosophy & process to ensure they are quality, undervalued companies in or entering an earnings upgrade cycle, and therefore candidates for our portfolio.