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factors are of growing importance, but the ter- minology and methods can be confusing. A jumble of terms is used, often interchangea- bly, even when they may only partly overlap or have slightly different meanings. A useful starting point is the way Responsi- ble Investment Association Australasia’s (RIAA) puts it: an investment process that “takes into account environmental, social, governance (ESG) or ethical considerations”. This raises an important point. While ethical investing comes under the umbrella term “re- sponsible investing”, not all responsible investing strategies will take ethical considerations into ac- count. Consider “ESG integration”, the most used tool among modern-day investment managers seeking to adopt a responsible approach. ESG recognises that non-traditional ESG fac- tors have financial relevance. But from an eth- ical standpoint, ESG is not enough. It is only concerned about the financial implications of factors such as pollution, carbon footprint or labour relations for companies – not whether they are right or wrong. An investment manager weighing up a possi- ble investment in energy giant BP would consid- er the company’s carbon footprint and possible effects of future carbon taxes on company prof- itability, but not whether their business activity is fundamentally good or bad for the world. It is possible for companies that operate in detri- mental industries to have top ESG ratings. An investment based on principles Ethical investment goes both further and deep- er than ESG analysis. Its strategy uses a range of tools, including ESG analysis, but also applies its own ethical filter on the investor’s princi-

be certain whether it is making a discernible dif- ference to lowering greenhouse gases, tackling poverty or increasing gender equality? The most cited barrier to progress is not a lack of measurement, but rather the failure to adopt a single, universal standard – which increases in- vestor trust and confidence. Currently different standards are used to measure impact, including the Global Reporting Initiative and the Impact Re- porting and Investment Standards. There is grow- ing demand for a universal approach to measur- ing impact, and the UN Sustainable Development Goals (SDGs) have emerged as the clear favourite for a measurement framework. The SDGs were officially launched in 2015 with the aim of creating a new global agenda for sustain- able development. The 17 goals were developed by governments, but government action alone won’t be enough to achieve them. The United Na- tions has estimated that meeting the 17 SDGs will require global investment of between $US5 trillion and $US7 trillion every year until 2030. UN SDGs in practice Acceptance of global SDGs provides a clear call to action for the private sector and a much need- ed framework for responsible investors. Some of the SDGs are easier to contribute to than others; sometimes it is easier to address an SDG through investment decisions; sometimes it is easier to incorporate the SDG in active ownership. Which- ever way, investors can contribute to solutions through them. Several funds joined together to establish an AI-driven SDG investment platform – the Sus- tainable Development Investments Asset Owner Platform. It uses the definitions and taxonomy defined by the asset owners and turns those rules

and methodology into classifications for 8,000 companies. Asset owners can integrate this data across all investment processes – quantitative and fundamental – and monitor, map and steer their portfolios. The Impact Management Project (IMP), a forum for building global consensus on how to measure and manage impacts, has also been a prominent advocate of utilising the SDGs. The IMP provides a framework to understand the impact perfor- mance of different enterprises and investments against the SDGs and, with a network of over 2,000 organisations globally, will be integral in es- tablishing standards for measurement, manage- ment and reporting. We expect and support further acceptance of the UN SDGs as a sustainability framework and an effective way of not only managing ESG risk in a portfolio but also driving growth in investing that benefits people and planet. Mathew Browning is the Executive Director, Chief Executive Officer at U Ethical. He is the former general manager of The Myer Fami- ly Company and has over 30 years’ executive experience in financial, property and profes- sional services in roles across Australia, Asia and the United Kingdom.

ples. This can get complicated because what is considered “ethical” can vary among investors and organisations. Ethical investment involves research and judgement as well as standards. It involves ask- ing questions, gathering facts and weighing up the potential ethical implications of investment decisions. How do you conduct a deeper assess- ment of an international supply chain that might, on the surface, meet ESG standards? Take Wool- worths Group, often screened out by responsi- ble investors due to its alcohol production and poker machine operations. Has the company’s decision to spin off these businesses made it el- igible for investment? What about a retailer that sells some tobacco products? Linking investment decisions to impact While ethical investing has gained in popular- ity, the hurdles of financial and non-financial impact have to date prevented more main- stream acceptance. Many studies have shown that investing ethically doesn’t mean sacrific- ing returns, but what about the non-financial impact? Can the societal benefit derived from investing in one security over another be quan- tified and measured? Ethical investing can be used as a tool to benefit humanity and the natural world, but how can we

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