Australian Islamic Super’s Investment Approach :

Our main objective is to maximise members’ investment returns whilst adhering to ethical principles.

To achieve this we abide by clearly defined socially responsible investment guidelines and we utilise a multi-style investment approach, well diversified across asset classes. We believe this allows us to take advantage of future gains, whilst offering a balanced, well-structured portfolio.

Ethical Principles

By integrating environmental, social and governance (ESG) consideration into investment decisions, we believe that investment risks can be better managed and investment opportunities better understood and captured. Our focus is always on providing strong, consistent performance, whilst also contributing to positive, sustainable change, across society and the environment.

Integrating ESG considerations into our investment approach has two benefits:

  • It serves to improve risk adjusted investment returns to members .
  • It works to advance the betterment of the community and environment.

Sharia Compliance

A double layered and highly disciplined Sharia compliance process (rule book) offers both an external and internal screening method. This is implemented via an Approved Product List that provides rigor and assurance to our ethical mandate.

In implementing our approach, Australian Islamic Super will attempt to seek out companies that are:

Environmentally Responsible

Australian Islamic Super will look to invest in environmentally friendly companies and assess their environmental management and performance. This criterion is about assessing a company’s efforts to reduce and avoid environmental pollution.

Socially Responsible

Australian Islamic Super will invest along socially responsible criteria in which both internal (employee relations and labour practices) and external (stakeholder and community relations) aspects are assessed. Social criteria are based on worldwide minimum standards and best practices and also take into account the manner in which companies deal with human rights issues internally, in their supply chain and in the communities in which they operate. We consider communities in both a local, and global sense.

Governance/Economically Responsible

Australian Islamic Super will review companies for transparency, assessing their financial robustness, clear strategic guidance and good governance. Companies will be monitored as to how they adapt to changing market demands, sustainability trends and macroeconomic driving forces. These criteria measure a company’s ability to make use of the economic benefits of sustainability and good management.

These factors are a very important and often overlooked in term of investment performance.

Below is a practical example of how our ethical philosophy effects our investment decisions.

Examples of the environmental, social and governance (ESG) factors we consider at a company level are:

Environmental

  • Pollution
  • Waste management
  • Renewable resources

Social

  • Health and safety
  • Human rights standards
  • Exploitive financial practices

Governance

  • Reporting / Disclosure policies
  • Board structure
  • Remuneration

Our Ethical Investment Approach

Australian Islamic Super adopts both positive and negative screening in our ethical investment approach.

Positive screening

As a more proactive approach, positive screening is being employed by a growing number of investors.

Here, the investor methodically supports companies that set positive examples of environmentally friendly products or production methods and socially responsible business practices. Positive screens require an analysis of complex issues such as pollution, workplace practices, diversity, and product safety.

Many companies are embarking on products that may contribute to the world’s future economic and environmental sustainability. Alternative forms of energy that produce less pollution, such as solar power, wind power, and hydrogen fuel cells, constitute a rapidly growing and potentially profitable area for many investors. Natural food and healthy living products, fiber products that conserve forests, environmental clean-up and recycling, are all areas that can benefit the sustainable future, and are fertile ground for positively screened investments.

Australian Islamic Super’s innovative investment process rewards investments that:

Support the community (local and global)

  • Encourage locally based business
  • Focus on education
  • Advance health and prosperity
  • Work to overcome poverty

Support innovation and advancement

  • Life sciences research and development
  • Green or renewable technologies
  • Efficient and sustainable technologies

Support the environment

  • Contribute to preserving eco-systems
  • Minimise pollution and waste
  • Energy efficient and building practices
  • Recycling

Negative screening

Negative screening is the simplest method used by socially responsible investors. Some mutual funds have been screening companies that participate in the production of alcohol, tobacco, or gambling products, known collectively as the “sin” screens, for over 60 years. Tobacco products are now so publicly reviled that tobacco screens are being used by nearly 200 mutual funds. Other popular negative screens include military weapons production, firearms, and nuclear power.

Negative screening has an appropriate place in the quiver of tactics used by socially responsible investors, to be complemented by positive screening and shareholder activism, and will remain the most palatable starting point for many.

We will avoid investing in businesses that:

Damage the environment

  • Destruction or waste of resources
  • Environmental degradation
  • Pollution and non-renewable energy

Lead to harm or suffering

  • Activities that harm humans or animals
  • Sell products that may lead to addiction
  • Involved in military or defense related fields
  • Exploitive or predatory financial practice

Treat people unfairly

  • Exploitation through low wages
  • Provision of poor working conditions
  • Discrimination
  • Misleading or deceitful marketing
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