Annual Report 2024
Contents
Welcome to the Australian Ethical Investment Limited
(Australian Ethical) Annual Report for 2024.
About the report
We have included the performance for Australian
Ethical and its wholly owned subsidiaries: Australian
Ethical Superannuation Pty Ltd (‘Australian Ethical
Super’) and Australian Ethical Foundation Limited
(‘The Foundation’), for the period 1 July 2023 to 30
June 2024 (‘FY24’) in this report.
Our purpose is investing for a better world. This
means that as well as striving to deliver great
investment outcomes for our customers, we must
also understand, measure and mitigate our impacts
on people, on animals and on the world around us.
Our annual and sustainability reporting along with
our FY24 Databook and 2024 Stewardship Report
will together meet the requirements of the Global
Reporting Initiative’s (GRI) Sustainability Reporting
Standards and continue our long history of providing
best practice reporting on how we make money
matter.
We have continually evolved our reporting to reflect
developing global standards. In 2017 we mapped
the alignment of our listed share investments to the
United Nation’s Sustainable Development Goals.
In 2018 we released our first annual Task force on
Climate-Related Financial Disclosures Report (TCFD)
and in 2020 we added a statement to address our
approach to Modern Slavery concerns. Since 2002
we have used the GRI reporting framework to help
us track and report our impacts. This year we are
combining our annual and sustainability reports into
one document as we move towards an integrated
reporting approach.
KPMG has audited the financial statements within
our Annual Report and provided limited assurance
over a selection of data points. Data points that are
covered by the limited assurance are identified in the
document. KPMG's assurance opinion is available on
pages 178 to 179.
We welcome your feedback on our reports.
Please contact Karen Hughes, Chief Risk Officer
& Company Secretary, Australian Ethical Investment
Limited on 0406 753 535 or at
khughes@australianethical.com.au.
Our Corporate Governance Statement is available at australianethical.com.au/shareholder/
corporate-governance/
Acknowledgement of Country
Australian Ethical has offices on Gadigal country in Sydney, a part of the Eora Nation, and on Wurundjeri
Woi-wurrung and Bunurong Boon Wurrung country in Melbourne, a part of the Kulin Nation. Australian Ethical
acknowledges the Traditional Owners of the country on which we work. We recognise and celebrate their
continuing connection to land, waters and culture. We pay our respects to Elders past and present and thank
them for protecting Country since time immemorial.
About us
4
Message from the CEO
8
Message from the Chair
10
Financial and sustainability highlights
12
Awards and recognition
14
CIO report
18
Key management personnel
21
Annual Financial Report
24
• Directors’ report
26
• Remuneration report
53
• Auditor’s Independence Declaration
90
• Statements of comprehensive income
92
• Statements of financial position
93
• Statement of changes in equity
94
• Statements of cash flows
96
• Notes to the financial statements
97
• Directors’ declaration
128
• Independent auditor’s report
129
Sustainability Report
134
• We are ethical investors
138
• Our portfolio is aligned to our values
140
• Sustainability metrics
144
• Reporting to the GRI
146
• Our approach to climate change (TCFD)
148
• People with purpose
166
• The Australian Ethical Foundation
172
• Memberships and certifications
174
More information
176
Auditors' limited assurance opinion
178
Shareholder information
181
Company directory
182
ANNUAL REPORT 2024
3
Eventually
we will reach
a tipping point
where money is
a force for good
An equitable future for people,
planet and animals
... then we will begin
to see these changes...
Environmental and
social costs and benefits
get baked into
investment valuations
which becomes a means to
address systemic risk
Our efforts will scale up
and multiply
as markets reward not only
financial return for investors,
but also the positive and
negative outcomes for all
stakeholders
We will attract more capital
growing our influence and
foundation giving, encouraging
others to follow our example
Our portfolios will benefit
because our approach leads
us to investments that are well
positioned as low carbon and
sustainable transitions
accelerate
“We are putting our
capital and influence
behind a low carbon
future. We believe this
transition can be achieved
without compromising
investment returns or our
ethical standards.”
Ludovic Theau
Chief Investment Officer
Our Theory of Change
We believe if we do
all these things...
Our purpose
is to invest for
a better world
We believe investing can
deliver both attractive
investment returns while
also influencing progress
towards a better future for
the planet and all
its inhabitants.
“Our Theory of Change
framework orientates
us towards the best
things we can be
doing and helps us
understand when
our activities are
moving the dial.”
Alison George
Head of Impact & Ethics
Intentionally
allocate capital
to investments
with net positive
activities according
to our Ethical Charter
and Criteria
Use our position
as investors
to call for
and catalyse
positive change
Provide
consequences
(positive and
negative) for ethical
performance
Signal our
example and
collaborate
to amplify our
message
ANNUAL REPORT 2024
4
5
2021
Australia's
fastest growing
super fund +
highest NPS
2020, 2021,
2022, 2023
Finder Green
Superannuation
Fund of the Year
2014
First Australian public
company awarded
B Corp status
2015
• Commence financial
adviser channel
• Money Management
Responsible Fund
of the Year
2022
• Christian Super integrated
in adding 28,000 members + $1.93bn FUM
• RIAA Responsible Investment Leader
• B Corp Best for the World
(Customer & Governance)
2023
• Morningstar Highest Honours
ESG Commitment Level
• New record B Corp score
2024
• Australian Growth
Company Awards
Financial Services
Growth Company
of the Year Award
• Top 5 super fund
for member growth
2024 KPMG Super
Insights Report
• Acquisition of Altius
Asset Management
to add around
c$2bn to FUM
in FY25
$1bn
$5bn
$10bn
Our journey
1995
Company
changes
name to
Australian
Ethical
1998
Retail Super
Fund launch
2002
Listed on the
Australian Stock
Exchange
2008
Infinity
Award
Winner
2011
Ethical
Investor
Fund of
the Year
$200m
2000
Company launches grant
program, giving away 10%
of before tax profits to
charitable organisations
1986
Company
formed and
Australian
Ethical
Charter set
38 years of growing good money
ANNUAL REPORT 2024
6
7
Our goal, we
stated, was to
position ourselves
to capture the once-
in-a-generation
opportunity
represented by
the quantum shift
towards responsible
investing.
Since this time, we’ve been assiduously investing in
our strategy. Building out our infrastructure and ethical
investing capability to support a broader product
mix and greater scale. Digitising and enhancing our
online customer experience while also uplifting our
distribution and call centre offerings. Investing in
our brand, to ensure investors know who we are and
understand our unique difference.
This includes broadening into different asset classes
and different solutions as the size and diversity of
our customer base passes 130,000 and continues to
grow.
This will inevitably lead to more partnerships and
deals, like our successful integration with Christian
Super in 2023, the acquisition of sustainable fixed
interest investor Altius Asset Management we
announced in May 2024, and the collaboration with
specialist investment firm InfraDebt we forged in
February.
We have much to celebrate when we reflect on the
last five years. From less than $3.5 billion in funds
under management (FUM) at 30 June 2019, we
reached the milestone of $10 billion in March of this
year. Revenue has grown 2.5 times over the five years
to over $100 million in FY24, even while we continued
to deliver fee reductions to our customers.
We know we couldn’t have achieved what we have to
date and what we are aiming for in the future without
the support of all our stakeholders including our
shareholders, investors, super fund members, and
the entire Australian Ethical team. As we broaden and
grow our influence, our purpose remains unwavering,
guided by our Ethical Charter, with our Theory of
Change at the heart of everything we do.
Message from the CEO
John McMurdo, Chief Executive Officer & Managing Director
With 2024 seeing further record-breaking temperatures, and
more extreme weather events impacting communities world-
wide, it’s clear that we still have a long way to go to thwart the
extreme scenarios scientists have foreshadowed if warming
isn’t slowed to less than 1.5 degrees.
But it’s also important to acknowledge that much
progress has now been made and we see that
globally there is more than twice as much investment
in clean energy as in fossil fuels1. More than 140
countries have signed up to net zero carbon
commitments by 2050, covering more than 90% of
global Gross Domestic Product2. It seems that the
message is finally getting through.
The progress to date reinforces the importance of
maintaining our focus and staying the course. A
new greenhouse gas emissions reduction target
will be set by the Australian Government later this
year as part of this country’s Nationally Determined
Contribution (NDC). This target needs to be
ambitious, as it represents the work we all need to do,
collectively as nation, over the next five years to the
end of 2030 to slow climate warming to safe levels.
Australian Ethical has an important role to play, not
only in understanding the levers that need to be
pulled to meet our new energy ambitions, but also
to help guide industry, governments – and even
households, through our growing customer-base of
superannuants and investors – to get to where we
need to go.
Climate Policy Advocacy is a strategic stewardship
priority for us now, alongside the work we are doing
to turn off financing for unsustainable expansion of
fossil fuels, stopping livestock-driven deforestation
in Australia, reducing building sector emissions, and
advancing alternatives to animal research. Being at
the forefront of influencing and advocating for our
new energy and low carbon future means we can
better understand the risks and opportunities from an
investment perspective.
Investing in companies and assets we believe
are part of a sustainable economy, and restricting
investments in companies that aren’t, underlies
the promise we make to investors to consider both
financial value creation and outcomes for people,
planet and animals.
We know there is latent demand for our way of
thinking and investing. The latest Responsible
Investment Association Australasia data shows that
almost 90% of Australians expect their super, their
investments, and the money in their bank accounts
to be invested responsibly. Eighty per cent say it's
important to them to have a super fund, bank or
investment that delivers a positive impact in the
world. And 75% said they'd consider changing
providers if their current fund didn't align with their
values3.
In 2020, we could see this momentum building. In
the wake of the devastating East Coast bushfires and
as COVID raged around us, we took the opportunity
to carefully reflect on what would come next for
Australian Ethical. In 2021, we announced our
intention to further amplify our purpose by building
a much bigger, more impactful business, through a
significant reinvestment program aligned to our five
strategic pillars.
Our goal, we stated, was to position ourselves
to capture the once-in-a-generation opportunity
represented by the quantum shift towards responsible
investing. We explained this investment would have
an impact on short term profit, but our approach
received broad endorsement from our shareholder
base.
1
Overview and key findings – World Energy Investment 2024 – Analysis - IEA
2 Status of net-zero carbon emissions targets (ourworldindata.org)
3 Budak, Z., Samarakoon, N. & Sammut, P. 2024, From Values to Riches 2024: Charting Consumer Demand
for Responsible Investing in Australia, Responsible Investment Association Australasia, Melbourne.
9
ANNUAL REPORT 2024
8
Our dual purpose of investing for a better world
while delivering financial returns is enshrined in
our investment beliefs which are core to who we
are and our reason for existence.
Message from the Chair
Steve Gibbs, Chair
It’s been a year of milestones for Australian Ethical, headlined by
our funds under management and revenue achievements. The
continued growth and expansion of our influence in the last 12
months has been particularly satisfying – unwavering from our
beliefs and core purpose to invest for a better world. This resolve
enables us to take even more of a leadership role as an ethical
investor in the year ahead, while navigating financial markets as
the threat of climate change intensifies.
The size and health of our business is an important
part of our mission. We want to be a proof point for
other companies and investors that money can do
well and do good. Passing $10 billion funds under
management in March and achieving $100 million
in revenue at our most recent FY24 results were
important milestones for Australian Ethical in the last
year.
What’s perhaps most important is how we got
there, and the way we continue grow. We continue
to be an authentic ethical investor and a purpose
driven company. This is evidenced in researcher
Morningstar’s recognition we are one of only eight
global leaders for ESG Commitment and confirmation
from the Responsible Investment Association
Australasia (RIAA) as a Responsible Investment
Leader every year since 2001.
Equally pleasing is how we have continued to
prioritise and uplift our customer, employee and
broader stakeholder experiences, a result of a lot of
hard work throughout the business. This is reflected
in accolades in the last 12 months including the Top
3 Most Trusted Super Brand award from Roy Morgan,
and confirmation of Australian Ethical as the highest-
rated Certified B Corporation in Australia & Aotearoa.
These accolades, along with our recent strong
operating performance, have been achieved during
a time of changeable and at times challenging
investment markets. While our long-term performance
continues to show that investing ethically doesn’t
require forgoing investment returns, it’s important to
acknowledge that our approach to investing might
mean we don’t end up at the top of the short-term
performance rankings.
With equity markets rising to all-time highs in Australia
and in the United States, our focus on valuation and
not overpaying for companies has meant some of
our competitors have achieved higher relative returns
during the period.
Despite the short-term fluctuations, I am proud
that we continue to fulfil our promise to invest for a
better world while delivering competitive long-term
investment returns. Over 10 years our superannuation
strategies have delivered returns which are close to or
have exceeded their objectives, while our Emerging
Companies and Australian Shares Funds have
outperformed their respective benchmarks over the
long-term, delivering 12.4% and 12.5% respectively
since inception.
Our dual purpose of investing for a better world
while delivering financial returns is enshrined in our
investment beliefs which are core to who we are
and our reason for existence. To have the greatest
possible impact we need buy-in from everyone –
other investors, policy makers, industry leaders and
the broader society.
The next 12 months will be pivotal in the journey
towards global emissions reductions and the
transition towards cheaper and cleaner renewable
energy, particularly as the Australian government sets
its Nationally Determined Contribution (NDC) target
for the five years from 2030 to 2035.
We understand that we must continue to make
our voice heard on climate change, which is why
Australian Ethical is taking a leadership role by
pushing hard for science-based targets and real-
world change. There is no zero cost option to address
climate change because the cost of unabated global
warming will far exceed the cost of our actions today.
11
ANNUAL REPORT 2024
10
Our listed share portfolio
9 Scope 1 and 2 carbon intensity (tonnes CO2-e /$ revenue), sustainable impact solutions revenue, and investment in renewables
and energy solutions measures all relate to the listed companies whose shares we invest in across our funds and options for which
we have relevant data. This should not be considered representative of individual funds or options which will have their own mix
of share and other investments. See page 176 for more information about this comparison. For our analysis we use sustainable
impact criteria and revenue data from external sources which aim to measure revenue exposure to sustainable impact solutions and
support actionable thematic allocations in line with the U.N. Sustainable Development Goals (SDGs), EU Taxonomy of Sustainable
Activities, and other sustainability related frameworks. More information available on page 176.
10 We count one engagement where we engaged with a company on a topic or series of topics. There may be multiple activities within
that engagement. For example, our engagement with Westpac is counted as one engagement which included meetings, emails
and co-filing a shareholder resolution. We may count two engagements with a company if there were separate activities on entirely
separate topics.
11 Our 'proactive' engagement count includes where we engaged directly with a company, government or other entity; we actively
contributed to collective engagements (as distinct from simply 'signing on'); we used a nominal advocacy holding to support
shareholder resolutions; or we co-filed a resolution. Commitments to change are commitments made by the engaged entity after
our engagement commenced, that reflect progress towards the ultimate objectives of the engagement beyond acknowledgment
of an issue. They may be identified through e.g. direct company responses, company reporting or actions taken, changes to
government policies or draft legislation, or actions taken by industry associations. For examples of commitments, see our
Stewardship Report: australianethical.com.au/why-ae/ethical-stewardship/
12 Investments exited during the year due to ethical re-assessment. Not including companies excluded from initial investment.
*
Indicates FY24 metric included in KPMG’s Limited assurance scope.
^ Compared to a blended share market Benchmark of S&P ASX200 Index (for Australian and NZ shareholdings) and MSCI World ex
Australia Index (for international shareholdings). Based on shareholdings at 30 June 2024 and analysis tools provided by external
sources which cover ~95% of the listed companies we hold shares in by value. See page 176 for more information about this
comparison.
Active stewardship
75% lower
CO2 intensity
compared to
Benchmark9^*
2.3x
4.7x
5.2x
2.3x revenue
from sustainable
impact solutions
compared to
Benchmark9^
4.7x revenue
from sustainable
water & agriculture
and pollution
prevention compared
to Benchmark9^
5.2x investment
in renewables
and energy
solutions than
Benchmark9^*
2 engagements resulted
in divestment12
engagements for people,
planet, animals10
proactive engagements
~30% committing to change11*
of investments ethically
evaluated*
Impact through
our Foundation
330+
140+
100%
-75%
•
10% yearly profits donated
through the Foundation
(after tax and before bonuses)
•
$11m+ allocated for impact
through the Australian Ethical
Foundation (since inception)
•
$1.8m record allocation
by AEI to the Foundation
Enhancing our business
platform to capture
growth opportunity
Strong momentum in FY24 results
#4
NPS for super
members6
79%
Top quartile
employee
engagement8
+57%
$18.5m in underlying
profit after tax
+80%
$11.8m in net profit
attributable to shareholders
•
Launch of Moderate Fund,
Conservative Fund & Infrastructure Debt
Fund
•
Acquisition of Altius Asset Management5
•
Embedding scalable, flexible and
professional business infrastructure
+13%
$10.44 bn
FUM
Top 5
for super member
growth4
74%
>134,000 customers
Awards across
multiple facets
of business7
Underlying cost to income ratio
(improvement from 79% in FY23)
$607m positive net flows
$100.5m record revenue
4 KPMG 2024 Super Insights Report, published May 2024, using statistics from APRA and ATO as at 30 June 2023.
Based on growth in member numbers.
5 Completion expected September 2024.
6 Net Promoter Score raking of 4 out of 29. Investment Trends Super Member Engagement Report 2024. Independent research with
29 major super funds.
7
See pages 14 to 15.
8 Culture Amp survey June 2024. Top quartile for Financial Services Australia is 78% and above. See: cultureamp.com/science/
insights/financial-services-australia
ANNUAL REPORT 2024
12
13
Customer experience
Roy Morgan 2023 Customer
Satisfaction Awards
Retail Superannuation Fund of the Year
CX Awards
Best Inclusive Customer Experience
Responsible investment leadership
Named 1 of only 8 global 'Leaders' for
ESG Commitment by Morningstar15
RIAA Responsible Investment Leader
since 2021
Highest scoring Certified B Corporation in
Australia & Aotearoa NZ as at 13 July 2023
Growth
notice and SuperRatings assumes no obligation to update. SuperRatings use proprietary criteria to determine awards and ratings and may
receive a fee for the use of its ratings and awards. Visit superratings.com.au for ratings information. © 2023 SuperRatings. All rights reserved.
15 Morningstar ESG Commitment Level: Report : 1 February 2024. Australian Ethical was the only Australian organisation to achieve this
recognition. 97 asset managers covered.
Investments and superannuation
Top 3 Most Trusted Super Brand13
Financial Standard Investment
Leadership Awards 2024
Australian Ethical Diversified Shares Fund -
Winner Australian Equities: High Active Risk 2024
Mindful Money Awards 2024
Australian Ethical Australian Shares Fund
– Best Ethical Overseas Fund
Rainmaker ESG Leader Rating 2022-2023
13 2023 Roy Morgan Trusted Brand Awards Report
14 The rating is issued by SuperRatings Pty Ltd ABN 95 100 192 283 AFSL 311880 (SuperRatings). Ratings are general advice only and have
been prepared without taking account of your objectives, financial situation or needs. Consider your personal circumstances, read the
product disclosure statement and seek independent financial advice before investing. The rating is not a recommendation to purchase,
sell or hold any product. Past performance information is not indicative of future performance. Ratings are subject to change without
Awards and recognition
ProductReview.com.au Awards
Best Retail Super Fund 2023
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Finder Green Awards
Superannuation Fund of the Year 2020-2023
SuperRatings GOLD 2024
For MySuper, MyChoice and Pension14
Australian Growth Company Awards
Financial Services Growth Company of the Year 2023
ANNUAL REPORT 2024
14
15
Investment performance
Managed Funds returns to 30 June 2024#
1 year
%
3 years
% p.a.
5 years
% p.a.
7 years
% p.a.
10 years
% p.a.
Fund performance
Income Fund
5.0
2.6
1.8
1.8
1.8
Benchmark16
4.4
2.4
1.6
1.7
1.8
Income Fund (Wholesale)
5.0
2.6
1.8
1.9
n/a
Benchmark16
4.4
2.4
1.6
1.7
n/a
Fixed Interest Fund
3.2
-2.6
-1.2
0.5
1.2
Benchmark17
3.7
-2.1
-0.6
1.3
2.2
Fixed Interest Fund (Wholesale)
3.4
-2.4
-0.9
0.9
1.7
Benchmark17
3.7
-2.1
-0.6
1.3
2.2
Balanced Fund
6.9
2.6
5.4
6.2
6.4
Benchmark18
9.2
4.9
6.2
7.1
7.3
Balanced Fund (Wholesale)
7.6
3.3
6.2
n/a
n/a
Benchmark18
9.2
4.9
6.2
n/a
n/a
High Growth Fund
9.5
4.4
7.1
8.2
8.5
Benchmark18
13.3
7.4
8.9
9.3
9.2
High Growth Fund (Wholesale)
10.0
4.9
7.8
9.1
9.5
Benchmark18
13.3
7.4
8.9
9.3
9.2
Diversified Shares Fund
9.5
4.0
6.9
8.0
8.4
Benchmark19
14.1
7.7
9.0
9.4
9.3
Diversified Shares Fund (Wholesale)
10.0
4.4
7.5
8.9
9.4
Benchmark19
14.1
7.7
9.0
9.4
9.3
International Shares Fund
17.8
8.8
10.8
10.7
10.2
Benchmark20
19.9
11.2
13.0
13.2
12.1
International Shares Fund (Wholesale)
18.2
9.2
11.5
11.6
n/a
Benchmark20
19.9
11.2
13.0
13.2
n/a
Australian Shares Fund
10.9
0.9
8.3
8.3
9.9
Benchmark21
11.6
6.0
7.1
8.6
8.8
Australian Shares Fund (Wholesale)
11.5
1.5
9.0
9.2
11.1
Benchmark21
11.6
6.0
7.1
8.6
8.8
Emerging Companies Fund
13.3
-1.8
10.0
11.2
n/a
Benchmark22
12.4
-2.2
2.9
5.4
n/a
Emerging Companies Fund (Wholesale)
13.8
-1.4
10.5
11.8
n/a
Benchmark22
12.4
-2.2
2.9
5.4
n/a
High Conviction Fund
4.0
n/a
n/a
n/a
n/a
Benchmark23
11.9
n/a
n/a
n/a
n/a
Past performance is not a reliable indicator of future performance.
References to ‘wholesale’ funds indicate the class of pricing above a minimum investment threshold, which varies by fund.
# After fees performance
16 Bloomberg AusBond Bank Bills Index
17 Bloomberg AusBond Composite
18 Indices of underlying asset classes weighted by the Fund’s Strategic Asset Allocation
19 75% S&P/ASX 200 Accumulation / 25% MSCI World ex Australia (NET)
20 MSCI World ex Australia (NET)
21 65% ASX 100/ 35% ASX Small Ordinaries
22 S&P/ASX Small Industrials
23 S&P/ASX 300 Accumulation
Note: Where benchmarks have changed, we have melded them together.
MSCI data is the property of MSCI. No use or distribution without written consent. Data is provided ‘as is’ without any warranties.
MSCI assumes no liability for or in connection with the data. For full disclaimer, please see australianethical.com.au/sources
Super and pension returns to 30 June 2024#
1 year
%
3 years
% p.a.
5 years
% p.a.
7 years
% p.a.
10 years
% p.a.
Accumulation options performance
Defensive Accumulation
4.0
1.9
1.2
1.2
1.2
Benchmark16 ~
3.6
1.9
1.2
1.2
1.3
Conservative Accumulation
3.8
0.0
1.4
2.5
2.9
CPI + 1.25%
5.3
6.0
4.6
4.0
3.7
Balanced Accumulation
6.8
3.0
5.6
6.5
6.8
CPI + 3.25%
7.4
8.4
7.0
6.5
6.2
Growth Accumulation
7.8
4.1
6.4
7.2
7.5
CPI + 3.75%
7.9
9.0
7.6
7.0
6.7
Australian Shares Accumulation
9.7
1.5
8.4
8.7
10.3
Benchmark24 ~
10.4
5.2
6.4
7.7
6.9
International Shares Accumulation
16.3
8.0
10.0
9.9
9.5
Benchmark20 ~
17.4
9.7
11.3
11.4
10.4
High Growth Accumulation
9.2
4.5
7.1
8.1
8.4
CPI + 4.25%
8.6
9.6
8.1
7.6
7.2
1 year
%
3 years
% p.a.
5 years
% p.a.
7 years
% p.a.
10 years
% p.a.
Pension options performance
Defensive Pension
4.6
2.1
1.3
1.4
1.4
Benchmark16 <
4.1
2.2
1.3
1.4
1.5
Conservative Pension
4.3
-0.0
1.4
2.7
3.2
CPI + 1.5%
5.5
6.1
4.6
4.0
3.7
Balanced Pension
6.5
2.3
4.8
5.7
6.3
CPI + 2.75%
6.9
7.9
6.5
6.0
5.7
Growth Pension
8.5
4.0
6.8
7.8
8.2
CPI + 4.25%
8.2
9.0
7.6
7.1
6.7
Australian Shares Pension
10.0
1.4
9.1
9.5
11.0
Benchmark24 <
11.6
5.8
7.1
8.4
7.6
International Shares Pension
17.4
8.4
10.6
10.4
9.8
Benchmark20 <
19.6
10.9
12.7
12.8
11.6
Super and Pension returns are calculated in compliance with APRA SRS702. It is the return that would have been achieved for a
representative member with a $50,000 balance and no contributions, after all administration and investment fees, taxes and other costs.
24 ASX 300 Monthly Index (Accum.) (Net of tax and % admin fees)
~ Net of tax and % administration fees
< Net of % administration fees
# CPI benchmarks are quarterly lagged, compounded monthly and reflect changes to the hurdle rates over time. CPI benchmarks are
gross.
ANNUAL REPORT 2024
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17
In May, we announced the acquisition of sustainable
fixed income investor Altius Asset Management from
Australian Unity, an agreement that added significant
expertise to our team including Altius founders Bill
Bovington, Chris Dickman and Gavin Goodhand, who
are widely regarded as leaders of sustainable fixed
income in Australia.
Fixed income is not only an asset class that carries
significant importance for the diversification of
investors’ portfolios, but it is also an increasingly
important area for funding our sustainable future.
This is evidenced by the issuance of the Australian
Government’s $7 billion inaugural green bond
in June, which Australian Ethical participated in,
and which also represents a major milestone for
Australia’s sustainable finance market and the energy
transformation.
In February, we launched the new Australian Ethical
Infrastructure Debt Fund in collaboration with
experienced responsible infrastructure debt investor,
InfraDebt. The fund provides capital to renewable
energy and social infrastructure projects, in particular
battery innovation and technology that will play a big
role in transitioning our grids and homes to alternative
sources. In recent months we appointed former
Macquarie Bank executive Adam Roberts to Head of
Private Markets in our new private markets division.
We strengthened our partnership with private equity
manager, Generation Investment Management,
with a joint investment in UK-based energy retailer,
Octopus Energy, which leads the transition to
renewables based on a market-leading energy
markets technology platform. We have also struck a
new partnership with Australian-based For Purpose
Investment Partners, with an investment in a newly
established aged care platform, which aims to deliver
up to 2,500 new, high-quality beds over the next few
years.
We continue to position ourselves at the forefront
of the great mega-trend of our time – the energy
transition. The shift from fossil fuel generated power
to low carbon emitting, sustainable and renewable
energy sources is gathering significant momentum
despite geopolitical tensions, and we will continue to
add our voice to global and local efforts to define and
influence where capital is needed the most.
We invest in the energy transition in many ways
across various asset classes, including in battery and
solar projects through our Infrastructure Debt Fund,
in early-stage technology and innovation through
our investments in the likes of CSIRO-backed Main
Sequence and Artesian. We were an early investor via
our public market portfolios in New Zealand based
Gentrack and Contact Energy. We also continue to
invest in companies exposed to energy transition
materials as well as directly in commodities including
lithium, copper and nickel.
Our belief that accelerating the transition to net
zero carbon is an urgent priority and critical to the
financial best interests of those that invest with us is
embedded within our investment beliefs. We believe
investing in the transition can be achieved without
compromising investment returns or our ethical
standards.
Strengthening our team and
capabilities
Building our asset class strategies and shaping our
investment talent and research platforms around
the important trends shaping investment markets
has been a focus over the past 12 months. We have
formalised a new structure with dedicated research
leads in healthcare, technology, financials and the
climate transition, as well as investment leaders in
asset classes including private markets, systematic
equities, domestic active equities and fixed income.
We have welcomed Natalie Tan to lead systematic
equities. Natalie was most recently at Perpetual
Investments where she was a portfolio manager.
Natalie is responsible for the International Shares
Fund and Domestic Shares Fund. Both are systematic
strategies in which we see a big opportunity to grow.
As I embark on my second year as Chief Investment Officer
(CIO) at Australian Ethical, I am energised by the milestones
we have achieved in the last 12 months, particularly the
strengthening of our investment team and capabilities. I’d like
to share these highlights with you, along with our portfolio
performance, and the risks and opportunities I see playing out
in financial markets.
CIO report
Ludovic Theau, Chief Investment Officer
While our ambitions and appetite for a wider reach
into asset classes and geographies continue to
grow, one thing that remains constant is the strong
conviction we have in our ethical DNA. Our belief
that ethical investing can deliver both attractive
investment returns while also influencing progress
towards a better future remains as strong as ever. We
expect this to play out even more as the transition to
net zero carbon continues to accelerate.
Investment performance
The past 12 months in global financial markets has
been largely characterised by a combination of
central bank interest rate decisions to address what’s
become sticky inflation, the ongoing geopolitical
tensions and uncertainty resulting from elections
globally, as well as investor optimism for new
technology developments against the backdrop of
weak global growth.
There is more risk and more uncertainty in financial
markets than this time last year. Equity market
valuations remain high, while concerns about
recessions and political uncertainty also remain
heightened.
Our strategies have helped us to navigate this difficult
period, and I’m pleased to report that the majority
of our funds have performed well and in line with
expectations for the financial year to the end of June
2024. We have adapted to conditions, and in certain
areas exceeded expectations, particularly in the
medium and smaller-capitalised segments of the
local share market where our active stock picking
within future focused industries like technology has
resulted in strong outperformance.
Our funds have kept pace with peers and benchmarks
despite our natural aversion to expensive or
overpriced investments. In this environment we
have worked hard to find attractive risk and reward
opportunities, while avoiding momentum chasing.
This has become increasingly difficult throughout
the year as traditional market risk premiums have
narrowed. During this time, we have been proactively
reducing exposure to winning trades while bolstering
protected risk exposure in compelling areas.
We have participated selectively in the technology-
driven rally towards the end of the first half the year,
when markets reacted to the expectation for future
interest rate cuts as inflation appeared to reach its
peak. In the Multi-Asset strategy that underpins our
main superannuation fund options, we have deployed
defensive put and derivative strategies to protect
against downside risk. These decisions have been
executed in line with our dynamic asset allocation
(DAA) process, which is designed to navigate short
term risks while taking advantage of our long-term
investment time horizon.
Our strategic priorities
We need a world-class investment platform and
capabilities across all the asset classes with the
best and brightest talent to deliver on our goals.
I am pleased to report we have made significant
progress in the last 12 months towards this, with more
milestones ahead.
I set myself and the broader team three important
objectives a year ago: to bolster our fixed income
team and capabilities to become category-leading
in the sustainable fixed income asset class; to launch
new product initiatives, including a new private
markets fund to sit within a new private markets
team; and to expand our network of local and global
manager relationships to further strengthen our thesis
of investing for a better world. I am pleased to say we
have met all three objectives.
ANNUAL REPORT 2024
18
19
While there are many new initiatives and processes
being formulated, it’s also the continuity of our
team and the track records of our funds that
provide certainty to our investors and underpin
our relationships with ratings houses as well as our
important wholesale and adviser networks. In this
regard it’s important to acknowledge Tim Kelly, who
has been leading our Fixed Income efforts for over
two decades, and Andy Gracey, who will have been
with Australian Ethical for 20 years this year, and was
the founding portfolio manager for the Emerging
Companies Fund (ECF) Strategy in July 2015.
The performance of the ECF speaks for itself, more
than double the S&P/ASX Small Industrials Index over
seven years and since it's inception. In the 12 months
to the end of June, the ECF was a standout performer
in the Australian Ethical stable, with the wholesale
fund returning 13.8% net of fees compared to the
benchmark’s 12.4% return for the period.
Where we’re heading
In the year ahead and beyond, we expect to forge
more investment-led M&A and partnerships – like
our deal with Altius and our new collaboration with
InfraDebt – to strengthen our investment platform and
expand our ethical investing footprint, in particular in
global equities.
It’s clear in my conversations, either with investment
talent we are hiring, or with the partners we are
looking to do business with, that our brand and
reputation carries a lot of weight. What we stand for
and who we, as guided by our Ethical Charter and our
legacy of investment performance, is a big reason for
people wanting to work with us and partner with us.
We are not just sticking to our beliefs, we are doubling
down on what makes us unique, by applying our
process of allocating capital to the right companies
and making a difference through our Theory of
Change in more ways and at greater scale.
Our belief that
ethical investing can
deliver both attractive
investment returns
while also influencing
progress towards a
better future remains
as strong as ever.
Key Management Personnel
John McMurdo
Chief Executive Officer & Managing Director
MBA, GAICD
John brings more than 30 years’ experience in investment management, private
client advisory and wealth management across Australia and New Zealand,
including 20 years in CEO roles at several leading investment and wealth
management businesses. He has significant Board and Directorship experience
within and outside financial services.
John has an MBA from Henley Business School (U.K.), is a graduate of the
Australian Institute of Company Directors and a member of the Fund Management
Board Committee of the Financial Services Council.
Karen Hughes
Chief Risk Officer & Company Secretary
BSc (Hons), ACA (ICAEW), GAICD, FGIA
Karen is Company Secretary and is also responsible for the Risk Management
Framework at Australian Ethical. Karen has over 25 years’ experience in risk and
compliance in Australia and the UK.
Ludovic Theau
Chief Investment Officer
MEng, GAICD
Ludovic joined Australian Ethical in April 2023 as Chief Investment Officer. He has
over 30 years of experience in ESG investing, funds management, commercial
and investment banking and financial advisory.
Prior to joining, Ludovic was the Chief Investment Officer for the Clean Energy
Finance Corporation, Australia’s Green Bank. He also had previous roles at
Hastings Funds Management, Westpac, ABN AMRO, Macquarie Bank, UBS and
BNP Paribas.
Ludovic holds a Master of Engineering from Ecole Centrale de Paris, France, and
is a graduate of the Australian Institute of Company Directors.
Maria Loyez
Chief Customer Officer
MEng
Maria is responsible for sales, marketing and customer experience to help drive
business growth, which in turn increases positive impact on society. Maria has
more than 20 years’ strategic marketing, CX and leadership experience having
previously held senior roles at neo-bank Volt, SocietyOne, OFX, AMP, Optus and
Virgin.
ANNUAL REPORT 2024
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20
Mark Simons
Chief Financial Officer
B Bus, CA, GAICD
Mark is responsible for business performance, financial control and fund
accounting. Mark has more than 30 years’ experience in financial services, having
previously held senior roles within Australian Ethical, Challenger, Perpetual,
Tyndall and KPMG.
Marion Enander
Chief Strategy & Innovation Officer
BCom, MBA
Marion is driving and championing Australian Ethical’s strategic direction and
innovation agenda. She has extensive experience in strategic leadership and
consulting roles at companies such as Credit Suisse, Perpetual and Booz Allen
Hamilton. She has a MBA from London Business School (UK).
Ross Piper
Chief Executive, Superannuation
GradDipEd, MBA
Ross has end-to-end responsibility for Australian Ethical’s superannuation
offering, with a focus on growth and profitability; and building the operational
backbone for the broader business. Ross has more than 25 years’ executive
leadership experience, including in investment management, having previously
held senior roles within Macquarie Bank, World Vision, Christian Super and
AgroInvest.
He currently sits on various other boards for organisations focused on social
enterprise and technology and is the Chair of the Responsible Investment
Association of Australasia (RIAA).
Alison George
Head of Impact & Ethics
CA (Fellow), M (Env), BA (Juris)
Alison joined Australian Ethical in May 2023 to ensure our investments continue
to meet our Ethical Charter and grow our positive outcomes for animals, people,
and planet.
Alison has more than 20 years’ experience in responsible investment and
stewardship, working with numerous industry leaders in her prior roles with
Pendal and Regnan. A Chartered Accountant, Alison also completed a Master of
Environment and was previously a corporate sustainability advisor with EY.
Conrad Tsang
Chief Technology Officer
BEng (Hons)
Conrad is responsible for developing Australian Ethical’s technology and data
capabilities, and aligning them to deliver positive impact and client outcomes. He
has extensive experience in Investment Management, OTC Markets, Securities
Services and Retail Banking having previously held roles in HSBC, Credit Suisse
and UBS.
Eveline Moos
Chief People & Culture Officer
BCom
Eveline is responsible for people and culture strategy and execution at Australian
Ethical, aligning our people to AE’s purpose, business strategy and client
outcomes. Eveline has extensive experience encompassing strategic and
operational leadership with previous roles at First Sentier Investors, AMP Capital
and Perpetual.
Extended leadership team
ANNUAL REPORT 2024
22
23
Annual
Financial Report
Australian Ethical Investment Limited and
its Controlled Entities
30 JUNE 2024
ABN 47 003 188 930
Directors’ report
26
Remuneration report
53
Auditor’s Independence Declaration
90
Statements of comprehensive income
92
Statements of financial position
93
Statement of changes in equity
94
Statements of cash flows
96
Notes to the financial statements
97
Directors’ declaration
128
Independent auditor’s report
129
24
The directors present their report,
together with the financial statements,
on the consolidated entity (referred to
hereafter as the ‘Group’) consisting of
Australian Ethical Investment Limited
(referred to hereafter as ‘Australian
Ethical’, 'AEI', the ‘Company’ or
‘Parent entity’), Australian Ethical
Superannuation Pty Limited (‘AES’)
and Australian Ethical Foundation
Limited (the ‘Foundation’), being the
entities it controlled at the end of, or
during, the year ended 30 June 2024.
Directors’
Report
Steve Gibbs
Non-Executive Director since 2012 and Chair since 2013
BEcon, MBA
Steve chairs the People, Remuneration and Nominations Committee, is a member of the
Due Diligence Committee and the Australian Ethical Investment Limited and Australian
Ethical Superannuation Pty Limited Audit, Risk & Compliance Committees. He is Chair of
Australian Ethical Superannuation Pty Limited and Australian Ethical Foundation Limited.
Steve is also the Non-Executive Chair of Netlinkz Limited. Steve has extensive experience
at both an executive and non-executive level in the investment and superannuation
industries, including being a former CEO of the Australian Institute of Superannuation
Trustees, a former CEO of what is now Commonwealth Superannuation Corporation
and a non-executive director of Hastings Funds Management and Westpac Funds
Management. Steve has been recognised for his commitment to, and expertise in, ethical
and responsible investing.
Mara Bûn
Non-Executive Director since 2013
BA (Political Economy), GAICD
Mara is a Member of the People, Remuneration and Nominations Committee, the
Investment Committee and the Australian Ethical Investment Limited and Australian Ethical
Superannuation Pty Limited Audit, Risk & Compliance Committees. She is a Director of the
Australian Ethical Superannuation Pty Limited and Australian Ethical Foundation Limited.
Mara, a dual Brazilian/Australian citizen, brings executive experience from Green Cross
Australia, Choice, CSIRO, Macquarie Bank and Canstar. She is Non-Executive Chair of
asset consultants Australian Impact Investments and environmental chamber music
ensemble The Bowerbird Collective. She is a Non-Executive Director of carbon market
leader GreenCollar and nature restoration technology start-up AirSeed Technologies.
She is a member of the Advisory Board of US-based regenerative agriculture SaaS start-up
Vayda and advises Australian nature/climate start-ups through The Salmon Project. Mara
is a founding director of The Conversation Brasil and is a Director of the board of DFAT’s
advisory Council on Latin American Relations, COALAR. She supports the Australia Brazil
Chamber of Commerce to forge climate/nature investment partnerships in advance of
Brazil’s COP30 which may be followed by an Australia/Pacific hosted COP31.
Kate Greenhill
Non-Executive Director since 2013
BEc, FCA, GAICD
Kate is Chair of the Audit, Risk & Compliance Committees for Australian Ethical Investment
Limited and Australian Ethical Superannuation Pty Limited, and is a Member of the People,
Remuneration and Nominations Committee and the Due Diligence Committee. Kate is a
Director of Australian Ethical Superannuation Pty Limited and Australian Ethical Foundation
Limited, and a Member of the Australian Ethical Superannuation Pty Limited Insurance
Benefits Committee.
Kate is a Fellow of the Institute of Chartered Accountants in Australia and a Graduate of
the Australian Institute of Company Directors. Kate has over 25 years’ experience in the
financial services industry with extensive knowledge of finance and risk. As a former
Partner with PwC, Kate has worked in both Australia and the UK providing assurance
and advisory services to clients. Kate is a Director of Intersect Australia Ltd, a not-for-
profit organisation that works with members and the wider research community to help
researchers accelerate their impact through innovative technologies, training and advice.
Kate is also a Director of Integrated Research Limited, an ASX listed company and leading
global provider of user experience and performance management solutions for payment
transactions and collaboration systems.
Directors
The following persons were directors of Australian Ethical Investment Limited during the
whole of the financial year and up to the date of this report, unless otherwise stated:
ANNUAL REPORT 2024
26
27
Sandra McCullagh
Non-Executive Director since 2023
BA, BSc, GAICD, MBA
Sandra is Chair of the Investment Committee and a Member of the People,
Remuneration and Nominations Committee. Sandra is a Non-Executive director
of Workcover Queensland, the Sunshine Coast Hospital and Health Services,
Sydney Dance Company and the Clayfield College Foundation. Sandra was a
former trustee and Chair of the Investment Committee of QSuper, leading up
to its merger with SunSuper. Sandra was a director of the Board of the Investor
Group on Climate Change, whose scope includes Australia, New Zealand and
Asia, and a member of the New Zealand Stock Exchange Corporate Governance
Institute. Sandra is a Graduate of the Australian Institute of Company Directors and
a member of Chief Executive Women, and chair of its Membership Committee.
Sandra has a strong background in ESG and experience on both the buy-side and
sell-side. She was the former top-rated head of ESG and utilities equities research
at Credit Suisse Australia.
Julie Orr
Non-Executive Director since 2018
BEc, MCom, MCom(Hons), CA, GAICD, FGIA
Julie is a Member of the People, Remuneration and Nominations Committee, the
Audit, Risk & Compliance Committee and the Investment Committee. She is also
a director of Australian Ethical Foundation Limited.
Her other roles include directorships with SAAFE Limited and Artistic Swimming
Australia Limited, and she is also a member of the NSW Biodiversity Conservation
Trust Audit & Risk Committee.
She has over 20 years of experience in executive and board roles including
experience with superannuation, investments, financial planning, stockbroking,
research, insurance, audit, finance, acquisitions and business integration.
Julie’s most recent executive experience was as Group General Manager
Corporate Development and General Manager Operations for Insignia. She was
previously Director of Finance India and Asia Pacific for Standard and Poor’s,
Head of Research for Morningstar, Chief Operating Officer at Intech, and Senior
Audit Manager with EY. Julie’s prior board experience includes AvSuper, Perennial
Value Management, Ord Minnett and Masters Swimming NSW.
John McMurdo
Chief Executive Officer and Managing Director
MBA, GAICD
John joined the Australian Ethical Board in February 2020 as Chief Executive
Officer and Managing Director. He brings more than 30 years’ experience in
investment management, private client advisory and wealth management across
Australia and New Zealand, including 20 years in CEO roles at several leading
investment and wealth management businesses. He also brings significant
previous Board and Directorship experience within and outside financial services.
John has an MBA from Henley Business School (U.K.), is a graduate of the
Australian Institute of Company Directors and a member of the Fund Management
Board Committee of the Financial Services Council.
Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
Company secretary
Karen Hughes
BSc (Hons), ACA (ICAEW), GAICD
Karen is the Company Secretary and is also
responsible for the Risk Management Framework
at Australian Ethical. Karen has over 25 years’
experience in risk and compliance in Australia
and the UK.
Principal Activities
The Group’s principal activities during the financial
year were to act as the responsible entity for a
range of public offer ethically managed investment
schemes and to act as the Trustee of the Australian
Ethical Retail Superannuation Fund (‘Super Fund’).
Other than what is described in this report, there were
no significant changes in the nature of the Company’s
activities during the year.
29
ANNUAL REPORT 2024
28
Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
In our FY21 results we announced our revised
strategic plan to double-down on our purpose and
build a much bigger and more impactful business,
through this significant reinvestment program aligned
to our strategic pillars.
Over the last five years we have been accelerating this
program: building out our investment team capability,
expanding our existing asset classes and adding new
ones to broaden our ethical product offering. We’ve
been working to digitise and improve our customer
experience, boosting our distribution capacity and
capability, while investing in our brand to ensure that
investors understand our unique difference. We’ve
started work to upgrade our technology platform and
business infrastructure to ensure we can support a
much larger business. This year we have progressed
our transformational programs to drive efficiency and
further improve our operating leverage. At the same
time, we invested in our leadership and innovation
initiatives to underpin our high-performance culture.
Review of operations
The investment we have made in our business
is demonstrably paying off with a number of key
milestones achieved during 2024. Since 2019, our
FUM has grown three-fold. We reached the milestone
of $10 billion in March of this year and ended the year
at a record $10.44 billion FUM. This growth, including
the first full-year benefit of the Christian Super SFT,
enabled us to further sharpen our operating leverage,
with the underlying cost to income ratio improving
from 79% in FY23 to 74% in FY24.
This investment has indeed lifted the strength
and quality of our business and we’re receiving
recognition across multiple facets of our business
– customer experience, growth, governance,
investment leadership and our high-performing
people – which were all recognised by awards and
accolades during the period.
1
wmo.int/news/media-centre/wmo-confirms-2023-smashes-global-temperature-record
2 stockholmresilience.org/research/planetary-boundaries.html
3 ourworldindata.org/what-is-the-gini-coefficient
4 Net Zero Tracker (2023) Net Zero Stocktake 2023: New Climate Institute, Oxford Net Zero, Energy and Climate Intelligence Unit and
Data-Driven EnviroLab.
5 iea.org/reports/world-energy-investment-2024/overview-and-key-findings
6 Budak, Z., Samarakoon, N. & Sammut, P. 2024, From Values to Riches 2024: Charting Consumer Demand for Responsible Investing in
Australia, Responsible Investment Association Australasia, Melbourne.
In 2023 the annual average global temperature
approached 1.45 degrees above pre-industrial
levels making it the hottest year on Earth since
records began in 1880. This was just one of a
“deafening cacophony of broken records”1, listed
by the World Meteorological Organisation. Along
with global temperatures, greenhouse gas levels,
ocean heat and sea levels experienced record
highs in 2023, while Antarctic Sea ice was a record
low. In the past year we also learned that six of nine
planetary boundaries evaluated since 2009 had
been transgressed, increasing the risk of large-scale
abrupt or irreversible environmental changes2. Given
the intricate biophysical system of our planet and
the interplay between climate and biodiversity:
the impact of climate change on ecosystems, the
stability of societies and financial markets are likely to
escalate if these trends continue.
Rising inequality3 and escalating conflicts around the
world add even further complexity and urgency to the
challenges we must all meet. While acknowledging
this web of risks and dependencies, climate change
remains the preeminent challenge of our era – an
existential threat for our own and all other species.
As stewards of this planet, we must collectively do
all we can to preserve and protect our precious
resources for all living beings and for those to come.
Behind the scenes, the momentum for change still
gathers speed, but has a fair way to go. More than
140 countries have signed up to net zero carbon
commitments by 2050, covering more than 90% of
global GDP4. The world now invests more than twice
as much in clean energy as it does in fossil fuels.
According to the International Energy Agency (IEA),
clean energy investments are set to approach USD
320 billion in 2024, up by more than 50% since 20205.
This is great news, but the path will not necessarily
be smooth or easy. Geopolitical turmoil in the Middle
East, Europe and the US can make it challenging
for all entities to maintain focus on the longer-
term commitments of the Paris Agreement. Many
companies, industries and countries are struggling
to find ways to meet their commitments, while
others see opportunity and seek to innovate a new
way forward. This need for innovation also presents
opportunities for capital – listed, non-listed, equity
and debt – and Australian Ethical is well-placed to
support and benefit from future-aligned investments
in all these asset classes.
Even with this geopolitical uncertainty and the cost-
of-living crisis, Australians still care how their money
is invested. The Responsible Investment Association
Australasia (RIAA) Values to Riches Report 2024 6
revealed that 88% of Australians expect their super
or other investments to be invested responsibly (up
from 83% in 2022) and three quarters would consider
changing providers if their current fund didn’t align
with their values.
We’ve been leading the way
We cannot be described as a standard ASX-listed
fund manager. We are for profit and for purpose,
offering investment and super solutions using our
unique ethical investment approach to underpin our
purpose of ‘Investing for a better world’.
For more than 38 years, our constitutionally enshrined
Ethical Charter has been our North Star, helping us
steer a steady course. It provides the framework
which shapes our investable universe, informs how
we operate our business, as well as how we advocate
and engage with companies, to ensure we are doing
well for our investors and good for all. Through all
market cycles, we have remained committed to
pursuing the aims of our Ethical Charter.
Despite our long history of responsible investing, it
wasn’t until the second half of the last decade that
we saw accelerating public awareness of climate
change and the role responsible investing could
play in the solution. To leverage our ethical investing
credentials, capture this accelerating demand
and maximise medium to long-term returns to
shareholders, we made a bold decision to rethink our
ambition and invest more in our business platform.
Year in review
Even so, we are conscious we have more work to do
to improve our customer experience offering. Our
team has been winning awards for the quality of their
interactions, but we look forward to our transition to
GROW which will provide a lift in infrastructure that will
enable us to roll out further improvements.
To 30 June 2024, our five-year total shareholder return
(TSR) at >160% is further evidence of our long-term
value creation for shareholders, at a time when many
of our peers are reporting negative TSR over the
same time horizon. Revenue grew 2.5 times over the
five years, reaching the milestone of $100 million in
FY24. This was achieved while continuing to deliver
fee reductions to our customers, lifting our quality
of service and looking after the wellbeing of our
employees. The success of this careful balance is
evidenced by our healthy TSR, our enviable customer
retention7 and customer satisfaction scores8, as well
as our strong employee engagement metrics9.
Since 2019, our underlying profit has almost tripled,
an achievement supported by strong organic and
inorganic growth. Our funded customer numbers now
stand at more than 134,000, from a base of 48,000 in
2019. Organic growth represents the majority, while
the Christian Super transaction contributed a further
28,000 members in FY23. In FY24, we were again
reported in the top five fastest growing super funds7
and received the Financial Services Growth Company
of the Year Award10.
Our financial success also benefits the community
through our grants to the Australian Ethical Foundation
(The Foundation). In FY24 we donated a record $1.8m
to The Foundation, which is a substantial increase
on that donated in FY23 and represents a significant
opportunity to increase our impact through our
targeted giving programs.
We are proud of our substantial achievements to date
across all our business metrics and confident about
the momentum for responsible investing we see as
we head into FY25.
7
2024 KPMG Super Insights Report and dashboard (Data source: APRA Annual fund level superannuation statistics back series: June
2004 to June 2023 (issued 13 December 2023)
8 Net Promoter Score raking of 4 out of 29. Investment Trends Super Member Engagement Report 2024. Independent research with 29
major super funds
9 Culture Amp Employee engagement survey June 2024. Top quartile for Financial Services Australia is 78% and above: cultureamp.
com/science/insights/financial-services-australia
10 Australian Growth Company Awards, Financial Services Growth Company of the Year 2023
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
We have continued to deliver against the pillars of
our growth strategy. Our focus in the period has been
on capability development, expanding our ethical
product suite and building out a robust operational
infrastructure to support our growth aspirations.
Our key strategic highlights are set out below:
Principled investment leadership
We believe that ethical investing can deliver
attractive returns while influencing progress towards
a better future for people, planet and animals, and
our experience over almost 40 years reinforces our
conviction in this approach.
Intentionally allocating capital to investments with
net positive activities including those that enable the
transition to a sustainable low carbon economy, then
using our position as investors to call for and catalyse
positive change, benefits our portfolios as well as
influencing broader change in the long-term.
To be a successful ethical investor requires a dual
materiality lens – ensuring our investable universe
is firstly aligned to our Ethical Charter and then
constructing portfolios suitable for the investment
objectives of our various funds.
FY24 has been a challenging year for markets, with
sticky inflation and geopolitical unrest. The resulting
uncertainty and rising equity valuations have
contributed to mixed investment performance over
the period. During the year we maintained a strong
focus on valuation across all our portfolios, reluctant
to chase momentum, and our approach to managing
risk meant we favoured protecting investors from the
potential downside while selectively participating in
further upside scenarios.
Diversification
As we grow our portfolio, we actively seek out
diversification opportunities within our ethical
investment universe. We are continually looking
for ways to improve our risk-adjusted returns and
portfolio protection to hedge against market volatility
and inflation, providing resilience through evolving
market conditions.
In early FY24 we successfully launched two new
Multi-Asset funds, the Moderate and Conservative
Funds. These enhance our Multi-Asset offering by
providing more choice to customers with a lower
risk tolerance and improving the product selection
experience for advisers.
In February we announced a new collaboration with
specialist infrastructure debt manager Infradebt
and launched our Infrastructure Debt Fund to
provide capital for key Australian projects spanning
renewable energy, social infrastructure, and
property with a social or environmental benefit. We
see infrastructure debt as an important growth
opportunity with debt capital likely to provide the
lion’s share of the total capital required to meet
Australia’s renewable energy transition target of 82%
renewable energy generation by 203011.
The Infrastructure Debt Fund aims to deliver solid
risk-adjusted returns and contribute towards meeting
these targets. We have seen around $23 million of
new flows into this exciting offering since launching
in February, which includes the transfer of existing
Infradebt clients.
In May we signed an agreement to acquire the
sustainable fixed income asset management
business Altius Asset Management from Australian
Unity. When completed in early FY25, the deal
will deliver an additional $2 billion in funds under
management (FUM).
Altius founders Bill Bovingdon, Chris Dickman and
Gavin Goodhand, widely regarded as leaders of
sustainable fixed income investment in Australia,
will be joining our investment team, resulting in a
sustainable fixed income team of seven, as well as an
expanded bond fund portfolio, and Australian Unity
becoming one of Australian Ethical's largest clients.
Other notable hires in the year included Natalie Tam
as Portfolio Manager, Systematic Equities, and Adam
Roberts as Head of Private Markets.
With two decades of experience in Australian equity
markets, Natalie is responsible for Australian Ethical’s
Diversified Shares and International Shares funds
and for building out a systematic equities platform
that will become an increasingly integral part of our
overall investment offering.
Joining in June, Adam has held various senior
investment roles at Macquarie, including Global Head
of Strategy, and was most recently the Australian
Head of Infrastructure and Real Estate at Cerberus
Capital Management. In his new role, Adam will
be responsible for the development, delivery and
execution of the Private Markets portfolio.
We have also added a Senior Investment Operations
Manager and three experienced analysts to further
round-out our investment capability.
Ethical assessment is a key aspect of our unique
investment process, and in January Dr Ella Robinson
joined as Senior Impact & Ethics Analyst. Ella has
deep expertise in public health; she previously
worked as a post-doctoral researcher investigating
the role of responsible investment in driving food
industry accountability for heath.
In FY24, our ethical product offering was recognised
by a number of awards and accolades. We won the
Australian Equities: High Active Risk 2024 category
in the Financial Standard Investment Leadership
Awards 2024 (Australian Ethical Diversified Shares
Fund); and the Best Ethical Overseas Fund in the
Mindful Money Awards Aotearoa 2024 (Australian
Ethical Australian Shares Fund). Our super fund was
ProductReview.com.au’s Best Retail Super Fund for
2023 and remains Finder’s Green Superannuation
Fund of the Year for 2023. Our leading approach was
recognised by Morningstar when we were named
in January 2024 as 1 of only 8 global ‘Leaders’ for
ESG Commitment12; by Rainmaker as an ESG Leader;
and again by RIAA in their select list of Responsible
Investment Leaders. We were also proud to be the
highest scoring Certified B Corporation (B Corp) in
Australia & Aotearoa NZ at our last certification on
13 July 2023.
In FY25, we will focus on integrating Altius and
delivering key strategic, transformative initiatives
to continue our investment capability uplift. We
will leverage the expertise of our newly enhanced
internal capabilities for future product development,
particularly in Private Markets and Systematic
Equities, as well as explore new thematic investment
opportunities.
11 Climate Change Act 2022
12 The Morningstar ESG Commitment Level: Our assessment of 108 asset managers' white paper. © 2023 Morningstar, Inc. All rights
reserved.
1. Principled
investment
leadership
Deliver superior risk
adjusted returns over
the long-term, and be
a powerful influence in
ethical investing
3. Compelling
client experience
Deliver a seamless,
modern and engaging
client experience to help
support the creation of a
better financial future for
customers, and provide
accessible and affordable
investment solutions
2. Advocates for
a better world
Foster a coalition of
co-investors in the cause
for a better world.
A bold voice harnessing
people power, strength
of community and values
aligned organisations
4. Impactful
business
Showcase the duality
of a deeply purpose
driven and commercially
successful business
at scale and inspire or
influence organisations
and society to do well and
to do good.
Executing against our strategy in FY24
Purpose: Investing for a better world
Leadership & Innovation: differentiated, purpose driven & high-performance culture
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
Advocates for a better world
As we expand our asset class coverage to include
fixed income and private markets for example, we will
be able to advocate for money as a force for good
in more segments of the economy. In December, to
help us to deliver on this promise, we embedded our
Theory of Change13 into our Investment Beliefs. Our
Investment Beliefs encapsulate our investment style,
approach and how we think we can create value for
customers. Though a guiding document like this is
typical for investment firms: most investment firms
do not create value that is both financial and ethical.
So, it is critical to represent this dual lens in the
documentation of our Investment Beliefs.
We also sought to provide further clarity to customers
about one of the key levers of our Theory of Change –
our distinctive ethical approach to capital allocation.
In FY24 we refreshed our customer communications
on ethics, producing for the first time a standalone
summary Ethical Guide.
Over the year, the Impact & Ethics team also
undertook activities in our four existing stewardship
priority areas – turning off finance for the
unsustainable expansion of fossil fuels, stopping
livestock driven deforestation in Australia, reducing
building sector emissions, advancing alternatives to
animal research – and a new priority area of climate
change policy.
During a periodic review of our stewardship priority
areas, we determined that advocating for ambitious
climate policy is a key opportunity where our
experience in this field and credibility could lend
weight. Furthermore, ambitious, and effective climate
policy serves to underpin all aspects of our Ethical
Charter.
We see an immediate and compelling opportunity
to coalesce the voices of investors, companies, and
the public, around Australia’s next carbon target.
This must be both ambitious and science-led. We
see this outcome as critical for all stakeholders, as
an orderly 1.5-degree transition is the best outcome
for living beings and the least cost alternative for the
economy. What’s more, acting with foresight, pace
and providing policy certainty will provide Australians
with the best chance to seize opportunities and
attract capital.
As part of our continuing efforts to turn off financing
to the unsustainable expansion of fossil fuels, we
co-filed climate-focused shareholder resolutions
at the 2023 NAB and Westpac annual general
meetings. Both received substantial and increased
support empowering our calls for progress. The
Westpac resolution, calling for a broader application
of policies to shift customers to greener energy
sources, received 21.5% of proxies in support, more
than double the level of the previous year.
The NAB resolution received four times the investor
support of the prior year's climate resolution, with
more than a quarter of proxies voting in favour. NAB
subsequently released expectations for customer
climate transition plans which respond to our
engagement asks.
While there is more to do to turn off expansionist
funding, this progress and the level of support is
pleasing.
Following continued engagement which we led,
Boral committed to improve their practices against
the CA100+ benchmark lobbying indicators and AdBri
commenced disclosure on lobbying activities for the
first time in 2024.
Over the year, we engaged14 more than 330
companies (or other entities) seeking progress
on ethical issues. Of these, more than 140 were
proactive engagements15: including direct
interactions, where we actively contributed to a
collective engagement; co-filings; or shareholder
voting through nominal advocacy holdings. Of
proactive engagements, more than 30% committed
to or made a positive change this year16. We made
two divestments on ethical grounds17.
In the period we voted on 99.25% of votable
meetings. 396 meetings were voted in total.
Of these, 17.68% were cast against management
recommendation. More detail will be available in our
Proxy Voting Report for FY2418.
Along with the assessments by Morningstar,
B Corp, RIAA and Rainmaker covered earlier in this
report19, our ethical approach was recognised by
Banks for Animals, who placed us in the top 5 of 80
global financial institutions for our actions to address
animal welfare and support plant-based transition.20
In addition, Alison George, our Head of Impact &
Ethics, was recognised in financial services industry
publication FS Sustainability’s 2024 ESG Power50
Guide.
The Australian Ethical Foundation
The Australian Ethical Foundation continues its
important work supporting innovative and effective
charities combatting climate change. The record $1.8
million donated by AEI to The Foundation in FY24
brings the cumulative total donated to not-for-profits
to just over $11 million21.
Utilising new and retained funding from previous
years, The Foundation continued its support of
not-for-profit organisations in FY24. This was
delivered through its multi-year Strategic Grants,
and its Visionary Grants program which funds
projects trialling new approaches to solving climate
change. The quality of the grant applications we
receive continues to rise, with successful projects
representing all our focus areas, from grassroots
community projects, all the way to system level
interventions.
A new three-year strategy was also approved by The
Foundation’s Board in FY24. Our focus will continue
to be on climate and nature-related activities, with an
emphasis on alignment with our ethical stewardship
program across Australian Ethical and partnering with
other philanthropic organisations to maximise impact.
16 Commitments to change are commitments made by the engaged entity after our engagement commenced, that reflect progress
towards the ultimate objectives of the engagement beyond acknowledgment of an issue. For examples of commitments and
information on how they are identified, see the Stewardship Reports available on our website.
17 Investments exited during the year due to ethical re-assessment. Not including companies excluded from initial investment.
18 australianethical.com.au/shareholder/corporate-governance/
19 Page 9
20 Rank 3; scoring 34 out of 42 in an assessment of 80 financial institutions globally on their actions to address animal welfare and
support plant-based transition: banksforanimals.org/
21 The amount cumulatively allocated to not-for-profits (NFP) by AEI, which includes grants made to NFPs made by AEI prior to the
Foundation’s inception
22 roymorgan.com/findings/2023-most-trusted-finance-and-insurance-brands
13 Theory of Change at: australianethical.com.au/why-ae/influence/
14 We count one engagement where we engaged with a company on a topic or series of topics. There may be multiple activities within
that engagement. For example, our engagement with Westpac is counted as one engagement which included meetings, emails
and co-filing a shareholder resolution. We may count two engagements with a company if there were separate activities on entirely
separate topics.
15 Our 'proactive' engagement count includes where we engaged directly with a company, government or other entity; we actively
contributed to collective engagements (as distinct from simply 'signing on'); we used a nominal advocacy holding to support
shareholder resolutions; or we co-filed a resolution. Commitments to change are commitments made by the engaged entity after
our engagement commenced, that reflect progress towards the ultimate objectives of the engagement beyond acknowledgment
of an issue. They may be identified through e.g. direct company responses, company reporting or actions taken, changes to
government policies or draft legislation, or actions taken by industry associations. For examples of commitments, see our
Stewardship Report: australianethical.com.au/why-ae/ethical-stewardship/
Compelling client experience
Since insourcing the customer servicing functions for
our super members in 2021, we have been working
hard to create a best practice, inhouse servicing
model. Together with a new telephony system, we
have built a strong operating model, rhythm and
cadence to support our high performing team. We
introduced the CARE (Collect, Analyse, Resolve,
Empower) framework to ensure feedback is actioned
at scale to make our customers feel heard and
valued.
While enhancing operations, we have also improved
the ease of doing business with us. Despite record
levels of interaction, our post-call customer
satisfaction scores are consistently in the 90% range,
with verbatim comments reflecting these results.
We are incredibly proud of the results we have
achieved. We were the Retail Superannuation Fund
of the Year in the Roy Morgan 2023 Customer
Satisfaction Awards and in the Top 3 Most Trusted
Super Brands according to Roy Morgan22, we won
the Best Inclusive Customer Experience at the CX
Awards and were finalists in three categories of the
Customer Service Institute of Australia Awards.
Building the brand to support growth
Having a strong, differentiated, and distinct brand
is critical to customer growth in both our direct and
B2B channels, and as such we continued to invest in
building brand awareness and consideration in FY24.
We launched a new brand campaign — ‘When you
prosper, we all thrive’ — at the end of January 2024.
The campaign has been designed to communicate
the core tenet of our investment principles — that
Australian Ethical strives to both deliver positive
returns and to make a difference in the broader
community. It continues to be highly visible to our
target market into FY25.
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
YouGov’s BrandIndex from April 2024 reveals that
while the campaign has increased brand awareness,
we continue to have low awareness compared to
the large super funds. However, the same research
shows that those who are aware of the brand have
significantly higher levels of brand consideration
and purchase intent than other super funds are
demonstrating.
In recognition of the vital connection between brand
and business growth, brand strategist Emma Grainge
was appointed in February 2024 as the new Head of
Brand and Communication. In addition to advertising,
Emma is tasked with building Australian Ethical’s
brand and reputation for responsible investment
leadership across content, social media and brand
partnerships.
The FY24 market environment was dominated by
cost-of-living pressures, market volatility and a
greenwashing backlash. These factors contributed
to a level of consumer inertia that impacted
switching and fund flows in super and managed
funds. Nevertheless, Australian Ethical continues to
win new super members and achieve positive net
flows. Super is an important source of growth for
our retail business, with mandated SG contributions
providing an ongoing, annuity-style revenue
stream. Our purpose-led business is attractive
to all demographics, but particularly to younger
customers, who may have low balances at the time
they join but represent decades of loyalty to come.
Indeed, our super retention figures are some of the
best in the industry23.
Impactful business
While $10 billion in FUM and $100 million in revenue
were significant milestones achieved in FY24, we are
just starting to deliver our ambitious growth strategy.
We have built an inhouse merger and acquisition
discipline and are pleased by the speed, integration
results and overall success of our recent SFT. This
capability will help to facilitate the effective execution
on the recently announced acquisition of the Altius
Asset Management business as well as future
opportunities.
23 2024 KPMG Super Insights Report and dashboard (Data source: APRA Annual fund level superannuation statistics back series:
June 2004 to June 2023 (issued 13 December 2023)
24 Over the contract period and subject to customer and FUM levels. To commence on the delivery of the super administration
transition and the custody and investment administration transition
We were delighted to win the Financial Services
Growth Company of the Year Award, 2023 in the
Australian Growth Company Awards. This award
program recognises exceptional growth companies
across Australia. An independent panel of judges
determined the winners from a list of finalists
demonstrating the highest rates of sustainable
growth, innovation, integrity, and contribution to the
community.
We continue the work to build a scalable, flexible
and professional platform to support the organic
or inorganic growth to come. We have made good
progress on our transformational programs, the
consolidation to a single super administrator
(GROW Inc) and the move to a new custodian. These
two projects due to complete in FY25 will further
enhance our readiness for future growth, while
reducing unit costs over time and delivering
a roadmap of enhanced member services.
Once the super administration transition project is
complete, it is expected to deliver a staged customer
experience uplift and a new modern technology
stack. Upon completion in late FY25, due to a more
favourable pricing agreement, the transition to GROW
is expected to deliver annualised unit cost savings of
approximately $3 million, with the custody transition
expected to deliver operating cost savings of
approximately $1 million per year post completion24.
We will also continue to invest in further customer
experience enhancements.
To facilitate integration of these projects, in early
FY24 we reviewed our end-to-end investment
processes and have developed a future state target
operating model which we are now working towards
implementing. The new model includes enhanced
front office systems for portfolio management and
trading, performance and risk, a new investment
book of record (IBOR), and a new investments data
platform and reporting capabilities. To facilitate
the new model, we established a revised support
organisational structure with clearer functional
accountabilities, segregation of duties, and
streamlining of processes to provide enhanced risk
management and efficiencies.
25 Culture Amp Employee engagement survey June 2024
26 The full public data report which includes information on our organisation’s policies, strategies, and actions on gender equality and
workforce statistics is available on our website: australianethical.com.au/shareholder/corporate-governance/
Leadership, culture & innovation
In FY24 we continued to invest in our people, the
lifeblood of our purpose-driven and high performing
culture. We maintained our focus on the important
capability build-out in key areas such as our Data
and Technology team, Product team, Brand team,
Investment, and Impact & Ethics teams.
To support this uplift, we implemented several
development programs focused on industry
knowledge, continuous improvement, and
empowering efficient and effective decision-making.
During the financial year, 26% of employees
participated in the CFA Institute Investment
Foundations Certificate program which provides
learners with an understanding of the global
investment industry including terminology and
foundational concepts. We also developed a
12-month training program with Generation E, to
advance our employees’ knowledge of Microsoft
365 tools and applications to better enable their
performance and personal development, and
improve the employee experience with consistent
usage, streamlining processes and information flow.
To ensure we can continue to grow sustainably —
through more scalable, efficient, and automated
processes while improving the employee experience
— our third “AEx week” held in March 2024 had a
similar theme. Inspired by the book ‘Essentialism,
the disciplined pursuit of less’ by Greg McKeown,
sessions explored how focusing on the essential
aspects of decision-making and eliminating non-
essentials can lead to greater impact and increased
fulfilment both personally and professionally.
In FY24 we implemented an improved business
planning and goal setting methodology and
framework — OKRs (Objectives and Key Results).
The fundamental purpose of OKRs is to provide a
collaborative process for leaders to set strategic
direction, with clear measures of success, so that
all team members have a shared understanding and
common purpose and context to determine what
work they will prioritise. This approach has improved
individual and organisational performance.
Diversity, Equity & Inclusion
We are committed to fostering an inclusive and
equitable environment so our diverse talent can bring
their authentic selves to work and be at their best. We
believe in the inherent strength this creates, which
inevitably leads to better outcomes for our people,
customers, shareholders, and the wider community.
Indeed, a resounding 88% of participants in our 2024
employee engagement survey25 affirmed ‘Australian
Ethical builds teams that are diverse’ and that ‘We
have initiatives that inspire a positive and inclusive
environment’.
We’ve held targets for achieving gender diversity at
board and senior management level, the investment
team and across the workforce for a number of
years. And we have been tracking well against these
targets. In FY24, we set a new stretch target to have
women represent 40% of our investment team (30%
previously); by the end of FY24 we had achieved 36%
female representation.
This year we submitted our first Workplace Gender
Equality Agency (WGEA) report. This documents
the gender pay gaps for private sector employers
with 100 or more employees. It was pleasing to see
that the policies and practices we have in place are
delivering results, noting there is more to do. AE’s
Total Remuneration average gender pay gap is 12.1%
and Total Remuneration median gender pay gap is
9.4%, well below the national statistics of 21.7% and
19%, respectively26.
Inclusive benefits
This year we updated our Parental leave policy
and launched our gender-neutral 20-weeks paid
parental leave, which can be taken flexibly, to support
employees to care for their newborn child or for
a child placed with them for adoption, fostering
or via a surrogacy arrangement. We believe the
enhancements are transformative and inclusive for
men, women, and LGBTQIA+ people and better
reflects the reality of work and care arrangements for
many working families today. Since implementing
the proportion of males accessing parental leave has
increased.
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
Employee engagement
We are very proud of our high-performing, purpose-
led culture and were therefore pleased to see our
employee engagement score lift from 70% in the
prior period to 79% in June 2024. This is a top quartile
result according to Culture Amp’s Financial Services
Australia index27.
The word is getting out. This year our approach, and
a number of our people, were recognised by a range
of awards and accolades. In the Financial Newswire
Women in Wealth Awards 2024 we were finalists in
the categories of Employer of the Year; Investment
Professional of the Year (Deana Mitchell, Portfolio
Manager); Superannuation Professional of the Year
(Mei-Ling Cheong-Nepia, Head of Service & Ops).
We were winners of the CX Awards Best Inclusive
Customer Experience (client services team); winners
of the Customer Service Institute of Australia’s
Customer Service Champion Award (Nyssa Lobo
Bismire, Client Services Manager) and finalists in the
categories of Customer Service Professional of the
Year (Avir Alagh) and Customer Service Advocate
of the Year (Caroline Maillols). Maria Loyez, Chief
Customer Officer was Awarded a Fellowship from
The Marketing Academy Asia Pacific, a prestigious
global program available to only 20 high achieving
marketing leaders each year.
Reconciliation
We have advocated for and supported the
achievements of the Aboriginal and Torres Strait
Islander peoples for many years. We recognise
reconciliation will provide a better future where
both people and planet prosper. Our established
Reconciliation Action Plan (RAP) working group
has representatives from across the organisation
who design and implement initiatives to promote
reconciliation within Australian Ethical and
encourage, educate, and promote involvement from
the wider business. In 2023 we developed a Reflect
RAP to capture the work we are already doing, along
with our focus areas moving forward. Our Reflect RAP
was recently endorsed by Reconciliation Australia.
27 This ranks as top quartile for Financial Services Australia (top quartile is 78% and above). cultureamp.com/science/insights/financial-
services-australia
28 In September 2023 we reduced the Management Fee for the Australian Ethical High Conviction Fund from 0.80% p.a. to 0.69% p.a.
Profit
Underlying profit after tax (UPAT) was $18.5 million,
up 57% compared to the prior corresponding period.
UPAT excludes integration and transition costs, due
diligence and transaction costs and the Sentient
investment fair value write-down (see below).
The net profit attributable to shareholders was
$11.8 million, up 80% compared to the $6.6 million
for the 12 months to 30 June 2023. The net profit for
the Group amounted to $11.5 million, which includes
consolidating the Foundation’s activities.
As we continue to execute on our growth strategy,
FY24 has seen continued prudent investment in
initiatives to build a strong business platform and
growth engine.
Revenue
Operating revenue reached the $100 million
milestone for the period, increasing 24% to $100.5
million. The increase was achieved through further
growth in our customer numbers (with resulting
positive net flows), the full year positive impact of the
Christian Super SFT undertaken in the prior year, and
positive investment returns.
Our Emerging Companies Fund outperformed its
benchmark, resulting in a performance fee of
$0.2 million for FY24.
Average FUM growth for FY24 was 25%. The average
revenue margin across all products decreased from
1.03% in FY23 to 1.02% in FY24 reflecting the full year
impact of fee reductions at the time of the Christian
Super SFT and the management fee reduction on the
Australian Ethical High Conviction Fund28.
Expenses
As we continue to grow our business both
organically and inorganically, we are seeing
further improvements in operating leverage, with
FY24 underlying cost to income ratio (CTI) of 74%
compared to 79% in FY2329.
Expenses increased by 16%. This excludes
integration and transformation costs, due diligence
& transaction costs and the Sentient investment fair
value write-down (described below).
As a result of Sentient Impact Group Pty Ltd’s
(Sentient) inability to drive the scale required to
achieve its strategy and business plan aspirations,
the Sentient Board decided to commence an orderly
sale of its assets. Consequently, the final capital call
on Australian Ethical of $0.4 million was no longer
required or payable. After this amount of $0.4 million,
Australian Ethical has prudently recorded a fair value
write-down of $2.2m in FY24, effectively valuing any
further residual liquidation value at zero.
Key drivers of our cost base increase
in FY24 were:
Employee expenses
Employee expenses increased 24% following several
hires and talent acquisition as part of the growth
strategy as we continue to build capability in the
investment and ethics, and data and technology
teams. In addition, back-office teams have been
enhanced to build out our mergers and acquisition
capacity and strengthen our risk and governance
function. Further, the run rate of FY23 hires as well as
remuneration increases contributed to the increase.
FTE increased from 118 on 30 June 2023 to 12530 on
30 June 2024.
Fund related expenses
Fund related expenses increased by 26%,
representing a third of the 16% growth in overall
expenses. This was driven by higher average funded
customer numbers and FUM following the full year
impact of the Christian Super SFT. Inflation and higher
regulatory fees following APRA and ASIC’s levy rate
increases contributed to the expense uplift. These
increases were partially offset by savings achieved
through reaching scale thresholds.
Marketing
Marketing costs have decreased 22% year on
year due to the rationalisation of the Employment
Platforms channel, with a tilt in focus towards
our more profitable direct and advised channels.
Continued spend on brand advertising remains an
important component of driving our brand awareness
and growth, however timing of brand campaigns
resulted in lower brand spend in FY24 compared to
prior year. It is worth noting that our overall marketing
and brand costs remain significantly lower than many
other super fund competitors31.
IT expenses
IT expenses increased 21%, driven by the
commencement of the IT strategy to build a stronger
core in-house technology capability able to support
the required agility and future scaling of the business.
This will enable a data driven, digitalised business
with improved automation and innovation. Further, we
continue to improve our cybersecurity defences with
further investment in FY24.
External services
External services costs increased 15%, as due to
higher recruitment costs and higher internal and
external audit and tax services expenses.
29 Underlying cost to income ratio is calculated as: total expenses excluding UPAT adjusted expenses and excluding tax, divided by
total revenue
30 Excludes FTE assigned to projects whose costs are not captured in employee expenses
31 In absolute terms as per APRA Annual Fund Level Superannuation Statistics. Data as at 30 June 2023, published on 13 December 2023.
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
Funds under management
We ended FY24 with $10.44 billion in FUM, surpassing
the $10 billion milestone we achieved in March.
Investment performance represented $626 million of
this growth, while positive net flows of $607 million
($602 million of this provided by super) made up
the balance. In the period, we saw member growth
driving new rollovers in, while superannuation
guarantee (SG) and voluntary contributions continued
to rise on the back of the organic and inorganic
growth of our member base.
While super net flows remained strong, managed
funds flows were impacted by cautious market
sentiment relating to the market volatility and were
just $6 million for the year.
Our well diversified product set has ensured we
remain resilient during the challenging market
conditions and continue to grow total FUM.
Material business risks
Australian Ethical’s approach to risk management
is based on the Risk Appetite Statement set by
the Board, which sets out the overall appetite and
tolerance levels and defines limits for each material
risk category.
The Board holds the ultimate responsibility for setting
strategic direction, the risk management framework
(RMF) and determining the risk appetite/tolerance
for the activities of the business. The board forms a
view of the risk culture of the Group and any desirable
changes required and monitors implementation of
these changes.
The Board recognises that risk management is an
integral part of good management practice and is
integrated into the Australian Ethical philosophy,
practices, and business planning processes. A risk
aware culture and operation within the Boards’ risk
appetite and tolerances is promoted throughout the
organisation through regular communications from
management and within the provision of training and
ongoing support from the Risk team.
The Audit Risk and Compliance Committee (ARCC)
oversees and reviews the RMF, and reviews internal
and external audit results. This oversight includes the
identification, treatment, and monitoring of:
• The use of risk appetite
• Current and emerging material risks, including
(but not limited to) investment, data, technology,
and cyber risks
• Exceptions, incidents, and breaches
• Complaints
• The results of control testing
The full ARCC charter (and other board charters) can
be found on the Australian Ethical website at:
australianethical.com.au/shareholder/corporate-
governance/
The RMF is supported by the Three Lines of Defence
model with the first line being Senior Leadership
Team (SLT) who foster and enhance development
of risk culture within the Group, monitor risks, report
breaches and review risk register. The SLT have
day to day responsibility and accountability for risk
management in their area and ensure an appropriate
risk culture.
Australian Ethical’s second line, the Risk team,
facilitates the RMF, including review and update
of the risk register and RMF, reports on exceptions
and control effectiveness. The third line of
defence is Internal Audit, (which is outsourced to
PricewaterhouseCoopers in accordance with ARCC
approved annual audit program) who provides
assurance over the RMF and independent review of
the design and operation of the control environment,
as well as External Audit (KPMG) who provides
assurance, through the annual audits and reviews as
required by SPS 310 and the Corps Act, that internal
controls are designed appropriately and operating
effectively.
Risk category
Risk description/impact
Risk mitigants
Risk Management
Risk that AE breaches its corporate,
fund and superannuation regulatory and
legal obligations or industry standards
(including licence conditions, governing
documents).
Risk that AE’s insurance policies are not
appropriate to cover business risk levels.
• Dedicated Risk and Legal Team.
• Internal & external reviews of public documents.
• Mandatory compliance training for all staff based
on internal policies and procedures.
• Embedded controls assurance framework,
including requirement for independent
assurance.
• Compliance obligations are documented and
monitored.
• Breach reporting escalation processes.
• Annual review of insurance program.
Financial
Risk that AE’s profitability, capital
reserves or liquidity are inadequate to
support ongoing business activities.
This includes inappropriate accounting,
financial reporting and related
disclosures (for both the funds and
corporate entities), as well as incorrect
calculation and payment of tax, and
poor financial control and operational
processes.
Risk arising from low net flows or poor
investment performance as a result of
exposure to equity markets resulting in
potentially volatile earnings (revenue
linked to FUM), and poor customer
outcomes.
Risks arising from calculation of
incorrect unit prices.
• Appropriate financial control processes,
including monitored cashflows and cash
position, annual budgeting and regular
forecasting.
• Regular reconciliation and review processes
for financials, units on issue and applications/
redemptions.
• Regular monitoring of regulatory capital
requirements.
• Appropriate policies and procedures, quality
control, management approval frameworks
across financial process, asset valuations,
distributions, fees and expenses and approval
of unit prices.
• Internal and external audit, professional reviews
of finance and unit pricing controls.
• Agile management of resource allocation,
prudent cost control.
• Regular monitoring of key financial metrics.
• Monitoring of external market drivers e.g. interest
rates, inflation, and refinement of business
activities in response.
• Confirmation and recording of asset valuations
including Valuation Committee for unlisted
assets.
• Unit Pricing oversight model including Unit Price
Committee.
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
Climate change
Climate change is a systemic risk to our
business, investments, and the financial
system as a whole.
High emitters in particular face
regulatory, legal and reputational risks,
as do their value chains, including
those who finance their activities. This
risk can manifest as increased costs,
changes in demand, and declines in
asset values, including asset stranding.
Climatic changes, both chronic and
acute, can affect costs, revenues,
and asset values, and will continue
to escalate unless effective policy
and technological responses are
implemented to prevent dangerous
climate change.
• Our response to climate change is considered
by our board in reviewing and approving our
corporate strategy and, via our investment
committee, where climate change related topics
are regular agenda items. The board includes
members with climate change expertise.
• Our investment beliefs recognise the criticality
of preventing dangerous climate change to both
our ethical and financial goals.
• Our ethical assessment and investments
processes consider climate change. We
restrict32 investments in companies assessed
to be obstructing the objectives of the Paris
Agreement to limit global warming to well below
2°C and to pursue a limit of 1.5°C.
• Our Chief Investment Officer and Head of Impact
& Ethics are responsible for implementation of
our ethical investment approach, including our
climate-related ethical assessment criteria.
• Our strategic and active asset allocation
processes consider climate risks.
• Our Impact & Ethics Team monitors existing and
emerging climate-related risks, using diverse
company, industry, government, responsible
investment, scientific, civil society and news
sources.
• We have established metrics to monitor the
effectiveness of our ethical investment approach
in managing climate risk and report on these in
our full Annual Report published on 11 October
2024.
Environmental,
Social and
Governance (ESG)
Risk arising from inadequate or
inappropriate Ethical and Environmental,
Social and Governance (ESG)
considerations in business and
investment decision-making. Risk
may arise due to unclear employee
accountabilities, inadequate board
reporting, inadequate identification
and management of conflicts, non-
compliance with Ethical Charter.
• Our Ethical Charter forms part of Australian
Ethical’s constitution and informs all aspects of
company operations.
• Robust ethical assessment and investment
processes - all investments are evaluated
against the positive and negative principles in
our Ethical Charter.
• Embedded governance framework including
board and committee charters, board and
committee reporting.
• Board oversight responsibilities are underpinned
by the Ethical Charter, which is embedded in
Board Charter.
• B Corp certification status maintained.
Risk category
Risk description/impact
Risk mitigants
Investment &
ethical evaluation
Risk arising from inappropriate
investment strategies, non-adherence
to investment governance, non-
adherence to fund governing
documents, non-adherence to ethical
criteria or inadequate management of
market, credit and liquidity risks within
the funds.
Risk arising from underperformance
of Managed Funds and Super Options
relative to stated investment objectives.
• Regular ethical reviews of investments to ensure
they remain in line with our Ethical Charter .
• Established investment governance frameworks
in place.
• Investment performance analytics.
• Stress testing.
• Reviews, reconciliations and monitoring of key
metrics.
• Investment Committee (IC) in place with
independent members appointed.
• Quarterly review of performance (including
attribution) by Investment Committee .
• Annual review and approval of Strategic Asset
Allocations.
• IC approved Trust Investment Parameters.
Customer
Risk arising from inaccurate, misleading
or inadequate PR, marketing, brand,
sustainability reporting or advocacy
activities leading to reputational
damage, regulatory penalties and
negative stakeholder sentiment.
Risk arising from inadequate processes,
systems, outsourced suppliers, quality
standards, product offering resulting in
poor customer experience, reputational
damage and financial impacts.
• Regular monitoring of brand awareness.
• Media monitoring and Media Policy.
• Review processes over marketing material.
• Mature ethical stewardship activities embedded.
• Monitoring of key metrics relating to customer
satisfaction (CSAT).
• Complaints handling processes.
• Product guidelines, frameworks and policies.
Strategic
Risk arising from poor strategic
decisions, inadequate development and
execution of strategic initiatives, a lack
of responsiveness to regulatory change
or external market and economic trends
that could affect our offering or market
position.
• Robust and embedded strategy and business
planning processes that includes regular review
and monitoring of external market trends and
metrics.
• Dedicated Project Management Office (PMO)
and program management framework for
effective execution of strategic and regulatory
initiatives.
• Senior Leadership variable remuneration linked
to strategic metrics.
• Regular monitoring of progress against strategy
through ‘Objective and Key Results’ (OKR)
framework, reporting to Senior Leadership Team
and Board, incorporating agile reprioritisation of
initiatives.
Risk category
Risk description/impact
Risk mitigants
32 Our investment restrictions include some thresholds. Thresholds may be in the form of an amount of revenue that a business
derives from a particular activity, but there are other tolerance thresholds we can use depending on the nature of the investment.
We apply a range of qualitative and quantitative analysis to the way we apply thresholds. For example, we may make an investment
where we assess that the positive aspects of the investment outweigh its negative aspects. For information on how we make these
assessments for a range of investment sectors and issues such as fossil fuels, nuclear power, gambling, tobacco, human rights, and
many others, please read our Ethical Criteria at: australianethical.com.au/globalassets/pdf-files/why-ae/ae-guide-to-our-ethical-
investment-process.pdf.
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
Operations
(including
Outsourcing Risk)
Risk arising from inadequate processes,
systems, quality standards, data
management or from external events.
This includes (but is not limited to)
processing errors, human error, fraud,
unauthorised advice or an event which
disrupts business continuity.
Risk that AE enters into untenable
contracts and servicing agreements
with vendors and suppliers or selects an
unsuitable vendor or supplier.
Risk that services provided by external
service providers are not managed in
line with contractual obligations and
service level agreements.
• Embedded policies, methodologies,
procedures, roles and responsibilities (including
segregation of duties where needed).
• Board subcommittees e.g., Due Diligence
Committee.
• Internal Fraud Design Taskforce.
• Controls assurance framework.
• Effective incident and issues management
processes.
• Business continuity planning and disaster
recovery programs (including by outsourced
providers).
• Comprehensive insurance program.
• Robust documented processes for new product
delivery and product management (including
regulatory compliance).
• New vendor due diligence processes.
• Monitoring of key metrics, contractual
arrangements and service delivery.
IT & Cybersecurity
Risk arising from inadequate, failed,
breached or corrupted IT systems
resulting from poor infrastructure,
data management, applications,
cloud services, business continuity
plans, security controls, IT support or
unauthorised access. Includes (but is
not limited to) confidentiality or privacy
breaches, loss of data integrity, loss
of sensitive or critical data as well as
business disruption or financial loss
resulting from a cyber security event,
disaster or failure of technology service
provider to meet business needs.
• Embedded IT security policies and procedures
including mandatory IT policy and phishing
training.
• Operational technology security in place
(including firewalls and antivirus).
• IT system penetration testing; Password integrity
testing.
• Regular board oversight over cyber security
risks. The Board and/or ARCC reporting receives
reports on cyber risk, threats, uplift programs,
cyber incidents (if any), and information security
testing results that identify material information
security control deficiencies requiring
remediation (if any).
• Business continuity planning and disaster
recovery programs including testing (including
service providers), incident response plans.
• AEI Board monitors IT Disaster Recovery Plans
and Business Continuity Plans and annual
testing.
• Independent assurance.
Risk category
Risk description/impact
Risk mitigants
People
Risk arising from an inability to hire,
engage, develop, empower and retain
quality and appropriate capability
(including Senior Leadership and Board)
to meet performance objectives and
execute AE’s business strategy.
Risk arising from inadequate work health
and safety (WH&S) practices.
Risk arising from unethical conduct
by directors or employees, or from
behaviours that are not aligned with AE’s
values, culture and expectations.
• Embedded People policies and procedures
(including WH&S policies, procedures and
training).
• Succession planning, talent identification
programs, retention and hiring strategies,
embedded performance review processes,
remuneration benchmarking and reporting to
the People, Remuneration and Nominations
Committee.
• Remuneration framework to ensure senior
management alignment to medium- and longer-
term strategic goals.
• Investment team remuneration structure aligned
to performance objectives.
• Regular employee engagement and turnover
monitoring; dedicated employee engagement
business representatives.
• Employee assistance program.
• Inclusion of risk metrics and thresholds as well
as values alignment assessment in performance
management framework.
Risk category
Risk description/impact
Risk mitigants
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
33 Over the contract period and subject to customer and FUM levels. Savings to commence on the delivery of phase 1 of the super
administration transition and the custody and investment administration transition.
34 Relates to the increased revenue from the Altius take-on FUM, less the additional expenses relating to Altius Fixed Income team,
registry, custody and front office system license costs
Outlook
The medium-term market opportunity remains
compelling, and we head into FY25 with good
momentum. The expected completion of the
Altius acquisition in September 2024 as well as
continued organic growth, and the increase of
the superannuation guarantee rate, is expected to
underpin further FUM growth in FY25.
In FY25 our investment focus will be the delivery
of key inflight projects, including the transition
of our super administration to GROW, as well
as the transition of our custody and investment
administration to State Street as our current custodian
exits the market. Whilst we continue to invest in our
business platform, the completion of these projects
is expected to deliver annualised unit-cost savings
of approximately $4 million to recurring operating
expenses33.
Our Data and Technology strategy implementation
will continue, with further enhancements delivered
to our technology infrastructure to enhance internal
efficiencies and access to data and business
intelligence in support of business growth. Further
investment in cybersecurity will continue to manage
this risk in the rapidly evolving external environment.
We will continue to hone the capability of our
investment team to build on our ethical investing
competitive advantage and complete the
enhancement of our investment management
platform. This will bolster operational, product
development and trading capabilities and systems,
to support a business of much larger scale. We
believe this will translate to an enhanced investment
capability across all asset classes, strong investment
performance outcomes, as well as increased
innovation through new investment products and
business initiatives.
Furthermore, the acquisition of Altius is expected
to generate approximately $1 million in annualised
EBITDA uplift34.
Notwithstanding the continued investment in our
business, we remain focused on delivering operating
leverage as we scale, whilst remaining cognisant of
uncertain market conditions.
As a business, we look forward to the opportunities
that lie ahead. We continue to be well-positioned
with no debt, well-managed cash flows and solid
momentum heading into FY25.
Financial Performance – management analysis
Financial Performance – management analysis
2024
$’000
2023
$’000
% Increase
(Decrease)
Net Profit after tax (NPAT) including performance fee
11,531
6,576
75%
Add: Net loss attributable to The Foundation*
316
–
Net profit after tax attributable to shareholders
11,847
6,576
80%
Adjustments:
Change in fair value of investment
2,159
2,600
Integration & transformation costs (refer to Note 13)
5,068
3,733
Due diligence & transaction costs (refer to Note 14)
1,379
–
Tax on adjustments
(1,934)
(1,120)
Underlying profit after tax (UPAT) including performance fee
18,519
11,789
57%
Performance fee (net of bonus, tax and Foundation grant)
78
–
Underlying profit after tax (UPAT) excluding performance fee
18,441
11,789
56%
Diluted EPS on NPAT attributable to shareholders (cents per share)
10.51
5.84
Diluted EPS on UPAT attributable to shareholders (cents per share)
16.44
10.46
* refer to Note 37 for additional details in relation to The Foundation's financial results.
Operating leverage
2024
$’000
2023
$’000
Total expenses per statement of comprehensive income
80,798
67,914
Less:
Integration & transformation
(5,068)
(3,733)
Due diligence & transaction
(1,379)
–
Total underlying operating expenses
74,351
64,181
Divided by:
Total operating revenue
100,491
81,096
Underlying cost to income ratio
74%
79%
Dividends
Dividends paid during the financial year were as follows:
2024
$’000
2023
$’000
Final dividend for the year ended 30 June 2023 of 5.00 cents
(2022: 3.00 cents) per ordinary share – fully franked
5,639
3,372
Interim dividend for the year ended 30 June 2024 of 3.00 cents
(2023: 2.00 cents) per ordinary share – fully franked
3,383
2,256
9,022
5,628
Since year end the Directors have declared a final dividend of 6.00 cents per fully paid ordinary share
(2023: 5.00 cents final dividend). The aggregate amount of the declared dividend expected to be paid on 18
September 2024 out of profits for the year ended 30 June 2024, but not recognised as a liability at year end, is
$6,767,000 (2023: $5,639,000).
All dividends paid during the year were fully franked based on tax paid at 30.0%. The final dividend to be paid in
September 2024 will be fully franked at 30.0%.
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
Changes to contributed equity during the year and prior to the issue of the report
During the year and prior to the release of this report the following changes to contributed equity occurred:
Details
Date
Shares
Weighted
Average
issue price
$’000
Balance
1 July 2023
112,782,052
10,515
Vesting of deferred shares in the Employee
Share Plan (255,234 shares)
15 September 2023
–
$4.53
1,156
Vesting of deferred STI shares (108,628 shares)
15 September 2023
–
$6.10
663
Vesting of deferred shares in the Employee
Share Plan (8,528 shares)
10 November 2023
–
$5.29
45
Purchase of deferred shares in the Employee
Share Plan – on-market (568,032)
23 October to
12 December 2023
–
$4.53
(2,571)
Purchase of deferred shares in the Employee
Share Plan – on-market (18,261)
22 December 2023
–
$5.27
(96)
Vesting of deferred shares in the Employee
Share Plan (2,271 shares)
1 February 2024
–
$7.37
16
Vesting of deferred shares in the Employee
Share Plan (7,013 shares)
1 March 2024
–
$5.68
40
Vesting of deferred shares in the Employee
Share Plan (72,121 shares)
6 March 2024
–
$6.49
468
Balance
30 June 2024
112,782,052
10,236
No amounts are unpaid on any of the shares. Refer to Note 25 for additional information and a detailed
breakdown of the shares vested during the year.
Significant changes in the state of affairs
In May 24, Australian Ethical signed an agreement to acquire the Altius Asset Management business from
Australian Unity. This will result in six new employees in the fixed income team, an expanded bond fund
portfolio and a new institutional client (Australian Unity). When completed in early FY25, the deal will add
approximately $2 billion to Australian Ethical’s funds under management.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
Apart from the dividend declared in Note 27, no other matter or circumstance has arisen since 30 June 2024
that has significantly affected, or may significantly affect the Group’s operations, the results of those operations,
or the Group’s state of affairs in future financial years.
Likely developments and expected results of operations
Information about likely developments in the operations of the Group and the expected results of those
operations in future financial years has not been included in this report because disclosure of the information
would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
To the best of the directors’ knowledge, the relevant environmental regulations under Commonwealth and
State legislation have been complied with.
Meetings of Directors
The number of meetings of the Company’s Board of Directors (‘the Board’) held during the year ended
30 June 2024, and the number of meetings attended by each Director were:
Full Board
People, Remuneration and
Nominations Committee
Audit, Compliance and
Risk Committee
Eligible
Attended
Eligible
Attended
Eligible
Attended
Steve Gibbs
11
11
7
7
6
6
Kate Greenhill
10
10
7
7
6
6
Mara Bun
11
11
7
7
6
6
Julie Orr
11
11
7
7
6
6
John McMurdo
11
11
–
–
–
–
Sandra McCullough
11
11
7
7
–
–
Due Diligence Committee
Investment Committee
Eligible
Attended
Eligible
Attended
Steve Gibbs
8
8
–
–
Kate Greenhill
8
8
–
–
Mara Bun
–
–
8
8
Julie Orr
–
–
8
7
Sean Henaghan
–
–
8
8
Steve Rankine
–
–
8
7
Sandra McCullough
–
–
8
8
Michael Anderson
–
–
8
6
Ludovic Theau
–
–
8
8
Indemnity and insurance of officers
The Company has indemnified the Directors and Executives of the Company for costs incurred, in their
capacity as a Director or Executive, for which they may be held personally liable, except where there is a lack of
good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the Directors and
executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract
of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of
the Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Directors’ Report
for the year ended 30 June 2024
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year
by the auditor are outlined in Note 31 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or
by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 31 to the financial statements do not
compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following
reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards
Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making
capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and
rewards.
Officers of the Company who are former partners of KPMG
There are no officers of the Company who are former partners of KPMG.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities
and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in
accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest
dollar.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001
is set out immediately after this Directors’ report.
Auditor
KPMG continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
On behalf of the Directors
JOHN MCMURDO
Managing Director and Chief Executive Officer
28 August 2024
Sydney
50
51
ANNUAL REPORT 2024
Remuneration
Report
Australian Ethical’s history.
Our results have been boosted by the first full-year
benefit of the successful Christian Super successor
fund transfer, which has contributed to the very
strong 57% uplift in underlying profit after tax.
We have also continued to grow organically despite
challenging markets. In FY24 we achieved positive
net flows of $607 million at a time many of our
competitors are in net outflow position. Together with
$626 million of positive investment return our funds
under management grew 13% to a new record high of
$10.44 billion.
With our greater scale, we are now delivering
higher profits, higher dividends and also delivering
meaningful improvements to our operating leverage,
with our underlying cost to income ratio1 further
improving in FY24 to 74%. All of this has enabled a
five-year total shareholder return (TSR) of >160% –
compelling evidence of our long-term value creation
for shareholders.
Whilst we are very pleased with our financial metrics
for the period, we are also delighted that our strategy
is delivering positive outcomes across many other
areas of our business, including:
• our enviable customer retention and customer
satisfaction, recognised through multiple awards,
• our strong brand trust and recognition, being
named Roy Morgan top 3 most trusted super
brands,2
• continued recognition for our responsible
For the year ended 30 June 2024
Dear Shareholder,
On behalf of the Board, I am pleased to present our
Remuneration Report for the financial year ended
30 June 2024 (FY24).
The remuneration report provides our shareholders
and stakeholders with a thorough and transparent
outline of our remuneration framework and the
philosophies behind the remuneration arrangements
and other employee benefits. It specifically focuses
on the remuneration outcomes of Non-Executive
Directors, the Chief Executive Officer (CEO) and
senior executives, collectively referred to as Key
Management Personnel (KMP), and how they align
with our performance and strategic goals for the
current and future years.
A transformational year
While FY24 has been a challenging year for markets
and investment performance, in many respects, it has
represented a coming of age for Australian Ethical.
In 2021 we outlined our strategy to capture the
significant opportunity represented by the macro
trend towards responsible investing and have been
investing prudently to build a scalable business
platform and grow the business both organically and
inorganically.
In FY24, as we reflect back on this journey, we
have much to celebrate, as the benefits of this
strategy are becoming evident. During the year, we
were delighted to reach the major milestones of
$100 million revenue, and $10 billion Funds under
Management (FUM) – a significant achievement in
1
Underlying cost to income ratio is calculated as: total expenses excluding UPAT adjusted expenses and excluding tax, divided by
total revenue
2 2023 Roy Morgan Trusted Brand Awards Report
ANNUAL REPORT 2024
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Australian Ethical Investment Limited and its Controlled Entities
Remuneration Report
for the year ended 30 June 2024
investment standing and ESG commitment,
• our high quality product offering, recognised
through multiple awards and accolades, and
• our outstanding talent and high performing people.
These strengths position us very well to continue
the positive growth trajectory we have achieved
in recent years. The planned FY25 acquisition and
integration of the Altius business, and the transition
of our custody and administration platforms, which
are expected to generate future unit cost savings and
further profit improvement for the business over time,
allow us to look forward with confidence.
These results are made possible through the
significant contribution and commitment of our
employees, with their high levels of engagement
being a testament to the shared purpose that
underpins the strength of our business.
Remuneration and reporting changes
At the 2023 Annual General Meeting, the Company’s
remuneration report received a ‘no’ vote of 27.01%
cast on the resolution that the remuneration report be
adopted. This constituted a ‘first strike’.
2023 voting participation was low with shareholders
holding only 35% of the issued shares of the
company voting on the resolution to approve the
Remuneration report. The 27% vote against the
approval of the report therefore represented less than
10% of shares eligible to vote on the resolution.
The Board has undertaken the following initiatives,
which also address the proxy adviser suggestions
raised in 2023:
• Weightings have been applied to the performance
measures in the STI Balanced Scorecard to
improve the transparency of STI achievement, with
50% assigned to financial measures to align closely
with shareholder outcomes
• Increased transparency of STI achievement through
improved disclosure of achievement outcomes
• Implemented a change to the determination of ESP
vesting that directly addresses last year’s proxy
adviser concerns regarding board discretion. In
FY24, ESP vesting outcome is determined against
a pre-approved metric, being ‘Adjusted NPAT pre
performance fee’ (see Section 4.4 for further detail)
• Improved disclosure relating to the Executive
Long Term Incentive (ELTI) program, the long-term
incentive scheme relevant for Executive KMPs as
distinct from the broader and smaller employee
share ownership program (ESP) which applies to all
employees
• Shareholder approval will be sought for the CEO’s
Long Term Incentive grant (equity rights) under the
ELTI.
In addition, the Board has approved a number
of planned initiatives to increase shareholder
voting participation and to improve shareholder
engagement in voting for the resolution.
Remuneration philosophy
and framework
Our remuneration policy aligns to the philosophy
of the Company that sees our people as key
stakeholders in the Company’s success. Our
remuneration framework aims to reward our
management and employees fairly and competitively.
Further, our framework aims to provide a direct link
between contribution and reward and alignment with
the long-term performance of the Company, and in
turn, long-term value creation for shareholders.
Each year, the Board and its People, Remuneration
and Nominations Committee (PRN) review the
remuneration framework and have oversight of
remuneration arrangements for all employees,
setting company key performance objectives to
align employee performance and behaviour with
remuneration outcomes.
Other than the reporting changes disclosed above,
and changes that might be necessary to align to the
Financial Accountability Regime (FAR), no changes
are contemplated for FY25.
Following a comprehensive market review in 2021,
assisted by AON Advisory, a number of changes were
advised and implemented. This year, the outcomes of
these changes have been actualised, and saw:
• The Employee Share Plan (ESP) redesigned and
Executive KMP allocations reduced in size to 10% of
fixed remuneration to align with other employees.
The ESP exists to ensure all employees are able
to participate in company ownership and hold an
interest in the success of the organisation. This
is in alignment with the Australian Ethical Charter
which supports “the development of workers’
participation in the ownership and control of their
work organisations and places”.
• The introduction of an Executive Long-Term
Incentive (ELTI) to ensure appropriate focus on the
significant growth aspirations of Australian Ethical.
The ELTI is a separate program, comparative to
competitor LTI programs, and applies to Executive
KMP’s and select Senior Executives only and
reflects more stretching targets and hurdles to
drive the achievement of long-term objectives and
deliver long-term shareholder value creation. The
longer dated vesting periods (4 years) also aids the
achievement of regulatory and ASX governance
principles which recommend a greater weighting
toward deferred remuneration within total
compensation arrangements.
All elements of our remuneration framework seek to
drive our growth aspirations which will amplify our
impact and realise our purpose of better outcomes
for all stakeholders, including people, planet and
animals.
FY24 variable remuneration outcomes
The PRN and the Board spend considerable
time each year evaluating the contributions and
performance of the company, CEO and other
Executive KMP to arrive at the variable incentive
outcomes for each Executive KMP, measuring
achievements against the Balanced Scorecard and
individual objectives. Objectives combine both
financial and non-financial business and customer
outcomes whilst ensuring an appropriate risk
culture is maintained. All employees, including
Executive KMPs, have objectives underpinned by
the company’s core values, whilst also incentivising
ethical behaviour and positive customer outcomes.
FY24 was a very successful year as outlined above.
Reflecting on Australian Ethical’s business
performance, outcomes for FY24 include:
• CEO’s STI at 69% of maximum opportunity
• STI’s for other Executive KMP range from 27% to
62% of maximum opportunity
• The agreed hurdle for achievement of ESP, 3-year
EPS CAGR of 10% based on 'Adjusted NPAT pre
performance fee' has been exceeded, resulting in
the vesting of the 2021 ESP tranche for all relevant
employees
No ELTI was available for vesting in FY 24. The first
tranche of ELTI awards, which were granted in
2021 will be assessed against the pre determined
performance hurdles at the end of FY25 and will vest
if those performance hurdles have been achieved
(see section 4.7.1).
Looking forward
We annually review our remuneration framework
to ensure it remains contemporary and is aligned
with the Company’s strategy and industry trends,
whilst remaining focussed on current and upcoming
regulatory changes.
We are committed to ensuring our remuneration
arrangements remain fair to all stakeholders and are
effective in attracting and retaining talented people
who are motivated, professional and contribute
positively to Australian Ethical’s growth aspirations.
STEVE GIBBS
Chair
People, Remuneration & Nominations Committee
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1. Key Management Personnel
Name
Position
Term as KMP in FY24
Executive Key Management Personnel (KMP)
John McMurdo
Managing Director & CEO
Full year
Marion Enander
Chief Strategy & Innovation Officer
Full year
Karen Hughes
Chief Risk Officer & Company Secretary
Full year
Maria Loyez
Chief Customer Officer
Full year
Ross Piper
Chief Executive Superannuation
Full year
Mark Simons
Chief Financial Officer
Full year
Ludovic Theau
Chief Investment Officer
Full year
Non-Executive Directors
Steve Gibbs
Chair
Full year
Katherine Greenhill
Non-Executive Director
Full year
Mara Bun
Non-Executive Director
Full year
Julie Orr
Non-Executive Director
Full year
Sandra McCullagh
Non-Executive Director
Full year
KMP’s perform work for the Super Trustee and other entities within the AEI Group subject to an appropriate
conflicts management framework.
As a result of a reorganisation of Executive KMP responsibilities, the Board has determined that the Executive
KMP’s effective 1 July 2024 will be the Chief Executive Officer, Chief Financial Officer, Chief Investment Officer,
Chief Customer Officer and Chief Risk Officer.
2. Our people
People Plan
Success in achieving our strategic goals is largely contingent on the quality and performance of our people
and the health of our organisation’s culture. Our People Plan (people strategy) is focused on delivering people
and culture solutions that will enable the growth of our business and transform our operating model to become
a global role model in responsible investing.
The AE People Plan priority areas are:
• Diversity, Equity and Inclusion (“DEI”) to foster a DEI led organisation to enable better performance
• Talent and Capability to secure talent and capability now and for the future
• Performance and Reward to motivate and reward our people to act in the best interests of our stakeholder
groups
• Culture and Employee Experience to bring to life our 'Purpose Driven and High Performing' culture
Diversity Equity & Inclusion
• Submitted our first Workplace Gender Equality Agency (WGEA) report which identifies
gender pay gaps for private sector employers with 100 or more employees
• Australian Ethical’s total remuneration average gender pay gap is 12.1% and total
remuneration median gender pay gap is 9.4%, versus the national statistics of 21.7%
and 19% respectively
• Gender representation
– Board – 67% female, 33% male
– Executive – 50% female, 50% male
– Investment & Ethics Team – 36% female, 64% male
– Organisation – 50% female, 50% male
• Investment team participated in a number of activities organised by Future IM/Pact, an
organisation that helps women launch a career in investment management. Activities
included university student mentoring circle, early career mentoring and advocacy
program and a university student investment competition
• Updated our parental leave policy and launched a gender-neutral 20 weeks paid
parental leave program. We believe the enhancements are transformative and inclusive
for men, women, and LGBTQIA+ people and better reflect the reality of work and care
arrangements for many working families today. Since implementing, the proportion of
males accessing parental leave has increased
• Reconciliation Australia endorsed our Reflect RAP this year. The RAP provides a
framework for the work we have already been doing, along with the focus areas we are
committing to moving forward. Our RAP working group of representatives from across
the organisation designs and implements initiatives to promote reconciliation within
Australian Ethical with involvement from the wider business
FY24 achievements
During FY24 there were a number of market and external forces impacting talent attraction and retention
generally, including high inflation and an uncertain economy, tight labour market, and a demand for a human
centric working environment. A key focus of our people and culture strategy in FY24 was strengthening our
purpose-driven and high performing culture.
For many years, we have worked hard to build a diverse workforce, including gender balance of the Board
and Executive leadership team, as well as advocating for positive change in other organisations. Further, we
have been focussed on an initiative to increase female representation within the Investment and Ethics team, a
traditionally male dominated sector, and are delighted to now have 36% female representation in this team. Our
talented team are also being recognised through a range of awards and accolades.
Key People Plan initiatives and achievements are outlined below.
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Talent & Capability
• Enhanced investment team capability with the appointment of Natalie Tam, Portfolio
Manager, Systematic Equities and Adam Roberts, Head of Private Markets, as well
as three new analysts, to broaden capability across asset classes. The addition of
the Altius fixed income team will further boost our Fixed Income capability. The
enhancement of investment operations has been underpinned by the appointment of a
Senior Investment Operations Manager and an Investment Platform Technology Lead.
Ethics team capability was also bolstered by the January 2024 appointment of
Dr Ella Robinson as Senior Impact and Ethics Analyst
• 26% of employees have participated in our Investment Management Foundations
program which includes completing the CFA Institute Investment Foundations
Certificate course work
• Continued to develop a culture of continuous improvement: We partnered with
Bevington Group for a 12-month program of LEAN training to drive effective change
and operational excellence, and launched a 12 month program to advance knowledge
of Microsoft 365 tools to streamline processes and information flow
Performance & Reward
• Implemented an improved business planning and goal setting methodology and
framework through the launch of Objective and Key Results (OKR) framework. This
framework provides a collaborative process for leaders to set strategic direction with
clear measures of success, to align purpose as a means to effective prioritisation
Culture & Employee Experience
• Introduced a new initiative, AE Giving, a month-long volunteering event to bring
our purpose driven culture to life. Employees were encouraged to utilise a day of
volunteering leave to volunteer with one of five partner organisations. 71 volunteering
days were completed, improving company culture, engagement and cross
collaboration and creating a true connection to AE’s purpose whilst making a positive
impact
• We expanded and refined our values to better reflect our evolving culture and business
• We continued to raise awareness of the importance of mental health with guest
speakers, Mental Health fundraising initiatives and donation matching
• A range of wellbeing offerings include a wellbeing allowance, flu vaccinations and skin
checks, organised fitness events, additional wellbeing leave, EAP support and a health
support program
• We achieved a Financial Services top quartile engagement score of 79%*, up from 70%
in FY23
*
Top quartile for Financial Services Australia. See: cultureamp.com/science/insights/financial-services-australia
3 Benchmarked to data provided by the Financial Institutions Remuneration Group Inc (FIRG). FIRG is a peer group provider of
remuneration and benefits data in the financial services industry.
3. Remuneration philosophy and structure
3.1 Remuneration guiding principles
Australian Ethical’s remuneration approach is designed to facilitate the attraction, retention and engagement
of talent, within the organisation’s capacity to pay, to achieve Australian Ethical’s corporate objectives and
purpose of Investing for a Better World.
Our remuneration approach is guided by the following principles:
• Pay fairly and equitably, and market competitively, to attract and retain talented people,
• Align and balance the interests of clients, shareholders, and employees,
• Recognise and differentiate for contribution to the Group’s performance,
• Promote our values, behaviours, risk and conduct expectations,
• Be simple to administer and to communicate to stakeholders,
• Adhere to all applicable legislation and regulations, and
• Support the long-term financial stability of AEI Group.
Australian Ethical's remuneration philosophy is consistent with the principles of the Australian Ethical
Constitution and Charter contained in the AEI and AES Constitutions. It is designed to:
• ensure that the Group facilitates “the development of workers’ participation in the ownership and control of
their work organisations and places” – Charter element (a)
• not “exploit people through the payment of low wages or the provision of poor working conditions” – Charter
element (ix)
• not “discriminate by way of race, religion or gender in employment, marketing, or advertising practices” –
Charter element (x)
The Board, before declaring any dividend, is required by the Company’s Constitution to provide a bonus or
incentive for employees of up to 30% of what the profit for that year would have been had not the bonus or
incentive payment been deducted.
3.2 Elements of remuneration
The following framework applied to employees and KMPs of Australian Ethical Investment Limited (not including
Non-Executive Directors and Investment Committee members) for the financial year ended 30 June 2024, as
indicated in the table. Employees of Australian Ethical Superannuation Pty Limited are entitled to receive all the
below elements of remuneration with the exception of the Employee Share Plan (ESP) and Executive Long-Term
Incentives (ELTI).
There were no significant changes to the remuneration framework in the FY24 year.
Element
Description
Detail
Paid as
Fixed
Remuneration
(FR)
Comprises base
salary, superannuation,
packaged employee
benefits and associated
fringe benefits tax.
• Reviewed annually, or on promotion.
• Benchmarked against market data3 for
comparable roles based on position, skills and
experience brought to the role.
• Target remuneration is based around the
median of the relevant comparator group
for each job role, taking into consideration
companies in a similar industry and of a similar
size.
Cash and
superannuation
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Element
Description
Detail
Paid as
Short Term
Incentive
(STI)
An annual incentive
aimed at motivating and
rewarding employees for
achievement of annual
performance objectives.
A risk modifier applies
where non-compliance
with risk and values
expectations.
• Actual outcome is linked to performance
against individual KPIs and contribution against
annual financial and non-financial metrics in the
Board approved Balanced Scorecard. Maximum
achievable for Executive KMPs is two times the
target incentive, based on a percentage of Fixed
Remuneration.
• For Executive KMPs (except CEO and CIO), STI
in any given year that exceeds $100,000 will
typically be deferred for up to 3 years, is not
subject to further hurdles and is paid in shares.
The CEO and CIO have additional deferral
components within their remuneration.
• Short term incentives are treated as follows in
the following circumstances:
– resignation – usually forfeited, subject to
Board discretion;
– termination for serious misconduct – forfeited;
– retirement – at discretion of the Board;
– death or total and permanent disablement –
at discretion of the Board; and
– redundancy – at discretion of the Board.
Cash and
deferred shares
Employee
Share Plan
(ESP) –
Aimed at enabling
employees to share in
the ownership of the
company, in keeping
with our Constitution and
Ethical Charter. Aligns
employee performance
and behaviour with the
long-term success of the
Company. The ESP also
supports the retention
of employees. Applies
to all employees who
have satisfied the risk and
values gate.
• Awarded as percentage of Fixed Remuneration
(10%)
• Shares are issued or purchased and held in trust
for 3 years.
• Vest in the name of the employee after 3 years,
provided that:
– employee remains employed; and
– subject to 3-year compound annual growth in
diluted earnings per Share (EPS) as follows:
• 0 – 5% – nil vests
• 5% – 10% – pro rata up to 100%
• > 10% – fully vests.
• The Board applies an 'Adjusted NPAT pre
performance fee' for the purpose of calculating
the 3-year EPS CAGR achievement. Adjustments
are agreed in advance by the Board as part
of the annual budget setting process, for
strategic development initiatives e.g M&A,
transformational initiatives that impact short
term NPAT, but are highly advantageous to
medium term shareholder value accretion.
• Employees participate in dividends and have
voting rights from the date of grant.
• On cessation of employment, no unvested
shares shall vest unless the Board in its absolute
discretion determines otherwise.
Shares
Element
Description
Detail
Paid as
Executive
Long-Term
Incentive
(ELTI)
Designed to align
Executive KMPs and
key executives to the
business strategy. The
ELTI includes specific
KPIs reflecting strategic
targets to drive long-
term shareholder value
creation, encourage the
achievement of AEI’s
long-term strategic
goals, and to support the
retention of key senior
talent.
Awarded as percentage of Fixed Remuneration,
ranging from 10% to 50% for selected senior
executives.
Issued as performance rights and vest as ordinary
shares after 4 years, provided that:
•
Employee remains employed; and
•
Stretching financial and non-financial
performance hurdles are achieved.
Refer to section 4.7.1 for the specific
performance hurdles relating to each grant.
During the vesting period, ELTI participants are
not entitled to receive dividends nor hold voting
rights.
On cessation of employment, all performance
rights are forfeited unless the Board in its absolute
discretion determines otherwise.
Shareholder approval will be sought for the CEO’s
Long Term Incentive grant (equity rights) under the
ELTI.
Performance
Rights
In addition, Australian Ethical offers a comprehensive range of employee benefits across professional
development, and financial, health and community wellbeing so employees can bring their best selves to work.
3.3 FY25 Changes and considerations
There are no material changes to compensation structures anticipated in FY25, however the Board are in the
process of considering the implications of the Financial Accountability Regime (FAR) .
A new FY25 ELTI grant with a vest date of 1 September 2028 is being considered which is expected to be based
on a similar percentage of fixed remuneration for KMPs as in FY24. Like recent grant allocations, there will be
no multiplier mechanism applied. The performance hurdles for this grant are yet to be determined. Shareholder
approval will be sought for the CEO’s Long Term Incentive grant (equity rights) under the ELTI.
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4. Executive KMP remuneration outcomes for FY24
4.1 Corporate performance
In considering the Company’s short-term incentive payments, regard is had to the following measures which
reflect Australian Ethical’s performance across a range of metrics over the last six years:
2019
2020
2021
2022
2023
2024
2024
% growth
FUM at year end ($ billion)
3.42
4.05
6.07
6.20
9.20
10.44
13%
Net inflows ($ billion) – organic
growth
0.33
0.66
1.03
0.94
0.47
0.61
30%
Net inflows ($ billion) – M&A
–
–
–
–
1.93
–
–
Operating Revenues ($’000)
40,977
49,902
59,110
70,784
81,096
100,491
24%
Performance fees ($’000) included
above
769
3,640
2,895
375
–
187
–
Underlying Profit After Tax (UPAT)
($’000)^
6,540
9,279
11,052
10,284
11,789
18,519
57%
Net Profit After Tax attributable to
shareholders ($’000)
6,465
9,457
11,261
9,597
6,576
11,847
80%
UPAT pre performance fee
6,024
7,028
9,167
10,044
11,789
18,441
56%
NPAT pre performance fee
5,949
7,206
9,377
9,356
6,576
11,769
79%
Adjusted NPAT (pre performance
fee)^
5,949
7,206
9,377
10,043
9,189
16,281
77%
Diluted Earnings Per Share (cents
per share)
5.84
8.42
10.02
8.55
5.84
10.51
80%
Diluted EPS growth (based on
Adjusted NPAT pre performance
fee) (3 years)
25.3%
36.4%
23.2%
19.1%
8.4%
20.2%
–
Dividends (cents per share,
restated for share split)
5.00
5.00
7.00
6.00
7.00
9.00
29%
Special performance fee dividend
(cents per share)^^
–
1.00
1.00
–
–
–
–
Staff engagement scores
71%
86%
82%
79%
70%
79%
13%
^ Underlying Profit After Tax and 'Adjusted NPAT pre performance fee' are non-IFRS measures and are not audited albeit reconciled
to the audited statutory profit. Adjusted NPAT pre performance fee’ has been reported for 2022 and 2023, in accordance with 2024
methodology as if adjustments applied retrospectively.
^^ The special performance fee dividend is linked to the performance fee achieved on the Emerging Companies Fund outperformance
in FY20 and FY21.
21%
18%
21%
16%
16%
4%
23%
10%
4%
59%
6%
14%
4.2 Weighting of remuneration components
The following are the weightings of the various components of target remuneration for the CEO, CIO and all
other KMP. Target remuneration is the remuneration that KMP expect to be paid if all of their strategic initiatives
are achieved.
Target remuneration by component
CEO
CIO
Other KMPs
0%
20%
40%
60%
80%
100%
44%
43%
Fixed Remuneration
STI
Deferred STI
ESP
ELTI
4.3 Short-Term Incentive (STI) outcomes
4.3.1 Performance measures for short term incentives
Performance measures for Short-Term Incentives (STI) are based on a Balanced Scorecard of financial and
non-financial metrics and an individual’s specific performance objectives. Employees have no contractual right
to receive an STI award and the Board retains discretion to amend or withdraw the STI at any time. Adherence
to the Company’s values and risk culture are required to remain eligible for an STI award. The following table
provides the overall Balanced Scorecard and the performance outcomes for these objectives for the financial
year ended 30 June 2024. The following outcomes have been taken into account when assessing short term
incentives for Executive KMPs.
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Measure
Weight
Target
Weighted Outcome
Why this metric is appropriate
Achievement comments
Financial
50%
UPAT $15.3m
Not met
Met
Exceeded
UPAT & NPAT targets provide alignment to the Group’s
financial performance.
The targets were set in context of investment required to
underpin the growth strategy outlined in August 2021.
$15.3m UPAT represents a 30% increase on FY23 actual.
FY24 UPAT of $18.5m exceeds target by 21%
NPAT $11.2m
Not met
Met
Exceeded
FY24 NPAT of $11.8m exceeds target by 5%
Cost to income ratio <77.6%
Not met
Met
Exceeded
Metric reflects goal of achieving improved operating
leverage as the business scales
Cost to income ratio of 74% exceeds target by 3.6ppts
$650m net flows
Not met
Met
Exceeded
Growth and scale will benefit our customers through
lower fees and better products and service. It also
allows us to deliver greater social and environmental
impact.
Net flows of $607m is 7% below target of $650m
Business
Transformation
20%
Successful delivery of below key transformational
projects:
1. New customer administration agreement
executed and transition plan finalised in FY24,
to deliver meaningful unit cost improvement in
FY25.
2. New Custodian agreement executed in FY24,
to deliver meaningful unit cost improvement in
FY25
3. Exploration and pipeline of accretive M&A
4. Asset class strengthening in fixed income,
private markets and international equities,
via capability build within investment team
and execution of partnerships/acquisition
opportunities
Not met
Met
Exceeded
Delivery of key transformation strategic initiatives is
critical to underpin the growth strategy, which will
deliver improved shareholder returns.
1. Administration transition agreement executed &
project on track for delivery in FY25
2. Custody transition, including unit cost savings, on
track for FY25 delivery.
3. M&A pipeline: Altius acquisition due to be completed
in September. Strong M&A
pipeline in progress.
4. Altius acquisition to strengthen Fixed Income
capability. New Head of Private Markets role
commenced, providing new private markets
expertise. Internal international fund launched in July
to support multi-asset funds.
Reputation
& Customer
experience
10%
Responsible Investment
Leadership recognition
• Morningstar Global ESG Commitment Leader
• RIAA RI leader
Not met
Met
Exceeded
Provides an evidence point for our strategy of becoming a
powerful influence in ethical investing. Supports our brand
strength and growth in customer numbers.
• AE recognised as Morningstar ESG commitment
leader, achieved by only 8 asset managers covered
globally
• AE named as a RIAA RI leader
B Corp Leadership
• Top 5% rated B Corp in
Australia and NZ
Not met
Met
Exceeded
An independent certification to reflect high standards
of verified social and environmental performance,
accountability and transparency. An evidence point of our
deeply ethical business.
Highest scoring Certified B Corp in Australia and NZ*
achieving a record score.
Compelling customer experience
• Superannuation Customers
NPS top 10
Not met
Met
Exceeded
Customer satisfaction with product and service drives
improved customer and business outcomes, improved
reputation and underpins long-term growth and
shareholder returns.
4th highest NPS**. As measured and externally
benchmarked by Investment Trends in March 2024 and
published in May 2024.
People
10%
Employee engagement
• Top Quartile Finance Australia
Not met
Met
Exceeded
Providing a motivating and inspiring workplace and high
employee engagement has been proven to drive better
business outcomes for customers and shareholders.
Financial Services top quartile employee engagement
score of 79%***.
*
As at 13 July 2023, the date of our last assessment
** Investment Trends Super Member Engagement Report 2024. Independent research with 29 major super funds
*** Top quartile for Financial Services Australia. See: cultureamp.com/science/insights/financial-services-australia
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Measure
Weight
Target
Weighted Outcome
Why this metric is appropriate
Achievement comments
Investment
Performance
10%
MF ASF achieves benchmark
1 year
Not met
Met
Exceeded
Delivering long-term competitive investment returns
for our customers is core to our offering. It underpins
growth in netflows, FUM and revenue which in turn
enhances shareholder returns.
ECF outperforming benchmarks, ASF and
BF below target at 30 June 24 for 1 and 3 years.
3 years
Not met
Met
Exceeded
MF ECF achieves benchmark
1 year
Not met
Met
Exceeded
3 years
Not met
Met
Exceeded
MF BF achieves benchmark
1 year
Not met
Met
Exceeded
3 years
Not met
Met
Exceeded
MF ASF v peers
– achieve 2nd quartile
1 year
Not met
Met
Exceeded
Delivering long-term competitive investment returns
for our customers is core to our offering. It underpins
growth in netflows, FUM and revenue which in turn
enhances shareholder returns.
ASF and ECF met target for 1-year returns. BF was below
target for 1-year. Tracking below all 3-year targets in the
4th quartile. As measured against June 2024 Mercer
Quarterly performance survey (wholesale).
3 years
Not met
Met
Exceeded
MF ECF v peers
– achieve 2nd quartile
1 year
Not met
Met
Exceeded
3 years
Not met
Met
Exceeded
MF BF v peers– achieve 2nd
quartile
1 year
Not met
Met
Exceeded
3 years
Not met
Met
Exceeded
Superfund - Balanced accum
option v peers– achieve 2nd
quartile
1 year
Not met
Met
Exceeded
Delivering long-term competitive investment returns for
our super members is core to our offering. It underpins
growth in netflows, FUM and revenue which in turn
enhances shareholder returns.
Tracking below targets for 1-year and 3-years.
Source: June 2024 Superratings SR50 Balanced (60-76)
ranking.
3 years
Not met
Met
Exceeded
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for the year ended 30 June 2024
Short-Term incentive modifier
The Board recognises that the Balanced Scorecard outcome needs to be assessed in combination with other
factors in order to make effective reward decisions.
As such, an overall risk assessment is applied to the scorecard outcome, through assessment of the following
factors:
• Risk appetite compliance
• Embedded risk culture as evidenced by: managing incidents and risks out of tolerance back into tolerance;
lack of significant regulatory issues; training compliance; behaviours demonstrating Australian Ethical acting
in the best interests of customers
Measurement is made via a combination of factual and subjective assessment and if triggered, the impact
has a modifier impact on overall STI allocation for the KMP. The modifier can vary between zero and 100%, and
therefore acts as a gateway and a downwards adjustment mechanism.
The Chief Risk Officer has determined that no risk matters have been identified which would justify the
application of a modifier. The Board has determined that no downward modifier is applicable for 2024 STI
outcomes for Executive KMPs.
The CEO’s performance is assessed on the Company Balanced Scorecard and a number of equally weighted
strategic initiatives such as:
• Leadership and team development,
• Strategy development and execution,
• Brand and reputation,
• Strategic partnerships including mergers and acquisitions.
The PRN considered the Executive KMP’s STI awards in light of the Balanced Scorecard achievements, and
each individual’s contribution to the results and recommended to the Board each Executive KMP STI award, as
reflected in the statutory table. In addition to the Balanced Scorecard, each Executive KMP is also assessed on
a range of individual objectives relevant to their role and responsibilities. The awards reflect recognition of the
performance of each Executive KMP, their team and the achievement of strategic initiatives.
4.3.2 Short-Term Incentives awarded
The below table shows for each Executive KMP how much of their STI bonus was awarded, in relation to the
maximum incentive pay they were entitled to. The Executive KMP bonuses are subject to Board approval and all
other employee bonuses are approved by the CEO – minimum is 0%.
Total STI Bonus (Cash and Deferred Shares)
Name
Opportunity as a % of
Fixed Remuneration
Target
Opportunity
Maximum
Opportunity
(2 x Target)
Awarded
Achieved as %
of Maximum
Opportunity1
Target %
Max %
$
$
$
%
J McMurdo
75%
150%
414,000
828,000
570,000
69%
M Enander
25%
50%
97,125
194,250
121,406
62%
K Hughes
20%
40%
65,000
130,000
71,500
55%
M Loyez
25%
50%
100,000
200,000
110,000
55%
R Piper
25%
50%
111,250
222,500
60,000
27%
M Simons
25%
50%
111,250
222,500
100,000
45%
L Theau
75%
150%
376,697
753,394
376,697
50%
1
Forfeiture %, in accordance with Corporations Regulation 2001 – Reg 2M.3.03 clause 12(f), is calculated as 100% less the Achieved %
4.4 Employee Share Plan (ESP)
The ESP is currently awarded at 10% of fixed remuneration to all eligible staff. It serves the intent of the Australian
Ethical Charter, and Company Constitution which seeks to enable all employees to share in ownership of the
company and encourage behaviours and achievement consistent with the long-term success of the Company.
The ESP vesting outcome is determined against a pre-approved metric, being ‘Adjusted NPAT pre performance
fee’.
Adjusted NPAT pre performance fee of $16.28 million was achieved in FY24, which reflects 3 year EPS
cumulative average growth rate (CAGR) of 20.2%, materially above the 10% hurdle for 100% vesting of the ESP.
The items approved by the Board at the start of FY24 for adjustments to NPAT, for the purpose of calculating
achievement of the targeted measures, reflect transformational strategic initiatives which required a short-term
investment to drive attractive medium to long-term shareholder value creation. It is considered that these costs
reflect Board approved investment decisions to underpin the growth strategy.
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The below table outlines the Board pre approved adjustments for the calculation of 'Adjusted NPAT pre performance
fee' as compared to statutory NPAT and UPAT for FY24.
Profit item
$m
Reason for adjustment
NPAT attributable to shareholders
(pre performance fee)
11.77
Incentive payments relating to performance fees are allocated
separately to select members of the Investment Team.
Performance fees do not form part of this calculation.
Add: Superannuation administrator
transition expenses
3.55
This is a Board agreed transformational initiative to underpin
the growth strategy, and encompasses the consolidation of
administration providers. This initiative is expected to deliver
substantial savings to ongoing super administration expenses
post completion in FY25.
Add: Merger & acquisition expenses
0.96
Board agreed initiative to pursue specific inorganic growth
opportunities to drive long-term business growth. Expenses
reflect due diligence and transaction costs for the acquisition
of Altius Asset Management and other agreed merger and
acquisition pipeline activities.
Adjusted NPAT pre performance fee
16.28
Measure against which EPS vesting is assessed
Sentient write-off
2.16
Whilst adjusted for UPAT, the Sentient write-off is not considered
an adjustment for ‘Adjusted NPAT’. Management are held
accountable for business investments and write-downs.
UPAT (pre performance fee)
18.44
All adjustments are shown net of tax
4.5 Executive Long-Term Incentive (ELTI)
There were no Executive KMP or Senior Executive Long-Term Incentive awards vested or paid in FY24.
The first tranche of ELTI awards are due to vest at the end of FY25 subject to meeting the ELTI performance
measures outlined in section 4.7.1.
4.6 Executive KMP Remuneration Outcomes – statutory and cash and vesting
basis
The following two tables set out Executive KMP remuneration.
• The table ‘Executive KMP Remuneration Outcomes – Statutory Basis’ is aligned to the way the Company
expenses (accrues) the remuneration of the Executive KMP under the accounting standards and the
Corporations Act.
• The table ‘Executive KMP Remuneration Outcomes – Cash and Vesting Basis’ shows amounts received by
the Executive KMP in cash and shares vested during the financial year ended 30 June 2024.
The movement in the Executive KMP remuneration outcomes (statutory basis) between FY23 and FY24 is due
to:
• Chief Executive Officer (CEO) – the increase is attributable to an increase in salary in line with industry
benchmarking. FY24 cash STI has remained in line with FY23
• Chief Investment Officer (CIO) - the increase is due timing of commencement of employment (part
way through FY23). Further, in FY23 the CIO was not eligible for STI due to timing of commencement of
employment
• Other Executive KMP – increase due to timing of commencement of Chief Executive Superannuation
part way through FY23. Further, increases in individual salaries in line with responsibilities and industry
benchmarking to ensure reward remains competitive and fair. Bonuses vary from year to year based on
individual and company performance
• Performance rights (ELTI) expense in FY23 reflects the write-back of the rights granted on 1 December 2021
to reflect the probability of the rights achieving the performance hurdles (refer to section 4.7.1). FY24 ELTI
expense relates to ELTI granted on 1 December 2022 and 1 December 2023.
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Short Term Benefits
Post-Employment Benefits
Long Term Benefits
Name
Salary
$
STI – Cash1
$
Superannuation
$
Termination
Benefits
$
Long Service
Leave
$
Deferred STI –
Equity2
$
ESP –
Equity3
$
ETI –
Rights4
$
Total
$
STI as a %
of Fixed
Remuneration
Variable Rem
as a % of Total
Remuneration
2024 financial year
Current Executive KMP
J McMurdo5
520,497
285,000
27,399
–
10,726
297,077
52,567
129,173
1,322,439
106.2%
57.8%
M Enander
352,579
121,406
27,399
–
8,388
–
36,950
72,777
619,498
32.0%
37.3%
K Hughes
296,172
71,500
27,399
–
10,026
–
31,333
15,348
451,778
22.1%
26.2%
M Loyez
375,361
110,000
27,399
–
8,829
–
38,000
74,842
634,431
27.3%
35.1%
R Piper
416,263
60,000
27,399
–
12,946
–
23,530
84,403
624,540
13.5%
26.9%
M Simons
413,751
100,000
27,399
–
15,260
41,667
42,167
83,006
723,250
32.1%
36.9%
L Theau
474,864
263,688
27,399
–
9,663
28,252
20,779
49,552
874,197
58.1%
41.4%
Total 2024
2,849,487
1,011,594
191,793
–
75,839
366,996
245,326
509,101
5,250,133
45.3%
40.6%
2023 financial year
Current Executive KMP
J McMurdo5
493,712
285,000
27,500
–
9,747
253,004
99,739
(21,315)
1,147,387
103.2%
55.6%
M Enander
313,455
92,500
27,500
–
7,355
15,625
34,000
(11,757)
478,679
31.6%
29.7%
K Hughes
287,435
70,000
25,292
–
9,991
–
30,000
(2,558)
420,160
22.4%
23.8%
M Loyez
349,439
100,000
27,500
–
8,058
6,250
34,906
(12,134)
514,020
28.2%
27.5%
R Piper (commenced 25 Nov 2022)
234,180
70,000
24,589
–
8,551
–
–
31,179
368,499
27.1%
19.0%
M Simons
389,470
100,000
27,500
–
13,393
66,667
38,667
(13,641)
622,054
40.0%
33.0%
L Theau (commenced 3 April 2023)
73,094
–
6,323
–
1,554
–
–
–
80,971
–
–
D Macri (departed 31 Dec 2022)
308,329
–
27,500
–
7,789
–
43,543
(45,932)
341,229
–
12.8%
Total 2023
2,449,115
717,500
193,704
–
66,438
341,546
280,855
(76,158)
3,972,499
39.1%
33.7%
Executive KMP remuneration outcomes – statutory basis
The table below outlines Executive KMP remuneration as calculated in accordance with accounting standards
and the Corporations Act 2001 requirements. The amounts shown are equal to the amount expensed (accrued)
in the Company’s financial statements for the particular year based on the Balanced Scorecard and other
agreed KPIs.
1
The Short-term Incentive (‘STI’) expense is the amount accrued for performance during the respective financial year using agreed
KPI’s. The 2024 amounts were approved by the Board. STI in excess of $100,000 is typically paid in deferred shares (with exception
of the CEO and CIO who have additional deferral requirements).
2 The Deferred Short-term incentive (‘DSTI’) expense for 2024 includes the current year expense impact of deferred shares in the FY21,
FY22, FY23 and FY24 grants. The cost of shares is fixed at the time of grant and expensed on a straight-line basis over the vesting
period which ranges from 1 to 3 years.
3 The ESP Equity expense for 2024 includes the relevant 2024 expense impact of each of the FY22, FY23 and FY24 grants under the
Employee Share Plan. The cost of shares is fixed at time of grant and expensed over a three-year period using an annual probability
assessment of the hurdles being met at the end of the vesting period. The FY21 tranche will vest at an individual level in September
2024.
4 The ELTI rights expense includes the current year expense impact of the Executive LTI (ELTI) granted in FY21, FY22 and FY23, based
on the grant price of $13.54, $4.54 and $4.49 respectively. The life-to-date expense relating to the FY21 grant was written back as the
probability of achieving the performance hurdles was assessed as nil
5 The CEO was awarded 69% (2023: 72%) of his maximum STI incentive by the Board. The maximum incentive is 2 times his target STI
at 30 June 2024. 50% of this award is paid in cash and the remaining 50% is paid in deferred shares over each of the next 3 years,
with first vest in September 2025.
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Executive KMP remuneration outcomes – cash and vesting basis (non-IFRS, audited)
The table below reflects actual benefits received by each Executive KMP during the reporting period including
prior year bonus paid in cash in the current year and the value of shares vested under the employee share
plans.
Short-Term Benefits
Post-Employment Benefits
Long-Term Benefits
Name
Salary1
$
Cash Bonus
$
Equity
$
Superannuation1
$
Termination
Benefits
$
Long Service
Leave
$
ESP –
Equity2, 3
$
ELTI – Rights
$
Total
$
Performance
Related
%
2024 financial year
Current Executive KMP
J McMurdo
531,076
285,000
128,812
27,399
–
10,726
184,092
–
1,167,105
40.2%
M Enander
354,308
92,500
28,731
27,399
–
8,388
32,199
–
543,524
22.9%
K Hughes
297,423
70,000
0
27,399
–
10,026
26,671
–
431,518
22.4%
M Loyez
376,951
100,000
11,454
27,399
–
8,829
31,976
–
556,609
23.7%
R Piper
416,731
70,000
0
27,399
–
12,946
0
–
527,075
13.3%
M Simons
416,773
100,000
40,085
27,399
–
15,260
31,819
–
631,336
20.9%
L Theau
475,277
0
0
27,399
–
9,663
0
–
512,339
0.0%
Total 2024
2,868,539
717,500
209,081
191,792
–
75,839
306,757
–
4,369,506
23.4%
2023 financial year
Current Executive KMP
J McMurdo
499,297
281,250
81,638
27,500
–
9,747
–
–
899,432
31.3%
M Enander
314,223
100,000
–
27,500
–
7,355
–
–
449,078
22.3%
K Hughes
288,963
72,000
–
25,292
–
9,991
85,536
–
481,782
32.7%
M Loyez
350,153
100,000
–
27,500
–
8,058
–
–
485,711
20.6%
R Piper (commenced 25 Nov 2022)
234,180
–
–
24,589
–
41,994
–
–
300,763
–
M Simons
392,235
100,000
–
27,500
–
13,393
92,923
–
626,051
30.8%
L Theau (commenced 3 April 2023)
73,094
–
–
6,323
–
1,554
–
–
80,971
–
D Macri (departed 31 Dec 2022)
311,326
157,500
–
27,500
–
7,789
498,411
–
1,002,525
65.4%
Total 2023
2,463,471
810,750
81,638
193,704
–
99,881
676,870
–
4,326,313
34.4%
1
Fixed remuneration – includes base salary, payments made to superannuation funds and dividend income on unvested shares.
2 ESP – Equity 2024 represents the market value of vested shares during the financial year relating to employee share plan shares
granted in September 2020. 100% of these shares vested as the performance criteria was fully achieved. The market value on the
vesting date was $4.24 (price at grant was $4.53).
3 ESP – Equity 2023 represents the market value of vested shares during the financial year relating to employee share plan shares
granted in September 2019. 100% of these shares vested as the performance criteria was fully achieved. The market value on the
vesting date was $6.45 (price at grant was $2.15).
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4.7 ELTI - performance rights
Rights to ordinary shares under the Executive LTI program are granted each year on 1 December, with the first
grant in 2021. The number of performance rights allocated to each Executive KMP was determined as follows:
• Granted FY21 and FY22: based on the average share purchase price supporting the ESP program up to grant
date
• Granted FY23: using an allocation price based on the 60-day variable weighted average price for the period
25 August to 16 November 2023.
On vesting, each right automatically converts into one ordinary share.
The fair value of the performance rights was determined based on the market price of the company’s shares at
the grant date, with an adjustment made for dividends foregone during that period.
Allocation Price
Fair Value Price
Granted 1 December 2021
$10.34
$13.54
Granted 1 December 2022
$5.29
$4.54
Granted 1 December 2023
$4.37
$4.49
The table below shows the number of rights granted on 1 December 2021 and the grant value of those rights
based on the assumption that the first performance hurdle of $15bn of FUM is achieved by 30 June 2025 (1
times multiplier). For each incremental FUM hurdle of $2.5bn, a multiplier of 2 through to 6 would be applied.
The maximum opportunity is 7 times the base number of rights granted, which would only vest if $30bn FUM
is achieved along with other KPIs in 2025. Therefore, the maximum fair value of rights would be 7 times the
fair value presented in the table below. Refer to ELTI Performance Measures table below for detailed vesting
requirements.
At this time, the performance hurdles for the Performance Rights granted 1 December 2021 have not yet been
met. The Board’s assessment is that the likelihood of meeting the performance hurdles by the vest date is less
likely than more likely given the growth still required to achieve the threshold. Accordingly, the fair value of
these rights has been written down to nil.
This probability assessment does not change the ambitious growth that is still being targeted including both
organic and inorganic growth. Should the assessment be probable at a future date, then this write-back will be
revisited.
Statutory expense in the ‘Remuneration Outcomes – Statutory Basis’ table above includes the impact of the
write-back.
Granted 1 December 2021*
Granted as
% of Fixed
Remuneration
No. of Rights
Granted
(based on 1 times
multiplier)
Grant Value
of Rights
(based on 1 times
multiplier)
Fair Value of
Rights
J McMurdo
50%
24,178
$327,369
–
M Enander
40%
13,540
$183,327
–
K Hughes
10%
2,901
$39,284
–
M Loyez
40%
13,926
$188,565
–
R Piper
25%
10,517
$142,406
–
M Simons
40%
15,474
$209,516
–
* This grant includes a potential multiplier of 1 to 7 times
The table below shows the number of rights granted on 1 December 2022 and 2023 and the grant value of
those rights. The Board’s assessment is that it is probable that the performance hurdles for these tranches will
be achieved.
The multiplier mechanism does not apply to the ELTI tranches vesting 1 September 2026 and 2027.
Granted 1 December 2022
Granted as
% of Fixed
Remuneration
No. of Rights
Granted
Fair Value
of Rights
J McMurdo
50%
49,622
$225,284
M Enander
40%
27,977
$127,017
K Hughes
10%
5,955
$27,034
M Loyez
40%
28,733
$130,450
R Piper
40%
32,892
$149,331
M Simons
40%
31,758
$144,181
L Theau (commenced 3 April 2023, after grant date)
–
–
–
Granted 1 December 2023
Granted as
% of Fixed
Remuneration
No. of Rights
Granted
Fair Value
of Rights
J McMurdo
50%
63,158
283,579
M Enander
40%
35,561
159,668
K Hughes
10%
7,437
33,392
M Loyez
40%
36,613
164,392
R Piper
40%
40,732
182,886
M Simons
40%
40,732
182,886
L Theau
40%
45,974
206,423
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4.7.1 ELTI Performance measures
There are some differences in performance measurements for the tranches granted in 2021, 2022 and 2023
outlined below.
Granted 1 December 2023*
Granted 1 December 2022
Granted 1 December 2021
Performance
measures
Financial measures:
• Net flows, including no more
than 50% from M&A activity,
over the 4-year vesting
period of $6.05bn
• Underlying cost to income
ratio of no more than 75%**
Financial measures:
• Net flows, including no
more than 50% from M&A
activity, over the 4-year
vesting period of $6.05bn
• Underlying cost to income
ratio of no more than 75%**
Financial measures:
• $15bn of FUM as at 30
June 2025, and with each
incremental increase in FUM
of $2.5bn, a multiplier to
the base award is applied
ranging from 2 to a maximum
of 7 times at $30bn*
• Underlying operating cost to
Income ratio of no more than
75%**
Non-financial measures:
• Median NPS (Net Promoter
Score) for Financial Services
companies in Australia^
• Median employee
engagement score for
financial services companies
in Australia^^; and
• Continued compliance
with the aims of our Ethical
Charter.
Non-financial measures:
• Median NPS (Net Promoter
Score) for Financial
Services companies in
Australia^
• Median employee
engagement score
for financial services
companies in Australia^^;
and
• Continued compliance
with the aims of our Ethical
Charter.
Non-financial measures:
• Median NPS score for both
super and managed funds
to measure customer
satisfaction^
• Median employee
engagement score
for financial services
companies^^, and
• Continued compliance
with the aims of our Ethical
Charter.
Vesting period
Four years, ending
30 June 2027
Four years, ending
30 June 2026
Four years, ending
30 June 2025
*
A multiplier of the base award will apply at each FUM target achieved. If the maximum stretch FUM target of $30bn by
30 June 2025 (along with other KPIs) is achieved, then the maximum multiplier of 7 times the base award will apply.
** Based on achievement of the underlying cost to income ratio for the year in which the rights vest.
^ Achievement of at least median NPS. This includes NPS scores for both super and managed funds based on Investment Trends
survey, or a comparable survey approved by the Board. NPS is to be monitored on an annual basis and KPI specifically references
the results achieved in the financial year in which the rights vest.
^^ Achievement of at least median employee engagement score, based on Culture Amp Employee Engagement Survey based on
employee responses to Say, Stay, Strive questions for the year in which the rights vest
In implementing the ELTI opportunity, the Board was cognisant of the remuneration philosophy remaining
consistent with the Ethical Charter and ensuring that the structure of the ELTI closely aligns the interests of
Executive KMP with those of shareholders. The ELTI opportunity was designed to drive greater long-term
business impact and purpose, with challenging stretch targets and longer vesting horizons and to reward those
key to that success.
78
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Name
Grant Date
Vesting Date
Share Price at
Grant Date
Balance at
1–Jul–23
Number of
shares/rights
granted
Number of
shares/rights
forfeited
Number of
shares vested
Number of
shares sold
Balance at
30–Jun–24
J McMurdo
Unvested Deferred STI shares & ESP
1–Sep–20
1–Sep–23
4.53
48,602
–
–
(48,602)
–
–
Unvested Deferred STI shares
1–Sep–21
1–Sep–23
9.80
7,459
–
–
(7,459)
–
–
Unvested Deferred STI shares & ESP
1–Sep–21
1–Sep–24
9.80
12,562
–
–
–
–
12,562
Unvested Deferred STI shares
1–Sep–22
1–Sep–23
5.29
17,722
–
–
(17,722)
–
–
Unvested Deferred STI shares
1–Sep–22
1–Sep–24
5.29
17,722
–
–
–
–
17,722
Unvested Deferred STI shares & ESP
1–Sep–22
1–Sep–25
5.29
27,646
–
–
–
–
27,646
Unvested Deferred STI shares
1–Sep–23
1–Sep–24
4.53
–
20,989
–
–
–
20,989
Unvested Deferred STI shares
1–Sep–23
1–Sep–25
4.53
–
20,989
–
–
–
20,989
Unvested Deferred STI shares & ESP
1–Sep–23
1–Sep–26
4.53
–
33,185
–
–
–
33,185
Ordinary shares
17,845
–
–
73,783
–
91,628
Unvested Performance rights
1–Dec–21
1–Sep–25
10.34
24,178
–
–
–
–
24,178
Unvested Performance rights
1–Dec–22
1–Sep–26
5.29
49,622
–
–
–
–
49,622
Unvested Performance rights
1–Dec–23
1–Sep–27
4.37
–
63,158
–
–
–
63,158
Total
223,358
138,321
–
–
–
361,679
M Enander
Unvested ESP shares
1–Sep–20
1–Sep–23
4.53
6,620
–
–
(6,620)
–
–
Unvested ESP shares
1–Sep–21
1–Sep–24
9.80
3,571
–
–
–
–
3,571
Unvested ESP shares
1–Sep–22
1–Sep–25
5.29
6,994
–
–
–
–
6,994
Unvested ESP shares
1–Sep–23
1–Sep–26
4.53
–
8,583
–
–
–
8,583
Unvested Deferred STI shares
1–Sep–22
1–Sep–25
5.29
5,907
–
–
(5,907)
–
–
Ordinary shares
–
–
–
12,527
(12,527)
–
Unvested Performance rights
1–Dec–21
1–Sep–25
10.34
13,540
–
–
–
–
13,540
Unvested Performance rights
1–Dec–22
1–Sep–26
5.29
27,977
–
–
–
–
27,977
Unvested Performance rights
1–Dec–23
1–Sep–27
4.37
–
35,561
–
–
–
35,561
Total
64,609
44,144
–
–
(12,527)
96,226
K Hughes
Unvested ESP shares
1–Sep–20
1–Sep–23
4.53
6,289
–
–
(6,289)
–
–
Unvested ESP shares
1–Sep–21
1–Sep–24
9.80
3,061
–
–
–
–
3,061
Unvested ESP shares
1–Sep–22
1–Sep–25
5.29
5,955
–
–
–
–
5,955
Unvested ESP shares
1–Sep–23
1–Sep–26
4.53
–
7,180
–
–
–
7,180
Ordinary shares
18,835
–
–
6,289
(5,579)
19,545
Unvested Performance rights
1–Dec–21
1–Sep–25
10.34
2,901
–
–
–
–
2,901
Unvested Performance rights
1–Dec–22
1–Sep–26
5.29
5,955
–
–
–
–
5,955
Unvested Performance rights
1–Dec–23
1–Sep–27
4.37
–
7,437
–
–
–
7,437
Total
42,996
14,617
–
–
(5,579)
52,034
4.8 Unvested and ordinary shares
The movement during the reporting period in the number of unvested shares and ordinary shares in the Company, held
directly, or beneficially, by each key management person, including their related parties is outlined in the table below.
ANNUAL REPORT 2024
80
81
Australian Ethical Investment Limited and its Controlled Entities
Remuneration Report
for the year ended 30 June 2024
Name
Grant Date
Vesting Date
Share Price at
Grant Date
Balance at
1–Jul–23
Number of
shares/rights
granted
Number of
shares/rights
forfeited
Number of
shares vested
Number of
shares sold
Balance at
30–Jun–24
M Loyez
Unvested ESP shares
1–Sep–20
1–Sep–23
4.53
6,779
–
–
(6,779)
–
–
Unvested ESP shares
1–Sep–21
1–Sep–24
9.80
3,673
–
–
–
–
3,673
Unvested ESP shares
1–Sep–22
1–Sep–25
5.29
7,183
–
–
–
–
7,183
Unvested ESP shares
1–Sep–23
1–Sep–26
4.53
–
8,837
–
–
–
8,837
Unvested Deferred STI shares
1–Sep–22
1–Sep–25
5.29
2,363
–
–
(2,363)
–
–
Ordinary shares
–
–
–
9,142
(9,142)
–
Unvested Performance rights
1–Dec–21
1–Sep–25
10.34
13,926
–
–
–
–
13,926
Unvested Performance rights
1–Dec–22
1–Sep–26
5.29
28,733
–
–
–
–
28,733
Unvested Performance rights
1–Dec–23
1–Sep–27
4.37
–
36,613
–
–
–
36,613
Total
62,657
45,450
–
–
(9,142)
98,965
R Piper
Unvested ESP shares
1–Sep–23
1–Sep–26
4.53
–
15,596
–
–
–
15,596
Unvested Performance rights
1–Dec–21
1–Sep–25
10.34
10,517
–
–
–
–
10,517
Unvested Performance rights
1–Dec–22
1–Sep–26
5.29
32,892
–
–
–
–
32,892
Unvested Performance rights
1–Dec–23
1–Sep–27
4.37
–
40,732
–
–
–
40,732
Total
43,409
56,328
–
–
–
99,737
M Simons
Unvested ESP shares
1–Sep–20
1–Sep–23
4.53
7,503
–
–
(7,503)
–
–
Unvested ESP shares
1–Sep–21
1–Sep–24
9.80
4,082
–
–
–
–
4,082
Unvested ESP shares
1–Sep–22
1–Sep–25
5.29
7,940
–
–
–
–
7,940
Unvested ESP shares
1–Sep–23
1–Sep–26
4.53
–
9,832
–
–
–
9,832
Unvested Deferred STI shares
1–Sep–22
1–Sep–23
5.29
9,452
–
–
(9,452)
–
Unvested Deferred STI shares
1–Sep–22
1–Sep–24
5.29
5,671
–
–
–
5,671
Unvested Deferred STI shares
1–Sep–23
1–Sep–24
4.53
–
11,047
–
–
11,047
Unvested Deferred STI shares
1–Sep–23
1–Sep–25
4.53
–
4,419
–
–
4,419
Ordinary shares
40,000
–
–
16,955
(10,000)
46,955
Unvested Performance rights
1–Dec–21
1–Sep–25
10.34
15,474
–
–
–
–
15,474
Unvested Performance rights
1–Dec–22
1–Sep–26
5.29
31,758
–
–
–
–
31,758
Unvested Performance rights
1–Dec–23
1–Sep–27
4.37
–
40,732
–
–
–
40,732
Total
121,880
66,030
–
–
(10,000)
177,910
L Theau
Unvested ESP shares
1–Sep–23
1–Sep–25
4.53
–
13,772
–
–
13,772
Unvested Performance rights
1–Dec–23
1–Sep–27
4.37
–
45,974
–
–
–
45,974
Total
–
59,746
–
–
–
59,746
ANNUAL REPORT 2024
82
83
Australian Ethical Investment Limited and its Controlled Entities
Remuneration Report
for the year ended 30 June 2024
4.9 Contract terms
All Executive KMP’s, except the Managing Director are permanent employees with a 12-week notice period.
The Managing Director & CEO remuneration structure is outlined below:
Salary
Term
Notice period
STI
ESP
ELTI
Malus Provision
Fixed salary
from 1
September
2024 is
$573,900
inclusive
of super-
annuation
No fixed
term
6 months,
however, could
be terminated
without
notice due to
negligence in
carrying out
responsibilities,
dishonesty,
breaching
Company
policies or
criminal activity.
Target STI of
75% of fixed
remuneration
with a maximum
STI of 2 times
the target, based
on a Balanced
Scorecard of
KPIs and specific
objectives. Of the
amount payable
each year, 50%
shall be paid in
cash and 50%
shall be deferred
in the form of
Company shares
vesting as follows
– one third one
year after grant
date, one third
two years after
grant date and
one third three
years after grant
date.
Employee
share plan –
10% of fixed
remuneration.
The shares
are subject
to the rules
and terms of
the Employee
Share Plan.
This has been
reduced from
33% in 2021 to
ensure ESP is
aligned for all
employees
Executive
LTI –
performance
rights at
50% of fixed
remuneration.
The Board has
the discretion to
reduce or cancel
any STI or LTI for:
• Fraudulent
or dishonest
conduct;
• Material
misstatements
or omission in
the financial
statements; or
• Circumstances
that occur
that the Board
determines to
have resulted
in unfair or
inappropriate
benefit
The below graph summarises the structure of the variable incentive compensation paid or granted to the CEO
in FY24. The graph depicts the combination of short and long-term incentives granted and the upcoming
vesting dates.
FY24
FY25
FY26
FY27
FY28
Fixed Remuneration
Short-Term Incentive
Employee Share Plan
Executive Long-Term Incentive
50% Cash
50% Equity
deferred equally
over 3 years
Cash &
Superannuation
10% of Fixed Remuneration issued as equity
Deferred for 3 years subject to EPS hurdle
Performance Rights vesting as equity
Deferred for 4 years subject to financial and non-financial hurdles
5. Non-Executive Director arrangements
The director fee pool available for payment to NEDs of the Company is approved by shareholders. The
maximum annual aggregate pool for directors’ remuneration is $1,000,000, which was approved at the AGM
in October 2021. A review of NEDs’ remuneration is undertaken annually by the Company Board, taking into
account relevant benchmarking and recommendations from the PRN.
The following table sets out the agreed remuneration for NEDs by position for a full year, with effect from 1
November 2022. NEDs do not receive performance-related pay and are not provided with retirement benefits
apart from statutory superannuation.
In total, directors’ fees of $804,763 was paid during the year out of the director fee pool approved at the 2021
AGM of $1,000,000.
In addition to fixed remuneration, Non-Executive Directors (NEDs) are entitled to be paid reasonable expenses,
remuneration for additional services and superannuation contributions. Non-Executive Directors are not eligible
to participate in employee incentive plans and the Chair of Australian Ethical Superannuation Ltd does not
receive any additional fees for chairing this Board.
From 1 November 2023
AEI
$
AES
$
The Foundation
$
Base fees
Chair
152,066
38,016
–
Other non-executive directors
86,895
38,016
–
Additional fees
ARC – chair
28,512
19,008
–
ARC – member
16,293
10,862
–
Investment Committee (IC) – chair
28,512
–
–
Investment Committee (IC) – member
16,293
–
–
Due Diligence Committee – chair
5,431
–
–
Due Diligence Committee – member
5,431
–
–
Insurance Benefits Committee (IBC) – chair
–
5,431
–
Insurance Benefits Committee (IBC) – member
–
5,431
–
PRN – chair
–
–
–
PRN – member
–
–
–
ANNUAL REPORT 2024
84
85
Australian Ethical Investment Limited and its Controlled Entities
Remuneration Report
for the year ended 30 June 2024
5.1 Non-Executive Directors’ remuneration
The table below outlines Non-Executive Director reward as calculated in accordance with accounting
standards and the Corporations Act 2001 requirements for the directors of the consolidated group.
The amounts shown are equal to the amount expensed in the Company’s financial statements.
Name
Board Fee
Audit, Risk &
Compliance
Committee
People,
Remuneration
& Nominations
Committee
Investment
Committee
Due Diligence
Committee
Insurance Benefits
Committee
Super-annuation
Total
$
$
$
$
$
$
$
$
2024
S Gibbs
169,050
24,150
–
–
4,830
4,830
22,315
225,175
K Greenhill
111,090
42,263
–
–
5,341
4,830
17,988
181,512
M Bun
111,090
24,150
–
14,490
–
–
16,470
166,200
S McCullagh
77,280
–
–
25,357
–
–
11,290
113,927
J Orr1
77,280
14,490
–
14,490
–
–
11,689
117,949
Total
545,790
105,053
–
54,337
10,171
9,660
79,752
804,763
2023
S Gibbs
162,803
23,258
–
–
4,652
4,652
20,513
215,877
K Greenhill
106,985
40,701
–
–
–
4,652
15,995
168,333
M Bun
106,985
23,258
–
13,955
–
–
15,141
159,338
M Monaghan (retired 31 Mar 2023)
79,934
–
–
18,246
3,475
–
10,674
112,329
S McCullagh (app 1 Mar 2023)
25,091
–
–
7,351
–
–
3,406
35,848
J Orr1
74,424
13,955
–
13,955
–
–
10,745
113,078
Total
556,222
101,172
–
53,507
8,127
9,304
76,474
804,803
1 J Orr is a director of Australian Ethical Investment Limited (AEI) and a member of AEI’s PRN, ARC and Investment Committees. She is
not a director of Australian Ethical Superannuation Pty Limited (AES).
Mr Anderson is a Director of Australian Ethical Superannuation Pty Limited but is not a Director of Australian
Ethical Investment Limited and is not a KMP. His remuneration is not included in the Director fee pool, and is not
disclosed in the table above.
ANNUAL REPORT 2024
86
87
Australian Ethical Investment Limited and its Controlled Entities
Remuneration Report
for the year ended 30 June 2024
5.2 Shares owned by Non-Executive Directors
Name
Purchase
date
Balance at
1 July 2023
No. of shares
purchased
No. of
shares sold
Balance at
30 June 2024
Non-Executive Directors
M Bun
AEF Ordinary shares
13-Nov-17
57,000
–
–
57,000
Total
57,000
–
–
57,000
6. Governance
6.1 The Role of the People, Remuneration and Nominations Committee (PRN)
The role of the PRN is to help the Board fulfil its responsibilities to shareholders through a strong focus on
governance and in particular, the principles of accountability and transparency. The PRN operates under
delegated authority from the Board.
The terms of reference include oversight of remuneration as well as executive development, talent
management and succession planning.
The PRN members for the financial year ended 30 June 2024 were:
• Steve Gibbs (Chair),
• Mara Bun,
• Kate Greenhill,
• Julie Orr,
• Sandra McCullagh
The PRN met seven times during the year. Attendance at these meetings is set out in the Directors’ Report. At
the PRN’s invitation, the Managing Director and Chief People & Culture Officer attended all meetings except
where matters were associated with their own performance evaluation, development and remuneration were
to be considered. The PRN considers advice and views from those invited to attend meetings and draws on
services from a range of external sources, including engaging remuneration consultants from time to time.
Annually, the PRN assesses the eligibility for vesting of deferred shares.
6.2 CEO and Executive KMP Performance
The CEO is responsible for reviewing the performance of Executive KMPs and determining whether their
performance requirements were met. In addition, the CEO has oversight of all employees’ performance
appraisals. Both quantitative and qualitative data is used to determine whether performance criteria are
achieved.
An annual assessment of the CEO is completed by the Chair and is overseen by the Board, with input from the
PRN. The review includes measurement of performance against agreed KPI’s and Company performance. The
PRN also has oversight of Executive KMP performance.
6.3 Malus Provisions
The Board has the discretion to reduce or forfeit awards where:
• the participant has acted fraudulently or dishonestly or is in breach of their obligations to the Company
• the Company becomes aware of material misstatement or omission in the financial statements
of the Company, or
• circumstances occur that the Board determines to have resulted in unfair or inappropriate benefit to the
recipient.
6.4 Hedging Policy
Senior executives participating in the Company’s equity-based plans are prohibited from entering into any
transaction which would have the effect of hedging or otherwise transferring to any other person the risk of any
fluctuation in the value of any unvested entitlement in the Company’s securities.
6.5 Trading Restrictions and Windows
All directors and employees are constrained from trading the Company’s shares during ‘blackout periods’.
These periods occur between the end of the half year and two days after the release of the half-year results,
and between the end of the full year and two days after the release of the full year results. In addition, where
potential price sensitive information is known and not required to be disclosed to the market, the directors and
relevant employees are constrained from trading the Company’s shares.
The Directors’ report, incorporating the Remuneration report, is signed in accordance with a resolution of the
Board of Directors.
STEVE GIBBS
Chair
People, Remuneration & Nominations Committee
28 August 2024
ANNUAL REPORT 2024
88
89
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the
independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Australian Ethical Investment Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Australian Ethical
Investment Limited for the financial year ended 30 June 2024 there have been:
i.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Jessica Davis
Partner
Sydney
28 August 2024
60
Financial
Statements
and notes
ANNUAL REPORT 2024
91
Australian Ethical Investment Limited and its Controlled Entities
Financial Statements
for the year ended 30 June 2024
Consolidated
Parent
Note
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Revenue
Operating revenue
5
100,491
81,096
84,866
69,604
Expenses
Employee benefits
6
(33,963)
(27,454)
(33,471)
(26,938)
Fund related
7
(17,626)
(14,038)
(6,081)
(4,835)
Marketing
8
(9,113)
(11,694)
(9,113)
(11,694)
IT expenses
9
(4,270)
(3,536)
(4,226)
(3,430)
External services
10
(3,143)
(2,728)
(2,513)
(2,282)
Grants to non-profit organisations
11
(2,159)
(1,116)
(1,822)
(1,099)
Depreciation
(1,120)
(1,265)
(1,120)
(1,265)
Occupancy
(685)
(446)
(685)
(446)
Finance charges
(173)
(88)
(173)
(88)
Other operating expenses
12
(2,099)
(1,816)
(1,596)
(1,353)
Integration & transformation costs
13
(5,068)
(3,733)
(213)
(2,357)
Due diligence & transaction costs
14
(1,379)
–
(1,379)
–
Total expenses
(80,798)
(67,914)
(62,392)
(55,787)
Change in fair value of investment
22
(2,159)
(2,600)
(2,159)
(2,600)
Profit before income tax expense
17,534
10,582
20,315
11,217
Income tax expense
15
(6,003)
(4,006)
(6,742)
(4,196)
Net Profit for the year
11,531
6,576
13,573
7,021
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss
Gain/(Loss) on revaluation of investments
(4)
4
–
–
Other comprehensive income for the year,
net of tax
(4)
4
–
–
Total comprehensive income for the year1
11,527
6,580
13,573
7,021
Cents
Cents
Basic earnings per share
35
10.61
5.89
Diluted earnings per share
35
10.51
5.84
1 Comprehensive income includes the results of The Foundation (refer to Note 37)
The above statements of comprehensive income should be read in conjunction with the accompanying notes.
Statements of comprehensive income
FOR THE YEAR ENDED 30 JUNE 2024
Consolidated
Parent
Note
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Assets
Current assets
Cash and cash equivalents
16
26,391
27,134
18,179
20,498
Term deposits
10,000
5,600
10,000
5,000
Trade and other receivables
17
3,647
2,475
6,610
5,404
Prepayments
1,626
1,475
1,254
1,080
Right-of-use assets
18
11
30
11
30
Total current assets
41,675
36,714
36,054
32,012
Non-current assets
Deferred tax
15
4,409
3,974
3,863
3,450
Right-of-use assets
18
2,865
2,284
2,865
2,284
Property, plant and equipment
19
1,469
911
1,469
911
Term deposit
749
749
749
749
Investments in subsidiary
20
–
–
316
316
Related party loan
21
–
–
3,698
240
Financial assets through profit or loss
22
–
2,600
–
2,600
Financial assets through other
comprehensive income
67
72
1
1
Total non-current assets
9,559
10,590
12,961
10,551
Total assets
51,234
47,304
49,015
42,563
Liabilities
Current liabilities
Trade and other payables
23
9,242
9,832
5,446
5,821
Employee benefits
24
7,429
6,258
7,354
6,214
Deferred consideration
–
871
–
871
Tax payable
15
760
605
1,036
605
Lease liabilities
18
590
379
590
379
Total current liabilities
18,021
17,945
14,426
13,890
Non-current liabilities
Lease liabilities
18
2,180
1,823
2,180
1,823
Employee benefits
24
390
444
390
428
Provisions
492
324
492
324
Deferred tax
15
7
14
7
14
Total non-current liabilities
3,069
2,605
3,069
2,589
Total liabilities
21,090
20,550
17,495
16,479
Net assets
30,144
26,754
31,520
26,084
Equity
Issued capital
25
10,236
10,515
10,236
10,515
Reserves
26
3,459
2,299
3,457
2,293
Retained profits
16,449
13,940
17,827
13,276
Total equity
30,144
26,754
31,520
26,084
Statements of financial position
AS AT 30 JUNE 2024
The above statements of financial position should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2024
92
93
Australian Ethical Investment Limited and its Controlled Entities
Financial Statements
for the year ended 30 June 2024
Issued
capital
$’000
Note 25
Share-based
payment
reserve
$’000
Note 26
FVOCI1
reserve
$’000
Note 26
Retained
profits
$’000
Total
equity
$’000
Consolidated
Balance at 1 July 2022
8,969
2,702
2
12,992
24,665
Profit after income tax expense for the year
–
–
–
6,576
6,576
Other comprehensive income for the year,
net of tax
–
–
–
4
4
Total comprehensive income for the year
–
–
–
6,580
6,580
Transactions with owners in their capacity as owners:
Dividends provided for or paid (Note 27)
–
–
–
(5,628)
(5,628)
Shares vested under deferred shares plan
during the year
1,895
(1,895)
–
–
–
Employee deferred shares & rights
–
1,486
–
–
1,486
Employee share plan – shares purchased
on-market
(349)
–
–
–
(349)
Revaluation of investments
–
–
4
(4)
–
Balance at 30 June 2023
10,515
2,293
6
13,940
26,754
Issued
capital
$’000
Note 25
Share-based
payment
reserve
$’000
Note 26
FVOCI1
reserve
$’000
Note 26
Retained
profits
$’000
Total
equity
$’000
Consolidated
Balance at 1 July 2023
10,515
2,293
6
13,940
26,754
Profit after income tax expense for the year
–
–
–
11,531
11,531
Other comprehensive income for the year,
net of tax
–
–
–
(4)
(4)
Total comprehensive income for the year
–
–
–
11,527
11,527
Transactions with owners in their capacity as owners:
Dividends provided for or paid (Note 27)
–
–
–
(9,022)
(9,022)
Shares vested under deferred shares plan
during the year
2,388
(2,388)
–
–
–
Employee deferred shares & rights
–
3,552
–
–
3,552
Employee share plan – shares purchased
on-market
(2,667)
–
–
–
(2,667)
Revaluation of investments
–
–
(4)
4
–
Balance at 30 June 2024
10,236
3,457
2
16,449
30,144
1 Fair value through other comprehensive income (FVOCI)
The above statements of changes in equity should be read in conjunction with the accompanying notes.
Statements of changes in equity
FOR THE YEAR ENDED 30 JUNE 2024
Issued
capital
$’000
Note 25
Share-
based
payment
reserve
$’000
Note 26
Retained
profits
$’000
Total
equity
$’000
Parent
Balance at 1 July 2022
8,969
2,702
11,883
23,554
Profit after income tax expense for the year
–
–
7,021
7,021
Other comprehensive income for the year, net of tax
–
–
–
–
Total comprehensive income for the year
–
–
7,021
7,021
Transactions with owners in their capacity as owners:
Dividends provided for or paid (Note 27)
–
–
(5,628)
(5,628)
Shares vested under deferred shares plan during the
year
1,895
(1,895)
–
–
Employee deferred shares & rights
–
1,486
–
1,486
Employee share plan – shares purchased on-market
(349)
–
–
(349)
Balance at 30 June 2023
10,515
2,293
13,276
26,084
Issued
capital
$’000
Note 25
Share-
based
payment
reserve
$’000
Note 26
Retained
profits
$’000
Total
equity
$’000
Parent
Balance at 1 July 2023
10,515
2,293
13,276
26,084
Profit after income tax expense for the year
–
–
13,573
13,573
Other comprehensive income for the year, net of tax
–
–
–
–
Total comprehensive income for the year
–
–
13,573
13,573
Transactions with owners in their capacity as owners:
Dividends provided for or paid (Note 27)
–
–
(9,022)
(9,022)
Shares vested under deferred shares plan during the
year
2,388
(2,388)
–
–
Employee deferred shares & rights
–
3,552
–
3,552
Employee share plan – shares purchased on-market
(2,667)
–
–
(2,667)
Balance at 30 June 2024
10,236
3,457
17,827
31,520
The above statements of changes in equity should be read in conjunction with the accompanying notes.
Statements of changes in equity
FOR THE YEAR ENDED 30 JUNE 2024
ANNUAL REPORT 2024
94
95
Australian Ethical Investment Limited and its Controlled Entities
Financial Statements
for the year ended 30 June 2024
Consolidated
Parent
Note
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Cash flows from operating activities
Receipts from customers
98,150
79,668
83,486
68,087
Payments to suppliers and employees
(69,603)
(58,695)
(56,098)
(55,409)
28,547
20,973
27,388
12,678
Interest received
1,129
728
862
574
Grants to non-profit organisations
(1,660)
(1,607)
(1,099)
(1,509)
Income taxes paid
(5,724)
(4,612)
(6,166)
(1,210)
Net cash from operating activities
34
22,292
15,482
20,985
10,533
Cash flows from investing activities
Payments relating to integration
& transformation costs
(4,242)
(3,233)
(213)
(1,857)
Payments relating to due diligence
& transaction costs
(1,079)
–
(1,079)
–
Payments for investment in
Sentient Impact Group
(429)
(429)
(429)
(429)
Security deposit
–
(245)
–
(245)
Investment in term deposit
(5,000)
–
(5,000)
–
Funds returned from term deposit
600
–
–
–
Payments for property, plant and equipment
19
(1,023)
(203)
(1,023)
(203)
Return on investment in SVA unit trusts
–
39
–
–
Net cash from investing activities
(11,173)
(4,071)
(7,744)
(2,734)
Cash flows from financing activities
Purchase of employee’s deferred shares
(2,667)
(349)
(2,667)
(349)
Interest on lease liabilities
18
(173)
(88)
(173)
(88)
Dividends paid
27
(9,022)
(5,627)
(9,022)
(5,627)
Loan to subsidiary entity - AES
–
–
(3,698)
(550)
Net cash used in financing activities
(11,862)
(6,064)
(15,560)
(6,614)
Net increase/(decrease) in cash and
cash equivalents
(743)
5,347
(2,319)
1,185
Cash and cash equivalents at the
beginning of the financial year
27,134
21,787
20,498
19,313
Cash and cash equivalents at the
end of the financial year
16
26,391
27,134
18,179
20,498
The above statements of cash flows should be read in conjunction with the accompanying notes.
Statements of cash flows
FOR THE YEAR ENDED 30 JUNE 2024
Notes to the financial statements
NOTE 1. ABOUT THIS REPORT
The financial report covers the consolidated entity of Australian Ethical Investment Limited, the ultimate parent
entity, and its wholly owned subsidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’)
consisting of Australian Ethical Investment Limited (referred to hereafter as ‘Australian Ethical’, the ‘Company’
or ‘Parent’ entity), Australian Ethical Superannuation Pty Limited (‘AES’) and Australian Ethical Foundation
Limited (the ‘Foundation’), and Australian Ethical Investment Limited as an individual parent entity. The financial
statements are presented in Australian dollars, which is the Group’s functional and presentation currency.
Australian Ethical Investment Limited is a listed public company limited by shares (ASX: AEF) and both the
parent and wholly owned entities are incorporated and domiciled in Australia.
The Group is a for-profit entity for the purposes of preparing financial statements.
The Group’s registered office is at Level 8, 130 Pitt Street, Sydney NSW 2000.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on
28 August 2024. The Directors have the power to amend and reissue the financial statements.
NOTE 2. MATERIAL ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out either in
the respective notes or below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the
Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply
with International Financial Reporting Standards as issued by the International Accounting Standards Board
(‘IASB’).
Historical cost convention
The financial statements have been prepared under the accruals basis and are based on historical cost
convention, except for, where applicable, the revaluation of available-for-sale financial assets at fair value
through other comprehensive income, and financial assets and liabilities at fair value through profit or loss.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s and Company’s
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are disclosed in Note 3.
Parent entity information
These financial statements include the results of both the parent entity and the Group in accordance with
Australian Securities and Investments Commission Corporations (Parent Entity Financial Statements) Instrument
2021/195.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Australian
Ethical Investments Limited (‘Company’ or ‘Parent Entity’) as at 30 June 2024 and the results of all subsidiaries
for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group.
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
ANNUAL REPORT 2024
97
96
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment
of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Interests in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Dividends received
from subsidiaries are recognised as other income by the parent entity.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and
non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed
in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are
classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities
and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in
accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest
dollar.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. The
adoption of these new standards did not have an impact on the financial statements.
These include:
• Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2
• Definition of Accounting Estimates – Amendments to IAS 8
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates
its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on other factors,
including expectations of future events, management believes to be reasonable under the circumstances.
Income tax & deferred tax assets/liabilities – refer to Note 15
The Group is subject to income taxes in the jurisdictions in which it operates. Estimation is required in
determining the provision for income tax. There are transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is yet to be finalised.
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
Estimation of useful lives of assets – refer to Note 19
The Group determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets based on the available information at balance
date. The useful lives could change in future periods as a result of technical innovations, planned use and
benefits or some other event. The depreciation and amortisation charge will increase where the useful lives are
less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned
or sold will be written off or written down.
Lease term – Note 18
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability.
Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease
or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised,
when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and
circumstances that create an economical incentive to exercise an extension option, or not to exercise a
termination option, are considered at the lease commencement date. Factors considered may include the
importance of the asset to the Group’s operations; comparison of terms and conditions to prevailing market
rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and
disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension
option, or not exercise a termination option, if there is a significant event or significant change in circumstances.
Employee benefits provision – refer to Note 24
The liability for employee benefits expected to be settled more than 12 months from the reporting date is
recognised and measured at the present value of the estimated future cash flows to be made in respect of all
employees at the reporting date. In determining the present value of the liability, estimates of attrition rates have
been taken into account.
Share-based payment transactions – refer to Note 36
The group measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. At the date the shares are granted the fair value
is determined as the on-market average purchase price if the shares are purchased or a 60-days VWAP price
post year end results announcement if the shares are issued. Judgement is used in estimating the probability of
performance hurdles being met in determining the value of equity instruments expensed in profit or loss.
Performance rights are measured at fair value at the date at which they are granted, and the likelihood of
performance conditions being met.
The accounting estimates and assumptions relating to equity-settled share-based payments have no impact
on the carrying amounts of assets and liabilities but will impact profit or loss and equity.
NOTE 4. BUSINESS SEGMENTS
An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the
Group’s other components. The Group comprises of one main operating segment being Funds Management.
ANNUAL REPORT 2024
98
99
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 5. REVENUE
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Management fees
75,753
62,465
59,383
50,172
Performance fees
187
–
187
–
Administration fees (net of Operational Risk
Financial Reserve contributions)
17,172
12,542
16,537
12,738
Principal investment advisory fee
–
–
7,650
5,876
Member fees (net of rebates)
6,012
5,108
–
–
Interest income
1,367
780
1,109
617
Other income
–
201
–
201
Revenue
100,491
81,096
84,866
69,604
Recognition and measurement
Management, administration and member fees
Fee revenue is earned from provision of funds management services to customers outside the Group. Fee
revenue is measured based on the consideration specified in 12 Managed Funds, 1 Exchange Traded Fund,
1 Separate Managed Account and Australian Ethical Retail Superannuation Fund (‘AERSF’) Product Disclosure
Statements (‘PDS’). The Group recognises revenue as the services are provided.
The parent entity earns investment management and administration fees from its subsidiary Australian Ethical
Superannuation Pty Limited (‘AES’) in accordance with arms’ length service agreements. The parent entity
also earns a principal investment advisory fee from AES for the provision of services relating to developing,
implementing and maintaining investment strategies including strategic advice and portfolio construction for
the AERSF. The Group recognises these revenues as the services are provided.
AES earns member fees from AERSF from the provision of services to members.
The administration fee entitlement earned in accordance with the Product Disclosure Statement (‘PDS’) is net of
$2,297k (2023: $2,934k) paid directly to the Operational Risk Financial Reserve (‘ORFR’) of AERSF.
Performance fees
Performance fees in relation to the Emerging Companies Fund and High Conviction Fund are dependent on
fund outperformance per PDS and are recognised when it is highly probable that performance hurdles have
been achieved and a reversal is unlikely.
Interest income
Interest revenue is recognised as interest accrues.
NOTE 6. EMPLOYEE BENEFITS
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Employee remuneration
30,404
24,396
30,141
24,136
Directors’ fees
896
826
695
621
Strategic project contractors
255
234
255
234
Other committee member fees
107
154
107
154
Other employment related costs
2,301
1,844
2,273
1,793
33,963
27,454
33,471
26,938
Other employment related costs include payroll tax ($1.6m), employee training and development, workers
compensation insurance and other benefits of employment with Australian Ethical.
Recognition and measurement
Employee benefits are expensed as the related service is provided. A liability is recognised for the amount
expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of
past service provided by the employee and the obligation can be estimated reliably.
The fair value of short and long-term equity-settled share-based payment arrangements is recognised as an
employee remuneration expense based on the value at grant date, with a corresponding increase in equity. The
amount recognised as an expense is adjusted to reflect the number of awards expected to vest based on the
likelihood or probability assessment that the performance conditions are met at the vesting date.
NOTE 7. FUND RELATED
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Administration and custody fees
14,357
11,191
4,190
3,105
Asset managers, ratings and platform fees
1,003
995
996
985
Regulatory & industry body fees
1,493
822
460
267
Ethical research
174
135
174
135
Regulatory projects
501
767
172
215
Strategic projects
98
128
89
128
17,626
14,038
6,081
4,835
The increase in administration and custody fees is driven by increases in members and FUM following the SFT
with Christian Super part-way through prior year, in addition to new organic managed funds and superannuation
members.
Regulatory and strategic projects include costs incurred to implement regulatory changes in the
superannuation industry and costs associated with the transition to a new custodian following the decision by
NAB Asset Servicing to exit the market.
Recognition and measurement
Expenses are recognised at the fair value of the consideration paid or payable for services rendered.
ANNUAL REPORT 2024
100
101
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 8. MARKETING
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Distribution costs
4,540
5,761
4,540
5,761
Brand awareness
2,902
4,295
2,902
4,295
Other
1,671
1,637
1,671
1,637
9,113
11,694
9,113
11,694
The decrease in distribution costs is due to terminating two employer platform channels. Continued spend
on brand remains an important component of driving our brand awareness and growth, however timing of
brand campaigns resulted in lower brand spend in FY24 compared to prior year. Other marketing costs include
events, sponsorships, marketing & public relations content, media agents’ fees and annual & sustainability
reports.
NOTE 9. IT EXPENSES
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Investment and client-facing systems
2,406
2,067
2,329
1,961
Support systems, infrastructure and security
1,666
1,205
1,649
1,205
Strategic projects
198
264
248
264
4,270
3,536
4,226
3,430
Investing in technology, systems and security is a strategic focus including continuous improvement in
IT controls, cybersecurity testing and the Business Continuity Planning environment.
NOTE 10. EXTERNAL SERVICES
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Internal & external audit and tax services
1,117
902
781
712
Consultants
955
1,067
754
862
Legal services
426
355
384
310
Other
645
404
594
398
3,143
2,728
2,513
2,282
Consultants for the current and prior year comparatives, includes advisory services in relation to strategic
projects including product development, investment governance, strategic investment consulting, and review
of investment management systems.
NOTE 11. GRANTS TO NON-PROFIT ORGANISATIONS
The Group’s constitution states that the Directors before recommending or declaring any dividend to be paid
out of the profits of any one year must have first gifted or provisioned for gifting an amount equivalent to 10% of
what the profit for that year would have been had bonuses and the amount gifted not been deducted.
NOTE 11. GRANTS TO NON-PROFIT ORGANISATIONS (CONTINUED)
Community grants amounting to $1,821,000 (2023: $1,099,000) have been expensed and gifted from the parent
entity to The Foundation. The Foundation has committed to granting all of its current year income (including
interest income, less costs) along with $316,000 of retained earnings, amounting to of $2,159,000 (2023:
$1,116,000) to non-profit organisations through its gifts program.
NOTE 12. OTHER OPERATING EXPENSES
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Insurance
854
767
379
338
Travel
691
476
690
476
ASX listing fees and registry costs
257
229
257
229
Printing and subscriptions
66
169
62
135
Other
231
175
208
175
2,099
1,816
1,596
1,353
NOTE 13. INTEGRATION & TRANSFORMATION COSTS
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Project Management and Project Team costs
2,623
1,626
183
1,626
Administrator transition costs
2,407
1,172
–
1,172
Marketing and member communications
8
115
–
115
Legal and consulting
3
802
3
802
Other
27
18
27
18
5,068
3,733
213
3,733
Australian Ethical is transitioning its superannuation administration services to a single service provider. This
transformational project aims to deliver a modern technology stack, improving growth flexibility with a more
compelling commercial rate-card. The integration and transformation costs include external Administrator
costs to facilitate the configuration and transfer of member data alongside project management and team
costs.
NOTE 14. DUE DILIGENCE & TRANSACTION COSTS
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Project Management and Project Team costs
691
–
691
–
Legal costs
688
–
688
–
1,379
–
1,379
–
Due diligence and transaction costs includes costs to acquire Altius Asset Management business and due
diligence on pipeline of other inorganic opportunities.
ANNUAL REPORT 2024
102
103
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 15. INCOME TAX
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Income tax expense
Current tax
6,445
4,662
7,162
4,459
Deferred tax asset – temporary differences
(435)
(636)
(413)
(243)
Deferred tax liability – temporary differences
(7)
(20)
(7)
(20)
Aggregate income tax expense
6,003
4,006
6,742
4,196
Deferred tax included in income tax expense
comprises:
Increase in deferred tax assets
(435)
(636)
(413)
(243)
Decrease in deferred tax liabilities
(7)
(20)
(7)
(20)
Deferred tax – temporary differences
(442)
(656)
(420)
(263)
Numerical reconciliation of income tax
expense and tax at the statutory rate
Profit before income tax expense
17,534
10,582
20,315
11,217
Add: Tax exempt loss attributable to the
Foundation
316
–
–
–
Taxable profit before income tax
17,849
10,582
20,315
11,217
Tax at the statutory tax rate of 30% (2023: 30%)
5,355
3,175
6,094
3,365
Tax effect amounts which are not deductible/
(taxable) in calculating taxable income:
Other non-deductible items
648
831
648
831
Income tax expense
6,003
4,006
6,742
4,196
The effective tax rate for the consolidated group is 34.2% (2023: 37.9%) and for the parent entity is 33.2% (2023:
37.4%).
The higher effective tax rate is due to non-deductible expenses incurred in relation to the write-down of the
investment in Sentient which is on capital account and not deductible. Excluding the impact of the change in
fair value of the Sentient investment, the effective tax rate is 30.0% for the consolidated group and 30.0% on
profit attributable to shareholders.
NOTE 15. INCOME TAX (CONTINUED)
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Employee benefits
1,237
976
1,227
965
Provision for employee leave
1,030
855
1,019
853
Integration costs
379
896
296
566
Accruals
231
207
140
160
Community grants
547
330
547
330
Provision for lease make-good
102
97
102
97
Other payables
709
592
358
458
Lease liabilities
174
21
174
21
Deferred tax asset
4,409
3,974
3,863
3,450
Movements:
Opening balance
3,974
3,338
3,450
3,207
Charged to profit or loss
435
636
413
243
Closing balance
4,409
3,974
3,863
3,450
Deferred tax liability
Deferred tax liability comprises temporary
differences attributable to:
Amounts recognised in profit or loss:
Property, plant and equipment
7
14
7
14
Deferred tax liability
7
14
7
14
Movements:
Opening balance
14
34
14
34
Charged to profit or loss
(7)
(20)
(7)
(20)
Closing balance
7
14
7
14
Provision for income tax
760
605
1,036
605
Income tax refund due
–
–
–
–
Recognition and measurement
Tax expense comprises current and deferred tax recognised in the profit and loss except where related to items
recognised directly in equity. Tax expense is measured at the tax rates that have been enacted or substantially
enacted based on the national tax rate for each applicable jurisdiction at the reporting date.
Current tax is the expected tax payable or receivable on taxable income or loss for the year and any adjustment
in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities.
ANNUAL REPORT 2024
104
105
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 15. INCOME TAX (CONTINUED)
Deferred tax assets and liabilities arise from timing differences between the recognition of gains and losses in
the financial statements and their recognition in the tax computation. Deferred tax assets are recognised only to
the extent that it is probable that future taxable profits will be available against which they can be utilised. These
are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related
tax benefits will be realised. The carry forward values of deferred tax assets and liabilities have been adjusted to
reflect applicable future corporate tax rates.
Australian Ethical Investment Limited and its wholly owned subsidiary, Australian Ethical Superannuation Pty
Limited, have formed an income tax consolidated Group under the Tax Consolidation System. Australian Ethical
Investment Limited is responsible for recognising the current tax assets and liabilities for the tax consolidated
Group.
The tax consolidated group has a tax sharing agreement whereby each company in the Group contributes to
the income tax payable in proportion to their contribution to the net profit before tax consolidated group.
Under the tax sharing agreement, Australian Ethical Superannuation Pty Limited agrees to pay its share of the
income tax payable to Australian Ethical Investment Limited on the same day that Australian Ethical Investment
Limited pays the Australian Taxation Office for group tax liabilities.
The tax liability for the subsidiary entities is recognised through intercompany payable or receivable.
NOTE 16. CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Cash at bank
26
242
20
229
Deposits at call
26,365
26,892
18,159
20,269
26,391
27,134
18,179
20,498
Recognition and measurement
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value. Deposits at call earn
interest at a higher rate than cash at bank which are low interest earning transactional accounts.
NOTE 17. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Trade receivables
3,460
2,475
937
624
Receivable from subsidiary
–
–
5,486
4,780
Performance fee receivable
187
–
187
–
3,647
2,475
6,610
5,404
Recognition and measurement
Trade receivables are initially recognised when they are originated and are measured at the transaction price.
Expected credit losses on trade and other receivables are estimated to be nil as there are currently no past
due receivables as at 30 June 2024 (2023: nil) and management have not identified any additional concerns
regarding collectability of the receivables as the receivables are predominantly due from related parties.
NOTE 18. LEASES
Leases includes the lease for the Sydney office premises, for printing and copying equipment for the office, and
other IT hardware and infrastructure.
The Group entered into a long-term lease for a 5-year term commencing 1 July 2023 for the Sydney office at 130
Pitt Street. The new lease includes the existing space and an additional half floor. The Group does not have an
option to purchase the premises at the expiry of the lease period.
A bank guarantee of $749,000 has been provided by the Group to the property owners as a security deposit.
A right-of-use asset and lease liability have been recognised in the Statement of Financial Position.
The Group entered into a new lease for printing and copying equipment in November 2023 for a period of 4
years.
Consolidated & Parent
Office
premises
$’000
IT hardware &
infrastructure
$’000
Total
$’000
Right-of-use assets
Balance at 1 July 2022
580
92
672
Additions
2,214
–
2,214
Depreciation
(526)
(46)
(572)
Balance at 30 June 2023
2,268
46
2,314
Comprising of:
Current
–
30
30
Non-current
2,268
16
2,284
2,268
46
2,314
Consolidated & Parent
Office
premises
$’000
IT hardware &
infrastructure
$’000
Total
$’000
Right-of-use assets
Balance at 1 July 2023
2,268
46
2,314
Additions
1,198
19
1,217
Depreciation
(616)
(39)
(655)
Balance at 30 June 2024
2,850
26
2,876
Comprising of:
Current
–
11
11
Non-current
2,850
15
2,865
2,850
26
2,876
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Amounts recognised in statement of cash flows
Interest on lease liabilities
173
88
173
88
Payments to landlord
557
722
557
722
Total cash outflow for leases
730
810
730
810
ANNUAL REPORT 2024
106
107
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 18. LEASES (CONTINUED)
Accounting policy for right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at
cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any lease incentives received, any initial direct costs
incurred, and an estimate of costs expected to be incurred for dismantling and removing the underlying asset,
and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the
leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets
are subject to impairment or adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. These includes a short-term lease for
offices in Melbourne. These are not included in Right-of-use assets or lease liabilities as the terms of these
leases are 12 months or under. Lease payments on these assets are expensed to profit or loss as incurred.
Consolidated & Parent
Office
building
$’000
IT hardware &
infrastructure
$’000
Total
$’000
Lease liabilities
Balance at 1 July 2022
742
92
834
Additions
2,090
–
2,090
Payments
(763)
(47)
(810)
Interest on lease liabilities
87
1
88
Balance at 30 June 2023
2,156
46
2,202
Comprising of:
Current
342
37
379
Non-current
1,814
9
1,823
2,156
46
2,202
Consolidated & Parent
Office
building
$’000
IT hardware &
infrastructure
$’000
Total
$’000
Lease liabilities
Balance at 1 July 2023
2,156
46
2,202
Additions
1,279
19
1,298
Payments
(519)
(38)
(557)
Interest on lease liabilities
(172)
(1)
(173)
Balance at 30 June 2024
2,744
26
2,770
Comprising of:
Current
579
11
590
Non-current
2,165
15
2,180
2,744
26
2,770
NOTE 18. LEASES (CONTINUED)
Accounting policy for lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at
the present value of the lease payments to be made over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate.
Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that
depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a
purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination
penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in
which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a
market review; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a
lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if
the carrying amount of the right-of-use asset is fully written down.
NOTE 19. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Consolidated
Leasehold
improvements
$’000
Plant and
equipment
$’000
Software
development
$’000
Total
$’000
Balance at 1 July 2022
432
80
889
1,401
Additions
–
138
65
203
Disposals
–
–
–
–
Depreciation expense
(378)
(84)
–
(462)
Amortisation expense
–
–
(231)
(231)
Balance at 30 June 2023
54
134
723
911
Additions
745
188
90
1,023
Disposals
–
(4)
–
(4)
Asset transfer
(27)
27
–
–
Depreciation expense
(110)
(112)
–
(222)
Amortisation expense
–
–
(239)
(239)
Balance at 30 June 2024
662
233
574
1,469
Recognition and measurement
Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment
losses. The carrying amount of property, plant and equipment is reviewed annually to ensure that it is not
in excess of the recoverable amount. Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the consolidated Group. Gains and losses between the carrying amount and the disposal proceeds
are taken to profit or loss.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. The carrying amount of any component accounted
for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit
or loss during the reporting period in which they are incurred.
ANNUAL REPORT 2024
108
109
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 19. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The increase in software development costs during the year is due to building the mobile app in line with our
growth plans with respect to digital platforms.
Depreciation and amortisation
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and
equipment (excluding land) over their expected useful lives. Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values using the straight-line method over their estimated useful
lives. The estimated useful lives for current and comparative periods are as follows:
Leasehold improvements
the lesser of unexpired lease term or useful life, 2-7 years
Plant and equipment
2-7 years
Platform development
5 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
Leasehold improvements and plant and equipment are depreciated over the unexpired period of the lease or
the estimated useful life of the assets, whichever is shorter.
NOTE 20. NON-CURRENT ASSETS – INVESTMENTS IN SUBSIDIARY
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Investment in Australian Ethical
Superannuation Pty Limited (as trustee of the
Australian Ethical Retail Superannuation Fund)
–
–
316
316
NOTE 21. NON-CURRENT ASSETS – RELATED PARTY LOAN
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Loan to subsidiary
–
–
3,698
240
The loan was provided to subsidiary AES to support the ongoing costs of the AERSF administrator transition
to GROW. The loan is non-interest bearing until completion of the transition, expected to be in the financial
year ended 30 June 2025. On completion, the loan becomes interest bearing and due to be repaid over a 5
year period. The parent entity support for AES includes waiving any loan repayment obligations to ensure AES
continues as a going concern at all times.
NOTE 22. FINANCIAL ASSETS THROUGH PROFIT OR LOSS
Consolidated
2024
$'000
2023
$'000
Balance as at 1 July – Investment in Sentient Impact Group
2,600
5,200
Fair value write-down
(2,159)
(2,600)
Cancellation of final Instalment payment
(441)
–
Balance as at 30 June
–
(2,600)
NOTE 22. FINANCIAL ASSETS THROUGH PROFIT OR LOSS (CONTINUED)
As a result of Sentient Impact Group Pty Ltd’s (Sentient) inability to drive the scale required to achieve its
strategy and business plan aspirations, the Sentient Board decided to commence an orderly sale of its assets.
Consequently, the final capital call on AE of $441k was no longer required or payable. After this amount of
$441k, AE has prudently recorded a fair value write-down of $2.16m in FY24, effectively valuing any further
residual liquidation value at zero.
NOTE 23. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Trade payables and accruals
7,400
8,509
3,624
4,722
Grants to non-profit organisations
1,842
1,323
1,822
1,099
9,242
9,832
5,446
5,821
Refer to Note 28 for further information on financial instruments.
Recognition and measurement
Trade payables and accruals represent liabilities for goods and services provided to the group prior to the end
of the financial year and which are unpaid. Due to their short-term nature, they are measured at amortised cost
and are not discounted. The amounts are unsecured and are usually paid within 30 days of an invoice being
rendered.
NOTE 24. EMPLOYEE BENEFITS
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Current
Annual leave
1,712
1,556
1,694
1,548
Long service leave
1,332
1,294
1,311
1,294
Employee benefits
4,385
3,408
4,349
3,372
7,429
6,258
7,354
6,214
Non-current
Long service leave
390
444
390
428
Recognition and measurement
Employee benefit accruals are recognised when the Group has a present legal or constructive obligation as a
result of past events, it is probable that an outflow of resources will be required to settle the obligation and the
amount can be reliably estimated.
Employee Benefits Liabilities including employee short term incentive compensation, annual leave and
long service leave expected to be settled wholly within 12 months of the reporting date are measured at the
amounts expected to be paid when the liabilities are settled. Non-accumulating benefits, such as sick leave,
are not provided for but are expensed as the benefits are taken by the employees.
ANNUAL REPORT 2024
110
111
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 25. EQUITY – ISSUED CAPITAL
Consolidated
2024 Shares
2023 Shares
2024
$’000
2023
$’000
Ordinary shares – fully paid
112,782,052
112,782,052
10,236
10,515
Movements in ordinary share capital
Details
Date
Shares
Issue price
$’000
Balance
30 June 2022
112,387,138
8,969
Vesting of deferred shares in the Employee
Share Plan (525,972 shares), and deferred
STI shares (88,613 shares) to the Investment
Team
1 September 2022
–
$2.15
1,322
Vesting of FY20 deferred STI shares (5,193
shares) – CEO
1 September 2022
–
$4.53
24
Vesting of deferred STI shares (24,626
shares) for FY20 Performance fee, and FY21
deferred STI shares (7,459) for the CEO
1 September 2022
–
$9.80
314
Purchase of deferred shares in the
Employee Share Plan – on-market
30 September to
6 October 2022
–
$5.26
(349)
Issue of deferred shares to the Employee
Share Plan
13 December 2022
394,914
$5.29
–
Vesting of deferred shares in the Employee
Share Plan (5,131 shares)
16 December 2022
–
$4.53
23
Vesting of deferred shares in the Employee
Share Plan (2,959 shares)
16 December 2022
–
$9.80
29
Vesting of deferred shares in the Employee
Share Plan (22,496 shares)
20 February 2023
–
$4.53
102
Vesting of deferred shares in the Employee
Share Plan (8,308 shares)
20 February 2023
–
$9.80
81
Balance
1 July 2023
112,782,052
10,515
Vesting of deferred shares in the Employee
Share Plan (255,234 shares)
15 September 2023
–
$4.53
1,156
Vesting of deferred STI shares (108,628
shares)
15 September 2023
–
$6.10
663
Vesting of deferred shares in the Employee
Share Plan (8,528 shares)
10 November 2023
–
$5.29
45
Purchase of deferred shares in the
Employee Share Plan – on-market
(568,032)
23 October to 12
December 2023
–
$4.53
(2,571)
Purchase of deferred shares in the
Employee Share Plan – on-market (18,261)
22 December 2023
–
$5.27
(96)
Vesting of deferred shares in the Employee
Share Plan (2,271 shares)
1 February 2024
–
$7.37
16
Vesting of deferred shares in the Employee
Share Plan (7,013 shares)
1 March 2024
–
$5.68
40
Vesting of deferred shares in the Employee
Share Plan (72,121 shares)
6 March 2024
–
$6.49
468
Balance
30 June 2024
112,782,052
10,236
NOTE 25. EQUITY – ISSUED CAPITAL (CONTINUED)
The Company measures the value of deferred shares at the price at which the shares are purchased on-market,
or a 60-day VWAP post results announcement where shares are issued. The Company recognises share grants
as a reduction in Issued Capital.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the
company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares
have no par value and the company does not have a limited amount of authorised capital.
Every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall
have one vote, including deferred shares.
Recognition and measurement
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax,
from the proceeds.
Capital risk management
The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders.
The capital risk management policy remained unchanged during the year.
(i) Regulatory capital requirements
In connection with operating a funds management business in Australia, the Parent entity is required to
hold an Australian Financial Services Licence (AFSL). As a holder of an AFSL, the Australian Securities &
Investments Commission (ASIC) requires the Company to:
– prepare 12-month cash-flow projections which must be approved at least quarterly by Directors, and
reviewed annually by auditors;
– hold at all times minimum Net Tangible Assets (NTA) the greater of:
(a) $150,000;
(b) 0.5% of the average value of scheme property (capped at $5m); or
(c) 10% of the historical 3-year average responsible entity revenue (uncapped).
The minimum NTA is $7.25m as at 30 June 2024.
The Company must hold at least 50% of its minimum NTA required as cash or cash equivalents and hold at
least $50,000 in Surplus Liquid Funds (SLF).
The Company has complied with these requirements at all times during the year.
(ii) Dividend policy
Dividends paid to shareholders are typically in the range of 80-100% of the Group’s net profit after tax
attributable to shareholders. The Board may declare a dividend outside that range with due consideration
to retained earnings and business activities. Refer also to Note 11 which discusses the provisioning of
staff bonuses and community grants prior to recommending or declaring a dividend under the Group’s
constitution.
ANNUAL REPORT 2024
112
113
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 26. EQUITY – RESERVES
Share-based
payment reserve
$’000
FVOCI
reserve
$’000
Total
$’000
Consolidated
Balance at 30 June 2022
2,702
4
2,706
Shares vested under deferred share plan during the year
(1,895)
–
(1,895)
Employee deferred shares & rights*
1,486
–
1,486
Revaluation of investments
–
2
2
Balance at 30 June 2023
2,293
6
2,299
Shares vested under deferred share plan during the year
(2,388)
–
(2,388)
Employee deferred shares & rights*
3,552
–
3,552
Revaluation of investments
–
(4)
(4)
Balance at 30 June 2024
3,457
2
3,459
*
includes employee share plan and deferred shares and ELTI rights granted to employees
Share-based
payment reserve
$’000
FVOCI
reserve
$’000
Total
$’000
Parent
Balance at 30 June 2022
2,702
–
2,702
Shares vested under deferred share plan during the year
(1,895)
–
(1,895)
Employee deferred shares & rights*
1,486
–
1,486
Balance at 30 June 2023
2,293
–
2,293
Shares vested under deferred share plan during the year
(2,388)
–
(2,388)
Employee deferred shares & rights*
3,552
–
3,552
Balance at 30 June 2024
3,457
–
3,457
*
includes employee share plan and deferred shares and ELTI rights granted to employees
Share-based payment reserve
This reserve relates to shares granted by the Group to its employees under its share-based payment
arrangements.
Further information about share-based payments to employees is set out in Note 36.
Financial assets at FVOCI reserve
The Group has elected to recognise changes in the fair value of certain investments in equity financial
instruments in OCI. These changes are accumulated within the FVOCI reserve within Equity. The Group
transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
NOTE 27. EQUITY – DIVIDENDS
Dividends
Dividends paid during the financial year were as follows:
2024
$’000
2023
$’000
Final dividend for the year ended 30 June 2023 of 5.00 cents
(2022: 3.00 cents) per ordinary share – fully franked (Paid 21 September 2023)
5,639
3,372
Interim dividend for the year ended 30 June 2024 of 3.00 cents
(2023: 2.00 cents) per ordinary share – fully franked (Paid 20 March 2024)
3,383
2,256
9,022
5,628
Subsequent to year end the Directors have declared a final dividend of 6.00 cents per fully paid ordinary share
(2023: 5.00 cents final dividend). The aggregate amount of the declared dividend expected to be paid on 18
September 2024 out of profits for the year ended 30 June 2024, but not recognised as a liability at year end, is
$6,767,000 (2023: $5,639,000). All dividends paid during the year were fully franked based on tax paid at 30.0%.
The final dividend to be paid in September 2024 will be fully franked at 30.0%.
Franking credits
Dividends paid during the financial year were as follows:
2024
$’000
2023
$’000
Franking credits available for subsequent financial years based
on a tax rate of 30% (2023: 30%)
14,502
12,667
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
• franking credits that will arise from the payment of the amount of the provision for income tax at the reporting
date
• franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
Accounting policy for dividends
Dividends are recognised when declared during the financial year.
NOTE 28. FINANCIAL INSTRUMENTS
Financial risk management objectives and framework
The Group’s activities expose it to a variety of financial risks, including market risk arising from Funds under
Management (FUM), credit risk and liquidity risk. The overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group.
The Group does not have a material exposure to currency and interest rate risk.
The Group recognises that risk is part of doing business and that the ongoing management of risk is critical to
its success. The approach to managing risk is articulated in the Risk Management Strategy and the Risk Appetite
Statement. The Chief Risk Officer is responsible for the design and maintenance of the risk and compliance
framework, establishing and maintaining group wide risk management policies, and providing regular risk
reporting to the Audit, Risk & Compliance Committee (ARCC). The Board regularly monitors the overall risk profile
of the Group and sets the risk appetite, usually in conjunction with the annual strategy and planning process.
ANNUAL REPORT 2024
114
115
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 28. FINANCIAL INSTRUMENTS (CONTINUED)
The Board is responsible for ensuring that management has appropriate processes in place for managing
all types of risk. To assist in providing ongoing assurance and comfort to the Board, responsibility for risk
management oversight has been delegated to the ARC. One of the main functions of the Committee is to
identify emerging risks and determine treatment and monitoring of emerging and current risks. In addition,
the Committee is responsible for seeking assurances from management that the systems and policies in
place to assist the Group to meet and monitor its risk management responsibilities contain appropriate, up-
to-date content and are being maintained. The Group is complying with its licences, and there is a structure,
methodology and timetable in place for monitoring material service providers.
The following discussion relates to financial risks the Group is exposed to.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices.
Exposure
The Group’s revenue is dependent on FUM which is influenced by equity market movements. Management
calculates that a 10% movement in FUM linked to equity markets would change annualised revenue by
approximately $7,083,000 (2023: $6,924,000).
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group is predominantly exposed to credit risk on its deposits with banks and financial
institutions. The Group manages this risk by holding cash and cash equivalents at financial institutions with
S&P’s rating of ‘A’ or higher. The maximum exposure of the Group to credit risk on financial assets which have
been recognised on the Consolidated Statements of Financial Position is the carrying amount of cash and cash
equivalents, and trade receivables. For all financial instruments other than those measured at fair value their
carrying value approximates fair value.
All trade and other receivables are short term in nature and are not past due or impaired.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of
this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to
make contractual payments for a period greater than 6 months.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents).
The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual
and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Surplus funds are
generally only invested in instruments that are tradeable in highly liquid markets. In addition, a twelve-month
rolling forecast of liquid assets and cash flows, and profit & loss statements are reviewed by the Board quarterly
to ensure there is sufficient liquidity within the Group.
Remaining contractual maturities
The Group’s and Company’s remaining contractual maturity for its financial instrument liabilities. The amounts
disclosed are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying
balances as the impact of discounting is not significant.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
NOTE 29. FAIR VALUE MEASUREMENT
Recognition and measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date; and assumes that the
transaction will take place either: in the principal market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement
is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, are used, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
This note provides an update on the judgements and estimates made by the Group in determining the fair
values of the financial instruments since the last annual financial report.
The following tables detail the group’s assets measured or disclosed at fair value, using a three-level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1:
Quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the
measurement date.
Relate to the Company’s nominal
holdings of shares in listed entities
held for advocacy purposes.
Level 2:
Fair value measurements derived from inputs other than
quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices). The fair value of financial assets
that are not traded in an active market is determined using
valuation techniques. These include the use of recent arm’s
length market transactions, referenced to the current fair value
of a substantially similar other instrument or any other valuation
technique that provides a reliable estimate of prices obtained
in actual market transactions.
Relate to the Foundation’s
investment in the Social Ventures
Australia (SVA) Diversified Impact
Fund (DIF) unlisted unit trusts.
Level 3:
Fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
Relate to the Company’s
investment in Sentient Impact
Group.
There were no transfers between levels during the financial year.
ANNUAL REPORT 2024
116
117
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 29. FAIR VALUE MEASUREMENT (CONTINUED)
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Consolidated – 2023
Financial assets measured at fair value
Investments
1
71
2,600
2,672
Total assets
1
71
2,600
2,672
Consolidated – 2024
Financial assets measured at fair value
Investments
1
66
–
67
Total assets
1
66
–
67
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Parent – 2023
Financial assets measured at fair value
Investments
1
–
2,600
2,601
Total assets
1
–
2,600
2,601
Parent – 2024
Financial assets measured at fair value
Investments
1
–
–
1
Total assets
1
–
–
1
NOTE 30. KEY MANAGEMENT PERSONNEL DISCLOSURES
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the
Group is set out below:
Consolidated
Parent
2024
2023
2024
2023
Short-term employee benefits
4,668,202
4,294,110
4,487,077
4,108,700
Post-employment benefits
280,575
299,697
260,651
280,229
Long-term benefits
75,839
72,621
75,839
72,621
Share-based payments
1,121,423
563,980
1,121,423
563,980
6,146,039
5,230,408
5,944,990
5,025,530
Information regarding key management personnel’s remuneration and shares held in Australian Ethical
Investment Limited is provided in the Remuneration Report.
NOTE 31. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of
the Company, and its network firms:
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Audit services – KPMG
Audit and review of financial statements
– Group
119,639
136,917
95,608
114,562
Audit and review of financial statements
– managed funds for which the Company acts
as Responsible Entity*
278,796
216,439
278,796
216,439
Audit and review of financial statements
– superannuation fund for which the subsidiary
entity acts as Responsible Superannuation
Entity*
50,554
47,027
–
–
448,989
400,383
374,404
331,001
Assurance services – KPMG
Regulatory assurance services – Group
65,955
52,771
61,058
48,216
Regulatory assurance services
– managed funds and superannuation fund*
80,028
74,444
–
–
Assurance services in relation to CPS 234
Tripartite
–
94,583
–
94,583
ATO Assurance review consulting services
–
66,625
–
66,625
SFT assurance procedures
–
30,000
–
30,000
Assurance services in relation to the
Sustainability Report
86,652
20,500
86,652
20,500
232,635
338,923
147,710
259,924
Other services – KPMG
Tax compliance and advisory services
150,854
104,909
117,655
83,538
150,854
104,909
117,655
83,538
Total remuneration of KPMG
832,478
844,215
639,769
674,463
*
These fees are incurred by the Company and are effectively recovered from the funds via administration or management fees. The
addition of new funds and audit work relating to the expanded asset base following the SFT have contributed to the increase in audit
fees.
The Board considered the other non-audit / assurance services provided by the auditor and is satisfied that the
provision of the non-audit services is compatible with, and does not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services are subject to the corporate governance procedures adopted by the Company and are
reviewed by the Audit, Risk and Compliance Committee to ensure that they do not impact the integrity and
objectivity of the auditor, and
• non-audit services provided do not undermine the general principles relating to auditor independence as
set out in APES 110 Code of Ethics for Professional Accountants, as they do not involve reviewing or auditing
the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an
advocate for the Company or jointly sharing risks and rewards.
ANNUAL REPORT 2024
118
119
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 32. COMMITMENTS
As at 30 June 2024, the Group did not enter into any capital commitments other than as disclosed in Note 18.
NOTE 33. RELATED PARTY TRANSACTIONS
Parent entity
Australian Ethical Investments Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in the Consolidated Entity Disclosure Statement (CEDS).
KMP remuneration
Disclosures relating to key management personnel are set out in Note 30 and the remuneration report included
in the Directors’ report.
Other related parties
Australian Ethical Superannuation Pty Limited (AES) acts as trustee for Australian Ethical Retail Superannuation
Fund (AERSF).
Australian Ethical Investment Limited (AEI) acts as the responsible entity for the following Australian Ethical
Trusts (AETs):
• Australian Ethical Australian Shares Fund
• Australian Ethical Diversified Shares Fund
• Australian Ethical Balanced Fund
• Australian Ethical Income Fund
• Australian Ethical Fixed Interest Fund
• Australian Ethical International Shares Fund
• Australian Ethical High Growth Fund
• Australian Ethical Emerging Companies Fund
• Australian Ethical High Conviction Fund (unlisted and listed)
• Australian Ethical Alternatives Fund (unregistered)
• Australian Ethical Defensive Alternatives Fund (unregistered)
• Australian Ethical Unlisted Property Fund (unregistered)
• Australian Ethical Global Credit Fund (unregistered)
• Australian Ethical Moderate Fund
• Australian Ethical Infrastructure Debt Fund
• Australian Ethical Multi Manager International Shares Fund
• Australian Ethical Conservative Fund
The Funds listed above are considered structured entities that have not been consolidated by the Group, as the
Group does not have control over these entities. The table below sets out the transactions that occurred during
the year between the Group and these entities.
Australian Ethical Employee Share Trusts (EST) acts as trustee for the employee deferred share plan. Pacific
Custodian Pty Limited acts as trustee to the trust.
NOTE 33. RELATED PARTY TRANSACTIONS (CONTINUED)
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Receipts from Australian Ethical Superannuation Pty Limited:
Receipts from Australian Ethical
Superannuation Pty Limited:
Administration fees
–
–
16,536
12,738
Investment management fees
–
–
38,395
30,339
Principal investment advisory fee
–
–
7,650
5,876
Transactions between the parent and
subsidiary entities under tax consolidation and
related tax sharing agreement
–
–
5,105
3,529
Receipts from the Australian Ethical Trusts:
Provision of investment management services
to the AETs in accordance with the PDS
20,966
19,676
20,966
19,676
Performance fee
187
–
187
–
Receipts from Australian Ethical Retail Superannuation Fund:
Provision of investment management
/ administration services to AERSF in
accordance with the PDS
71,936
55,173
–
–
Provision of member administration services to
AERSF in accordance with the PDS
6,012
5,108
–
–
Provision of transition services as part of the
Christian Super integration
–
194
–
194
Payments to Australian Ethical Foundation Limited:
Grants paid to non-profit organisations
–
–
1,822
1,099
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Current receivables:
Amounts receivable from the AETs
640
556
640
556
Amounts receivable from the AETs
– performance fee
187
–
187
–
Amounts receivable from AES – trade
payables and tax provision
–
–
5,475
4,780
Amounts receivable from AES – loan
–
–
3,698
240
Amounts receivable from The Foundation –
trade payables
–
–
11
–
Amounts receivable from AERSF
2,201
1,841
–
–
Current payables:
Amounts payable to AES
–
–
–
–
Amounts payable to The Foundation
–
–
(1,822)
(1,099)
ANNUAL REPORT 2024
120
121
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 34. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH FROM OPERATING
ACTIVITIES
Consolidated
Parent
2024
$’000
2023
$’000
2024
$’000
2023
$’000
Profit after income tax expense for the year
11,531
6,576
13,573
7,021
Adjustments for:
Depreciation and amortisation
1,120
1,265
1,120
1,265
Non-cash employee benefits expense -
deferred shares
3,070
2,194
3,068
2,194
Change in fair value of investment
2,159
2,600
2,159
2,600
Integration & transformation costs
4,242
3,733
213
2,357
Due diligence & transaction costs
1,079
–
1,079
–
Change in operating assets and liabilities:
(Increase) in trade and other receivables
(1,172)
(738)
(966)
(960)
(Increase) in lease assets
(562)
(1,642)
(562)
(1,642)
(Increase)/Decrease in other current assets
(151)
118
(151)
480
(Increase) in deferred tax assets
(435)
(636)
(435)
(243)
(Increase) in other non-current assets
–
(245)
–
(245)
Increase/(Decrease) in trade and other payables
(590)
1,264
(375)
(3,269)
Increase in employee benefits
1,117
422
1,102
404
Increase/(Decrease) in lease liability
568
(79)
568
(79)
Increase in other provisions
168
65
168
65
Increase in current tax liability
155
605
431
605
(Decrease) in deferred tax liability
(7)
(20)
(7)
(20)
Net cash from operating activities
22,292
15,482
20,985
10,533
NOTE 35. EARNINGS PER SHARE
Consolidated
2024
$’000
2023
$’000
Profit after income tax attributable to the owners of Australian
Ethical Investment Limited and its Controlled Entities
11,531
6,576
Cents
Cents
Basic earnings per share
10.61
5.89
Diluted earnings per share
10.51
5.84
Number
Number
Weighted average number of ordinary shares used in calculating
basic earnings per share
111,634,688
111,552,062
Adjustments for calculation of diluted earnings per share:
Deferred shares
1,043,689
1,127,974
Weighted average number of ordinary shares used in calculating
diluted earnings per share
112,678,377
112,680,036
NOTE 35. EARNINGS PER SHARE (CONTINUED)
Recognition and measurement
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Australian Ethical
Investment Limited and its Controlled Entities, excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for
bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the weighted average number of shares assumed to have been issued for no consideration, which
relate to deferred shares issued as part of the Company’s long-term employee benefits.
NOTE 36. SHARE-BASED PAYMENTS
Share-based payments include shares issued to employees under the employee share plan (ESP), deferred
short-term incentives, and rights granted under the Executive long-term incentives plan (ELTI).
As at 30 June 2024, the Employee Share Trust holds 1,251,039 shares (30 June 2023: 1,118,541 shares) on behalf
of employees until vesting conditions are met.
In the current year, $2,667,000 was paid to purchase deferred shares on-market to be granted under the
Deferred ESP and STI plans. In the prior year, $349,000 was paid to purchase all deferred shares on-market. The
Board has discretion to decide whether to issue new shares or purchase shares.
The below table provides a reconciliation of the number of deferred shares in the Employee Share Trust.
2023
Grant date
Vesting date
Balance
at the start
of the year
Granted
Vested
Forfeited
Balance
at the end
of the year
01/09/2019
31/08/2022
614,585
–
(614,585)
–
–
01/09/2020
31/08/2022
5,193
–
(5,193)
–
–
01/09/2020
31/08/2023
387,011
–
(27,623)
(34,450)
324,938
01/09/2021
31/08/2022
32,088
–
(32,088)
–
-
01/09/2021
31/08/2023
32,086
–
–
–
32,086
01/09/2021
31/08/2024
238,822
–
(11,267)
(20,416)
207,139
01/09/2022
31/08/2023
–
41,351
–
–
41,351
01/09/2022
31/08/2024
–
29,300
–
–
29,300
01/09/2022
31/08/2025
–
445,061
–
(17,640)
427,421
1,309,785
515,712
(690,756)
(72,506)
1,062,235
Unallocated treasury shares
56,306
Total deferred shares in the Employee Share Trust at 30 June 2023
1,118,541
ANNUAL REPORT 2024
122
123
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 36. SHARE-BASED PAYMENTS (CONTINUED)
2024
Grant date
Vesting date
Balance
at the start
of the year
Granted
Vested
Forfeited
Balance
at the end
of the year
01/09/2020
31/08/2023
324,938
–
(324,938)
–
–
01/09/2021
31/08/2023
32,086
–
(32,086)
–
–
01/09/2021
31/08/2024
41,351
–
(41,351)
–
–
01/09/2022
31/08/2024
207,139
–
(20,612)
(20,997)
165,530
01/09/2022
31/08/2024
29,300
–
(1,122)
–
28,178
01/09/2022
31/08/2025
427,421
–
(29,893)
(52,467)
345,061
01/09/2023
31/08/2026
–
479,259
(11,011)
(34,220)
434,028
01/09/2023
31/08/2025
–
206,925
–
–
206,925
1,062,235
686,184
(461,013)
(107,684)
1,179,722
Unallocated treasury shares
71,317
Total deferred shares in the Employee Share Trust at 30 June 2024
1,251,039
Recognition and measurement
Equity-settled transactions are awards of shares that are provided to employees in exchange for the rendering
of services.
The grant-date fair value of equity-settled transactions are recognised as an employee expense over the
vesting period with a corresponding increase in Share based payment reserve. Upon vesting, the employees
become unconditionally entitled to the awards and the shares are transferred from the Share based payment
reserve to Contributed equity.
The amount recognised as an expense is adjusted to reflect the number of awards for which the related
performance and service conditions are expected to be met at the vesting date.
The following share-based payment arrangements existed as at 30 June 2024.
Deferred Shares - ESP
Under the Group’s long-term incentive employee share plan (ESP), participants are granted shares annually
based on a fixed percentage of their fixed remuneration. The number of shares that the participant receives is
determined at the time of grant with the shares being held in trust. These shares are issued for nil consideration
with the shares having voting rights and employees receive dividends over the vesting period. The deferred
shares are subject to 3-year vesting periods after which time, the shares vest to the employee as ordinary
shares. Vesting is subject to meeting specified performance criteria over the performance period, service
hurdles and Board approval.
Included under employee benefits expense in the Consolidated Statement of Comprehensive Income is
$1,432,000 (2023: $1,308,000) relating to the deferred shares granted under the long-term employee share plan.
Deferred Shares – STI
For certain employees a portion of their short-term incentive (STI) is also paid in deferred shares which vest
subject to meeting service conditions. Depending on the grant, deferred STI shares have a 3-year vesting
period and no further performance hurdles. All share vesting is subject to Board approval.
Included under employee benefits expense in the Consolidated Statement of Comprehensive Income is
$1,008,000 (2023: $1,010,000) relating to the deferred portion of the short-term incentive plan.
NOTE 36. SHARE-BASED PAYMENTS (CONTINUED)
Executive Long-Term Incentives (ELTI)
The ELTI was introduced to retain key senior executives and provide reward for future outstanding performance
to the period ending 30 June 2025, 2026, and 2027.
The FY27 tranche comprises 347,756 hurdled performance share rights issued, which were issued on 1
December 2023. The ELTI expense is based on the grant date of 1 December 2023. Each share right was fair
valued at $4.49, being the share price on 1 December 2023 discounted for forecast dividend yield. These share
rights will be equity settled at the end of the vesting period.
The performance hurdles require the following performance conditions to be achieved:
• Net flows, including no more than 50% from M&A activity, over the 4-year vesting period of $6.05bn
• Cost to income ratio of no more than 75%
• Median NPS (Net Promoter Score) for Financial Services companies in Australia
• Median employee engagement score for financial services companies in Australia; and
• Continued alignment with our Ethical Charter.
During the vesting period, employees are not entitled to receive dividends nor hold voting rights. Vesting is
subject to meeting specified performance criteria over the performance period, service hurdles and Board
approval.
Included under employee benefits expense in the Condensed Statement of Profit or Loss and Other
Comprehensive Income is $636,000 (2023: $125,000 credit expense) for the executive long-term incentive
plans. This amount is allocated as follows, $261,000 relating to FY26 tranche and $375,000 relating to FY27.
Additional details are available in the Remuneration Report on these employee incentive plans.
ANNUAL REPORT 2024
124
125
Australian Ethical Investment Limited and its Controlled Entities
Notes To The Financial Statements
for the year ended 30 June 2024
NOTE 37. RESULTS OF THE FOUNDATION
All income received and net assets including cash of The Foundation are restricted to The Foundation’s
activities and are not available for distribution to AEI’s shareholders or to settle liabilities of other Group entities.
As at and for the year ended 30 June 2024, the impact of The Foundation before intercompany eliminations is
noted below:
2024
$’000
2023
$’000
Statement of comprehensive income
Revenue from parent entity
1,822
1,099
Interest income
34
28
Grants to non-profit organisations
(2,159)
(1,116)
Audit fees and other operating expenses
(13)
(11)
Loss for the year
(316)
–
Other comprehensive income
Fair value adjustment of investment
(4)
(4)
Total comprehensive income for the year
(320)
(4)
2024
$’000
2023
$’000
Statement of financial position
Assets:
Cash and cash equivalents
98
597
Receivables from parent entity
1,822
1,099
Other receivables
–
8
Financial assets at fair value through profit or loss
66
71
Liabilities:
Grants to non-profit organisations
(1,842)
(1,323)
Trade payables
(24)
(12)
Net assets
120
440
Equity:
Retained earnings
118
434
FVOCI reserve
2
6
Total Equity
120
440
NOTE 38. CONTINGENT LIABILITIES
As of the 30 June 2024 there are no contingent liabilities (2023: Nil)
NOTE 39. EVENTS AFTER THE REPORTING PERIOD
Apart from the dividend declared as disclosed in Note 27, no other matter or circumstance has arisen since 30
June 2024 that has significantly affected, or may significantly affect the Group's operations, the results of those
operations, or the Group's state of affairs in future financial years.
The Altius Asset Management business acquisition was subject to the satisfaction of a number of conditions
precedent. The transaction completion is expected by the end of September 2024.
Consolidated entity disclosure statement
For the year ended 30 June 2024
Set out below is relevant information relating to the entities that are consolidated in the consolidated financial
statements at the end of the financial year as required by the Corporations Act 2001 (s.295(3A)(a)).
Entity name
Body corporate,
partnership or
trust
Place
incorporated
/ formed
% of share
capital held
directly or
indirectly by
the Company
in the body
corporate
Australian or
Foreign tax
resident
Jurisdiction
for Foreign
tax resident
Australian Ethical Investment
Limited (the Company)
Body Corporate
Australia
–
Australian
–
Australian Ethical
Superannuation Pty Limited
(AES)
Private Company
– Trustee of
the Australian
Ethical Retail
Superannuation
Fund (AERSF)
Australia
100%
Australian
–
Australian Ethical Foundation
Limited (AEF)*
Body Corporate
Australia
0%
Australian
–
Christian Super Pty Limited
Private Company
Australia
100%
Australian
–
August Investment Pty
Limited
Private Company
Australia
100%
Australian
–
* The Foundation share capital is held in trust for charitable organisations.
Key assumptions and judgements
Determination of Tax Residency
Section 295 (3A) of the Corporation Acts 2001 requires that the tax residency of each entity which is included
in the Consolidated Entity Disclosure Statement (CEDS) be disclosed. In the context of an entity which was an
Australian resident, “Australian resident” has the meaning provided in the Income Tax Assessment Act 1997. The
determination of tax residency involves judgement as the determination of tax residency is highly fact dependent
and there are currently several different interpretations that could be adopted, and which could give rise to a
different conclusion on residency.
In determining tax residency, the consolidated entity has adopted the following interpretations:
• Australian tax residency
The consolidated entity has applied current legislation and judicial precedent, including having regards to the
Commissioner of Taxation’s public guidance in Tax Ruling TR 2018/5.
• Foreign tax residency
The consolidated entity has applied current legislation and where available judicial precedent in the
determination of foreign tax residency. Australian Ethical do not have any foreign operations or tax residencies.
The Company and consolidated group do not operate any Partnerships, Trusts or Branches (permanent
establishments).
ANNUAL REPORT 2024
126
127
Directors' declaration
1.
In the opinion of the directors of Australian Ethical Investment Limited (the ‘Company’):
a. the consolidated financial statements and notes that are set out on pages 61 to 96 and the Remuneration
Report on pages 28 to 59 in the Directors’ Report, are in accordance with the Corporations Act 2001,
including:
i. giving a true and fair view of the Group’s Financial position as at 30 June 2024 and of its performance for
the financial year ended on that date; and
ii. complying with the Australian Accounting Standards and the Corporations Regulations 2001.
b. the consolidated entity disclosure statement as at 30 June 2024 set out on page 97 is true and correct; and
c. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. There are reasonable grounds to believe that the Company and the group entities identified in the Note 1 will
be able to meet any obligations or liabilities to which they are or become subject to by virtue of the Deed
of Cross Guarantee between the Company and those group entities pursuant to ASIC Corporations (Wholly
owned Companies) Instrument 2016/785.
3. The Directors have been given the declarations required by section 295A of the Corporations Act 2001 for the
chief executive officer and the chief financial officer for the year ended 30 June 2024.
4. The directors draw attention to Note 2 to the consolidated financial statements, which includes a statement of
compliance with the International Financial Reporting Standards.
Signed in accordance with a resolution of Directors:
On behalf of the Directors
JOHN MCMURDO
Managing Director and Chief Executive Officer
Sydney
28 August 2024
Australian Ethical Investment Limited and its Controlled Entities
Directors' declaration
for the year ended 30 June 2024
99
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by
a scheme approved under Professional Standards Legislation.
Independent Auditor’s Report
To the shareholders of Australian Ethical Investment Limited
Report on the audit of the Financial Reports
Opinions
We have audited the Financial Report of
Australian Ethical Investment Limited (the Group
Financial Report). We have also audited the
Financial Report of Australian Ethical Investment
Limited (the Company Financial Report).
In our opinion, the accompanying Group Financial
Report and Company Financial Report give a true
and fair view of the Group’s and Company’s
financial position as at 30 June 2024 and of their
financial performance for the year then ended, in
accordance with the Corporations Act 2001, in
compliance with Australian Accounting Standards
and the Corporations Regulations 2001.
The Financial Reports of the Group and the
Company comprise:
Statements of financial position as at
30 June 2024;
Statements of comprehensive income,
Statements of changes in equity, and
Statements of cash flows for the year then
ended;
Consolidated entity disclosure statement
and accompanying basis of preparation as
at 30 June 2024;
Notes, including material accounting
policies; and
Directors’ Declaration.
The Group consists of Australian Ethical
Investment Limited (the Company) and the
entities it controlled at the year-end or from
time to time during the financial year.
Basis for opinions
We conducted our audits in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audits of the Financial Report section of our report.
We are independent of the Group and Company in accordance with the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110
Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are
relevant to our audits of the Financial Reports in Australia. We have fulfilled our other ethical
responsibilities in accordance with these requirements.
This is the original version of the audit report over the financial statements signed by the directors on 28 August 2024.
Page references should be read as follows to reflect the correct references now that the financial statements have
been presented in the content on the annual report in its entirety:
The Audited Remuneration Report is set out on pages 53 to 89 as opposed to pages 28 to 59 as outlined below.
128
100
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in
our audits of the Financial Reports of the current period.
This matter was addressed in the context of our audits of the Financial Reports as a whole, and in
forming our opinions thereon, and we do not provide a separate opinions on this matter.
Management fees – ($75.8m) and Administration fees ($17.2m) – Group; and Management
Fees ($59.4m), Administration fees ($16.5m) and Principal investment advisory fee ($7.7m) -
Company
Refer to Note 5 to the Group Financial Report and Company Financial Report
The key audit matter
How the matter was addressed in our audit
Management, Administration and
Principal investment advisory fees were
a key audit matter due to the:
individual fee arrangements in
place for each of the managed
funds and the Australian Ethical
Retail Superannuation Fund (the
superannuation fund) which
necessitated considerable audit
effort; and
significance of the fees to the
Group and Company, constituting
92% and 98% of total revenue,
respectively.
Funds under management (“FUM”) used
in the calculation of fees is dependent on
information sourced from a third party
service organisation which is both the
custodian and the administrator. This
required us to understand and assess
the key processes and controls in
determining the FUM, including that of
the third party service organisation.
Our procedures included:
For Group and Company:
We assessed the appropriateness of the Group and
Company’s accounting policies against the
requirements of Australian Accounting Standards and
our understanding of the business and industry
practice.
We read and understood the individual Management
and Administration fee arrangements in the Product
Disclosure Statements ("PDS") of each of the
managed funds and the superannuation fund.
We performed a recalculation of Management and
Administration fees charged using the fee
percentages and FUM, obtained from each of the
PDS and underlying fund financial records
respectively as the basis for revenue recognition in
accordance with the Group and Company’s
accounting policy.
We compared the independently calculated
Management and Administration fee revenue to
those of the Group and Company and investigated
significant differences.
We assessed funds under management (“FUM”) by:
-
testing key controls over the input of valuation data
into the Group and Company’s fund management
system such as daily price movement checks
performed by management;
-
reconciling daily FUM sent by the custodian to the
FUM used by the Group and Company in the
calculation of revenue;
-
obtaining and reading the custodian service
organisation’s Guidance Statement 007 Audit
101
Implications of the Use of Service Organisations for
Investment Management Services assurance report
to understand the processes and assess the controls
relevant to the determination of the FUM;
-
checking the quantity of assets held to external
custodian service provider reports at balance date;
and
-
using valuation specialists, testing the fair value of a
sample of investments held by underlying funds by
comparing the value to market data such as global
and domestic equity prices.
We assessed the disclosures in the Financial Reports
using our understanding obtained from our testing
and against the requirements of the accounting
standards.
For Company:
We read and understood the Management and
Administration fee arrangements in the Investment
Management and Trustee Service Agreements and
the Principal Investment Advisory Agreement
(collectively referred to as Agreements) between the
Company and its subsidiary, Australian Ethical
Superannuation Pty Limited (AES); and
We performed a recalculation of the Management,
Administration and the Principal Investment Advisory
fees between the Company and AES, using the fee
percentages obtained from the Agreements and FUM
as a basis for revenue recognition in accordance with
the Company’s accounting policy.
• We compared the independently calculated fee
revenue to the fee revenue recorded by the Company
and investigated significant differences.
102
Other Information
Other Information is financial and non-financial information in Australian Ethical Investment Limited’s
annual report which is provided in addition to the Financial Report and the Auditor’s Report. The
Directors are responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’
Report and the Remuneration Report. The Message from the CEO, Message from the Chair,
Financial year highlights, CIO’s Report, Investment performance and Shareholder information of the
Annual report are expected to be made available to us after the date of the Auditor’s Report.
Our opinion on the Financial Reports does not cover the Other Information and, accordingly, we do
not and will not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audits of the Financial Reports, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Reports or our knowledge obtained in the audits, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Reports
The Directors are responsible for:
preparing the Financial Reports in accordance with the Corporations Act 2001, including giving
a true and fair view of the financial position and performance of the Group and Company, and
in compliance with Australian Accounting Standards and the Corporations Regulations 2001;
implementing necessary internal control to enable the preparation of a Financial Reports in
accordance with the Corporations Act 2001, including giving a true and fair view of the
financial position and performance of the Group and Company, and that is free from material
misstatement, whether due to fraud or error; and
assessing the Group and Company’s ability to continue as a going concern and whether the
use of the going concern basis of accounting is appropriate. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group and Company or to cease operations, or have
no realistic alternative but to do so.
103
Auditor’s responsibilities for the audits of the Financial Reports
Our objective is:
to obtain reasonable assurance about whether the Financial Reports as a whole are free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinions.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Reports.
A further description of our responsibilities for the audits of the Financial Reports is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.This description forms part of our
Auditor’s Report.
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report of
Australian Ethical Investment Limited for the year
ended 30 June 2024, complies with Section 300A
of the Corporations Act 2001.
Directors’ responsibilities
The Directors of the Company are responsible
for the preparation and presentation of the
Remuneration Report in accordance with
Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report
included in pages 28 to 59 in the Financial
Report for the year ended 30 June 2024.
Our responsibility is to express an opinion on
the Remuneration Report, based on our audit
conducted in accordance with Australian
Auditing Standards.
KPMG
Jessica Davis
Partner
Sydney
28 August 2024
Company directory
X
Sustainability
Report
2024
The Australian Ethical Charter©
our North Star since 1986
Our purpose
Investing for a better world
Our vision
A world where money is a force for good
We value
Curiosity, authenticity, action, empathy, connection
Contents
In this section we provide additional sustainability reporting
including our TCFD Report; commentary addressing the GRI;
the alignment of our equity portfolio with the SDGs and a number
of the other important sustainability metrics that we track.
In addition, our GRI Index, FY24 Data Book and
Stewardship Report are available on our website at:
australianethical.com.au/shareholder/sustainability-insights/
We are ethical investors
138
Our portfolio is aligned to our values
140
Sustainability metrics
144
Reporting to the GRI
146
Our approach to climate change (TCFD)
148
People with purpose
166
The Australian Ethical Foundation
172
Memberships and certifications
174
More information
176
Auditors' limited assurance opinion
178
ANNUAL REPORT 2024
137
136
We believe the power of money can be harnessed to
deliver both competitive returns and positive change
for people, planet and animals.
To create this capital for good we start by determining
our investable universe. We do this by assessing 100%
of the investments in our portfolio to ensure they align
with the 23 principles of the Australian Ethical Charter.
We interpret and apply the general principles of the
Charter using our more detailed Ethical Criteria, which
we outline in the next section.
These beliefs have been driving our investment
philosophy and business practices since 1986. We
pursue these ethical investing goals and develop and
apply our Ethical Criteria in accordance with our duty
to act in the best interests of investors – this includes
acting in their best financial interests.
Our ethical investing approach aims to:
• Give investors access to ethical portfolios of
companies and other investments which are more
aligned with their values than market portfolios;
• Influence progress towards a better future for
people, animals and the environment by engaging
with select companies to improve key business
practices;
• Help us identify, understand and manage
investment risk and opportunity, at a company,
portfolio and systemic level which we believe can
help construct better investment portfolios.
We are ethical
investors
Rigorous Investment analysis
and portfolio construction
1
We assess investments across multiple asset classes including shares, property, alternatives, fixed interest and cash. Investments
can be made through different legal forms such as a company or through a trust, partnership, loan or other instrument. Where we
invest via an external investment manager, then our processes involve some important differences which you can read about in
section 5.13 ‘Externally Managed Investments’ of our Ethical Guide available on our website at: australianethical.com.au/why-ae/
ethics/.
+ Our investment restrictions include some thresholds. Thresholds may be in the form of an amount of revenue that a business
derives from a particular activity, but there are other tolerance thresholds we can use depending on the nature of the investment.
We apply a range of qualitative and quantitative analysis to the way we apply thresholds. For example, we may make an investment
where we assess that the positive aspects of the investment outweigh its negative aspects. For information on how we make these
assessments for a range of investment sectors and issues such as fossil fuels, nuclear power, gambling, tobacco, human rights, and
many others, please read our Ethical Guide available on our website at: australianethical.com.au/why-ae/ethics/.
1. Ethical assessment
Our in-house Impact & Ethics team assess possible
investments1 according to the 23 principles of
our Ethical Charter, using our ethical evaluation
process and applying a mix of rules and judgement
to bring these to life. This process identifies
companies we believe can influence progress
towards a better future for people, animals and the
environment, and restricts+ investment in those
that we believe are a threat to that progress. This
research defines our universe of potential ethical
investments.
2. Investment analysis and portfolio construction
Our investment team then constructs portfolios
suitable for the investment strategies and
objectives of our Funds.
3. Ethical stewardship
We don’t just set and forget. Monitoring our
investee companies and engaging to influence
companies, governments and others is an
important part of our process. See our Ethical
Guide available on our website at australianethical.
com.au/why-ae/ethics for more information.
Our investment process has three key elements:
ANNUAL REPORT 2024
139
138
Our portfolio is
aligned to our values
Ethical Assessment
Ethical assessment isn’t black and white, for example
when we think about the listed companies we might invest
in, some are complex and may have different business
lines, some of which meet our Ethical Criteria and some of
which don’t. This is why we have an Ethics Research team,
and why we use our Ethical Criteria to help us decide
which potential investments can enter our investible
universe. These criteria cover a wide range of positive
and harmful effects we consider when evaluating the
impact companies can have on people, animals and the
environment.
To pass our ethical evaluation an investment must first
be assessed against the principles of our Ethical Charter
as having positive activities. If they meet our positive
activity requirements after this assessment but have
other negative impacts from their products or operations,
we look at where their revenue comes from, and assess
this against our revenue tolerance thresholds and other
Ethical Criteria. For example, we won’t invest in a company
making weapons or tobacco products because we have
a zero-revenue threshold for these activities, but if a large,
diverse company is positive in other parts of its business,
our tolerance thresholds allow some limited revenue from
some negative products such as alcohol or fossil fuels.
As another example, we may invest in a company which
generates over 70% of its electricity from renewables but
falls back on gas when low rainfall reduces its hydropower.
We also consider how closely a potential investment is
involved in activities we consider harmful under our Ethical
Criteria. For example, we treat a producer of harmful
products differently to a company which sells or transports
harmful products along with other products. This allows
us to invest, for example, in a supermarket that on balance
provides a positive social impact even though they derive
a small amount of their revenue from retailing cigarettes
and alcohol.
We also consider how an investment conducts its
business, evaluating serious misconduct, as well as
potential benefit and harm from its operations. So a
company or investment which produces positive products
may still be excluded if they are mistreating workers or
highly polluting.
This is a complex area, but we provide more detail in our
Ethical Guide (available on our website at australianethical.
com.au/why-ae/ethics/) on our thresholds, positive
starting points, how we consider the appointment of
external managers, how often we assess, and instances
when investments may not meet our Ethical Charter.
We may invest in a company which
generates over 70% of its electricity from
renewables but falls back on gas when
low rainfall reduces its hydropower.
141
ANNUAL REPORT 2024
140
Energy
In: Transpower New Zealand - Transpower do not
own, generate or sell electricity but provide the
infrastructure and market systems that connects
electricity generators to major electricity users and
distribution networks that deliver electricity to homes
and businesses around the country. Eighty-five per
cent of the energy transmitted is renewable.
Out: Brookfield Renewables – We invested in
Brookfield Renewables for its renewable energy
investment, but a nuclear energy acquisition
prompted our divestment, which was completed
in FY24. We apply a zero revenue threshold for
investments in nuclear energy and uranium mining
taking into account the catastrophic risks associated
with nuclear accidents and misappropriation of
nuclear materials.
Responsible lending
In: Brighte is an Australian fintech which provides
financing for sustainable home improvements,
offering 0% interest payment plans that remove the
upfront cost barrier of big ticket items like solar and
batteries for homeowners.
In: Commonwealth Bank – We included CBA in
our investible universe for the first time in more than
15 years, as we assess it is now meeting our Ethical
Criteria. For banks this includes a focus on culture
and conduct, as well as climate (we assess whether
the bank is taking action to align their lending with
the objectives of the Paris Climate Agreement).
Responsible and well-regulated banks can do
good. They help individuals and organisations save,
invest and manage risk. On the climate front, large
banks are needed to support the massive shifts of
Ins & Outs
capital needed to combat climate change. We now
have three out of the big four banks included in our
investible universe: Westpac, NAB and CBA.
Out: DBS GROUP – without lending restrictions on
direct / project finance of oil and gas expansion, we
assessed that DBS was not taking sufficient action to
align its institutional lending with the Paris Agreement.
Out: Credabl, Metro Finance, Liberty – we excluded
investment in these financial services companies
which are specialist or significant lenders to SMEs
because they failed to assure disclosure of effective
interest rates to all their SME borrowers. We think
transparency around loan terms, including disclosure
of interest rates, is important for all customers.
Animal welfare
In: McPherson's Limited is an Australia-based
supplier of health, wellness, and beauty products.
The company does not conduct or commission any
animal testing for its finished products or ingredients
and has confirmed that half of all products containing
an animal derived ingredient (<10% of revenue) have
either current plans for phasing out, or for phasing out
of these ingredients over the next three years. Two of
its brands (Sugarbaby and A'kin) are already vegan.
Out: We excluded several major beauty brands for
non-medical animal research, including The Estee
Lauder Companies, L’Oreal, and Shiseido Company
Limited.
Sustainable consumption
In: Steel recyclers Nucor and Steel Dynamics –
steel continues to be required even in a net zero
emissions' future. With high recycled content (from
75% to almost 100% recycled content in some
products), both producers start from a low emissions
intensity base. Both have developed plans and
targets to achieve a net zero by 2050, in line with
remaining 1.5 degree aligned over the short, medium
and long-term.
Out: Dollar Tree / Dollar General operates discount
stores that sell consumables (food, beauty, cleaning,
tobacco) as well as seasonal items (toys and festive
decorations), homewares and apparel. The discount
price point and product range raised concerns
that the company's business model is likely to rely
on largely low-quality goods of a type that are not
designed to last, particularly for its non-consumable
categories like seasonal items, homewares and
apparel. It does not meet our expectations that
retailers demonstrate genuine commitment to
manage negative impacts on people, planet and
animals in their product range and supply chains.
Military and defence
In: Advanced Micro Devices’s microprocessors,
graphics cards and other components are used
in a broad range of electronics across its diverse
customer base. While some of its chips may be
used by the military, we did not see evidence that it
develops products for military purposes.
Out: BAE Systems PLC and Safran SA – we excluded
companies for weapons revenue in excess of our
tolerance thresholds: zero% revenue for production
of complete lethal firearms or military weapons
(including conventional, nuclear and controversial
weapons). We also restrict investment in producers
of critical hardware components of military weapons
which are components developed and sold for this
purpose.
Out: Analog Devices – When assessing companies
that are involved in the production of weapons
components, we consider the materiality of their
involvement against any positive contributions they
make. For a strongly positive company, we will still
rule them out for investment if more than 5% of
revenue is earned from weapons components made
for that purpose. This year, we engaged with Analog
Devices regarding their involvement in the production
of components specifically designed for weapons
systems, which resulted in our decision just after year
end to divest from the semiconductor company.
Some companies we
ruled 'In' and 'Out'
of our investable
universe
In FY24 we looked at around 240 companies and we present
some of the outcomes of our ethical assessments here.
Most of the ‘Outs’ are companies that we excluded from our
investable universe and therefore never invested in them.
Others such as Brookfield Renewables, were held by Australian
Ethical, but we decided to divest from them because of
business changes identified when re-assessing them.
143
ANNUAL REPORT 2024
142
Sustainablity metrics
Metric
FY22
FY23
FY24
How we invest
Proportion of investments ethically evaluated (Subject to Ethical Assessment as
described on page 139)
100%
100%
100%*
Proportion of revenue from sustainable impact solutions2#
1.8x Benchmark
2.3 x Benchmark
2.3x Benchmark
MySuper (Balanced accumulation) delivers its objective (returns of 3.25% p.a.
above CPI over 10 years). Objective as at 30 June 2024
1.7%
(p.a. above objective)
1.0%
(p.a. above objective)
0.6%
(p.a. above objective)
Australian Shares Fund (wholesale) objective (to significantly exceeds the return of
its benchmark after management costs over a 7-year period)
1.8% (p.a. above
benchmark)
1.4 (p.a. above
benchmark)
0.6% (p.a. above
benchmark)
Pursuing net zero emissions
Carbon intensity (scope 1 & 2) of listed share investments compared to Benchmark^
77% less
77% less
75% less*
Carbon intensity (scope 1, 2 & 3) of listed share investments compared to Benchmark^
–
–
80% less
Proportion of our listed share investments in renewables and energy solutions^
5.6 x Benchmark
4.6x Benchmark
5.2 x Benchmark*
Influencing for change
Companies (or other entities) engaged with on ethical issues4
450+
250+
330+
Number of proactive engagements and % followed by commitments to change5
80+/approx. 25%
65+/approx. 25%
140+/approx. 30%*
Divestments on ethical grounds6
4
5
2
Proportion of votable meetings where proxy votes cast7
99%
100%
99%
Votes cast against management recommendation - overall
17%
17%
18%
Ethical outcomes
B Corp Best for the World / certification8
Achieved
Achieved
Score: 168.5
Yearly profits donated to the Foundation (after tax and before bonuses)
10% ($1.5 million)
10% ($1.1 million)
10% ($1.8m)
$ allocated for impact through the Australian Ethical Foundation
$1.6 million
$1.1 million
$2.2 million
Stakeholder engagement
Super NPS9
+52% (No.1)
+16% (No.5)
+1% (No.4)
Super – customer advocacy
No.1
No.4
–
Our people
Employee Engagement10
79%
70%
79%
Diversity of Board (target: 40% each gender)
50%
67% female
67% female
Diversity of leadership team (target: 50%)11
44%
50% female
50% female
Diversity of investment team (target: female 30% by 2025)12
–
28% female
36% female
2 Based on the revenue from sustainable impact solutions as defined
by MSCI criteria earned by listed companies whose shares we
invest in across our funds and options, and the proportion of those
listed share investments in renewables and energy solutions.
Sustainable impact criteria and data provided by external sources
and aim to measure revenue exposure to sustainable impact
solutions and support actionable thematic allocations in line with
the U.N. Sustainable Development Goals (SDGs), EU Taxonomy of
Sustainable Activities, and other sustainability related frameworks.
Year to year movements can be for a range of reasons, which may
not be reflective of change in performance. See page 176 for more
information.
3 Carbon intensity of listed companies whose shares we invest in
across our funds and options, measured as tonnes CO2e per
$ revenue.
4 We count one engagement where we engaged with a company on
a topic or series of topics. There may be multiple activities within
that engagement. For example, our engagement with Westpac is
counted as one engagement which included meetings, emails and
co-filing a shareholder resolution. We may count two engagements
with a company if there were separate activities on entirely
separate topics. For example, we had one engagement with CBA
in relation to its fossil fuel exposure and a separate meeting with
CBA to discuss its exposure to deforestation in Australia.
5 Our 'proactive' engagement count includes where we engaged
directly with a company, government or other entity; we actively
contributed to collective engagements (as distinct from simply
'signing on'); or we co-filed a resolution. Commitments to
change are commitments made by the engaged entity after our
engagement commenced, that reflect progress towards the
ultimate objectives of the engagement beyond acknowledgment
of an issue. They may be identified through e.g. direct company
responses, company reporting or actions taken, changes to
government policies or draft legislation, or actions taken by
industry associations. For examples of commitments, see our
Stewardship Report: australianethical.com.au/why-ae/ethical-
stewardship/
6 Investments exited during the year due to ethical re-assessment.
Not including companies excluded from initial investment.
7
Our proxy voting record is published on our website annually.
See our FY24 Proxy Voting Report at australianethical.com.au/
shareholder/corporate-governance/
8 Our latest B Corp score, 168.5, awarded at recertification on
13 July 2023, was the highest score for any B Corp in Australia and
Aotearoa New Zealand.
9 Investment Trends Super Member Engagement Report 2024.
Independent research with 29 major super funds
10 Employee Engagement survey June 2024
11 Comprising members of Australian Ethical Senior Leadership Team
12 See page 166 for more information about our progress.
^ We report on our listed share investments because these comprise
a large proportion of our total funds under management (~65%),
and because data is less readily available across our other
investments.
– indicates that comparable data was not available or not tracked.
*
A subset of the metrics in this scorecard have been subject to
limited assurance by KPMG. KPMG's limited assurance report is
included on page 176 to 179 of this report.
# Compared to a blended share market Benchmark of S&P ASX200
Index (for Australian and NZ shareholdings) and MSCI World
ex Australia Index (for international shareholdings). Based on
shareholdings at 30 June 2024 and analysis tools provided by
external sources which cover ~95% of the listed companies we
hold shares in by value. See page 176 for more information about
this comparison. Both carbon intensity and sustainable impact
solutions revenue relate to the listed companies whose shares
we invest in across our funds and options. This should not be
considered representative of individual funds or options which will
have their own mix of share and other investments. See page 176
for more information about this comparison.
Our three-year scorecard is designed to give a snapshot of our performance and, where relevant, provide
comparability with previous years. A subset of the metrics in this scorecard (identified by an asterisk*) have been
subject to limited assurance by KPMG. KPMG's limited assurance report is included on page 178 to 179 of this report.
While our three-year progress is summarised in this scorecard, the detail is set out in the body of this report and the
other components of our sustainability reporting suite including our FY24 Databook. All of these documents are
available on our website at australianethical.com.au/shareholder/sustainability-insights/
ANNUAL REPORT 2024
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145
We have used the Global Reporting Initiative (GRI)
reporting framework to help us track and report our
impacts since 2002. To ensure we report on our most
important sustainability impacts, the GRI requires
us to conduct a ‘materiality assessment’ every few
years. In the revised GRI Standards issued in 2021,
‘material topics’ are defined as topics that represent
an organization’s most significant impacts on the
economy, environment, and people. Australian Ethical
has a long history of striving to understand and report
on its positive and negative impacts on ‘people,
planet and animals’, and therefore despite a refreshed
process, many of the same material topics remain
key.
Environmental
Social
Governance
That we screen our investments
That we seek ESG progress from companies we invest in
That we respond to the risk and opportunities of climate change
Ethics & integrity
Greenwashing
Customer experience
The transparency of our investment portfolio
The quality and credibility of our investment team
Our financial & investment performance
That we seek progress on sustainability issues through our
engagement with other stakeholders
That we apply ESG principles when operating our business
Critical
Important
Very Important
Our values and culture
Cyber security
Reporting to the GRI
In FY23, we conducted a desktop review of our
past materiality assessments, gathered stakeholder
feedback and insights through surveys, and then
asked Australian Ethical's employees to prioritise the
materiality of our long list of topics. This weighted list
was reviewed by the leadership and the Board. The
13 materiality topics identified through this process
are listed here in order of criticality. We have also
applied an Environmental, Social and Governance
lens to our material topics, with 10 of the 13 topics,
aligning to at least two of these dimensions.
This year we report with reference to the GRI and
cover our material topics in our Annual Report, our
FY24 GRI Index and Data Book and 2024 Stewardship
Report. All of these documents are available on our
website at australianethical.com.au/shareholder/
sustainability-insights/
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147
The climate crisis is not just a threat to future
generations; we are already feeling the
consequences today. If we continue the current
global trajectory, the crisis will only worsen,
deepening the impact of irreversible changes
to our world.
The climate threat is also bringing climate investment
opportunity in reducing emissions and helping
communities adapt to the changes already underway
and locked in by historical emissions.
In the following pages we report on the carbon
emissions associated with our investments and
our operations (carbon footprint) and how, through
our investments and stewardship, we are working
towards the emissions reduction needed to achieve
a 1.5°C temperature limit – consistent with the most
ambitious aims of the Paris Agreement.
This report has been prepared with reference to the
recommendations of the Task Force on Climate-
Related Financial Disclosures (TCFD).
Governance
All of our investments are made considering
our Ethical Charter, which is embedded in our
Constitution and overseen by our Board.
The Ethical Charter’s 23 principles are applied using
our more detailed Ethical Criteria, reflected in our
ethical frameworks, policies and measurement
systems. These ensure we prioritise action to help
avoid dangerous climate change and its serious
impacts on the planet, people, and animals.
Read more about our ethical investment approach at
australianethical.com.au/why-ae/ethics.
Responsibilities
Our Chief Investment Officer and Head of Impact
& Ethics are responsible for implementation of our
Ethical Charter across our investment activities.
They approve new and updated ethical frameworks,
which include our climate-related ethical assessment
criteria.
The Board, via the Investment Committee, receives
reports quarterly on changes to frameworks and
critical ethical issues. Climate change related topics
are regular agenda items and the Board includes
members with climate change expertise (see pages
27 and 28 for more information about our Directors).
During FY24 the Investment Committee approved
an update to our Investment Beliefs recognising the
criticality of preventing dangerous climate change to
both our ethical and financial goals.
Our in-house team applies our Ethical Criteria in our
investment processes. The team includes members
with expertise in climate change.
Our ethics research team monitors existing and
emerging climate-related risks. Using diverse
company, industry, government, responsible
investment, scientific, civil society and news sources,
the team monitors developments in:
• scientific understanding of the rate and impacts of
global warming.
• domestic and international climate policy and
regulation.
• technological innovation in climate mitigation and
adaptation.
Risk management
As a diversified investor, the securities we invest in
are exposed to a broad range of climate risks, for
example:
• Changes in temperature and rainfall are already
affecting the productivity and viability of different
types of agriculture,
• Sea level rise and extreme weather are changing
where and how buildings and infrastructure can
be safely built, with flow on effects to building and
operating costs,
• Increased flood and fire risk affects insurance costs,
and whether property is insurable at all.
Our approach to climate change:
Reporting to the TCFD
For 38 years, Australian Ethical has been investing to protect our planet. During
these decades, the scientists with the Intergovernmental Panel on Climate
Change (IPCC) have been issuing major reports about the state of the climate,
gradually expressing more certainty about what is happening, and why, and
the action needed to limit global warming.
149
ANNUAL REPORT 2024
148
Increased variability of returns across all asset
classes can be expected from climatic change that is
unavoidable due to historical emissions, regardless
of how effective emission reduction efforts are going
forward.
Climate change is the top factor we consider when
applying our Ethical Charter to companies because
of its wide-ranging implications for people, animals
and the planet. We restrict+ investments in companies
assessed to be obstructing the objectives of the Paris
Agreement to limit global warming to well below
2°C and to pursue a limit of 1.5°C. The way this test is
applied depends on the company and its sector (read
more about our ethical criteria at australianethical.
com.au/globalassets/pdf-files/why-ae/ae-guide-to-
our-ethical-investment-process.pdf).
Our ethical research and company engagement
guides us to sectors and companies which are
aligning their businesses with the transition needed to
limit climate change consistent with the global goals
set out in the Paris Agreement. We believe these
investments are better positioned to manage many
climate-related risks, such as the risk of introduction
/ increase in carbon pricing. Our approach can
also strengthen specialist investment capabilities
to navigate technological change associated with
climate disruption and transition.
However, the effects of climate change are projected
to be felt across the economy and society. Higher
warming threatens to disrupt trade and financial
markets with implications for all investment portfolios.
At the portfolio level, our:
• Strategic asset allocation approach (which guides
our long-term investment positioning) is informed
by scenario analysis that includes social and
environmental factors. Climate scenarios are
embedded in each of our seven core economic
scenarios, and reflect a subset of NGFS (Network
for Greening the Financial System) scenarios (‘too
little, too late’; ‘orderly’; and ‘hot house world’).
• Active asset allocation process considers the
resilience of our portfolio in the short term (up
to one year) to shocks like extreme weather
events. This shows strong resilience for individual
extreme events and is informing our thinking about
portfolio positioning as extreme events increase
in frequency and number with escalating climate
change.
Our Asset Allocation Forum meets quarterly to
monitor signposts (like renewable energy investment
and climate ambition) and review probabilities for
each scenario, as well as considering whether new
scenarios should be added.
Strategy
Our growth strategy recognises that our strong early
position on climate change is core to our brand
and reputation with customers and employees, and
critical to our competitive positioning. Under our
strategic pillar 'advocates for a better world', climate
change is a priority topic.
Given this, we consider our business is relatively
well positioned compared to peers under both low
and high temperature scenarios. But we also expect
high-temperature scenarios to bring lower economic
output and higher variability of returns, undermining
trust in investment markets and overall demand for
investment management.
Conversely, rapid action to address climate change
would contribute further to already rapid growth in
climate investment opportunities.
In all scenarios, imperfect information on climate
attributes creates challenges to investment
management as well as opportunities for
outperformance.
In addition to these opportunities and risks to
investment performance, we face risks from
increased regulatory expectations around climate
and opportunities for climate focused investment
products.
+ Our investment restrictions include some thresholds. Thresholds may be in the form of an amount of revenue that a business
derives from a particular activity, but there are other tolerance thresholds we can use depending on the nature of the investment.
We apply a range of qualitative and quantitative analysis to the way we apply thresholds. For example, we may make an investment
where we assess that the positive aspects of the investment outweigh its negative aspects. For information on how we make these
assessments for a range of investment sectors and issues such as fossil fuels, nuclear power, gambling, tobacco, human rights,
and many others, please read our Ethical Criteria: australianethical.com.au/globalassets/pdf-files/why-ae/ae-guide-to-our-ethical-
investment-process.pdf
13 Scope 1 and 2 carbon intensity (tonnes CO2-e /$ revenue), sustainable impact solutions revenue, and investment in renewables
and energy solutions measures all relate to the listed companies whose shares we invest in across our funds and options for which
we have relevant data. This should not be considered representative of individual funds or options which will have their own mix
of share and other investments. See page 176 for more information about this comparison. For our analysis we use sustainable
impact criteria and revenue data from external sources which aim to measure revenue exposure to sustainable impact solutions and
support actionable thematic allocations in line with the U.N. Sustainable Development Goals (SDGs), EU Taxonomy of Sustainable
Activities, and other sustainability related frameworks. More information available on page 176.
*
Indicates FY24 metric included in KPMG’s Limited assurance scope.
^ Compared to a blended share market Benchmark of S&P ASX200 Index (for Australian and NZ shareholdings) and MSCI World ex
Australia Index (for international shareholdings). Based on shareholdings at 30 June 2024 and analysis tools provided by external
sources which cover ~95% of the listed companies we hold shares in by value. See page 176 for more information about this
comparison.
Metrics & targets
We pursue net zero outcomes for our investments
and the world (our climate ambition) aligned with the
emissions reduction needed to limit temperature rise
to 1.5°C — consistent with the most ambitious aims of
the Paris Agreement.
We use a range of measures to check the
effectiveness of our ethical investment approach
in managing climate risk and pursuing our climate
ambition.
75% lower scope 1 & 2 CO2 intensity of
listed share investments compared to
Benchmark13^*
-75%
Emissions intensity of investments
On the following pages we report the carbon footprint
and fossil fuel reserves relative to Benchmark14 for our
listed share investments.
We report on our listed share investments because
these comprise a large proportion of our total funds
under management (~65%), and because data is less
readily available across our other investments.
We believe this measurement remains a useful
demonstration that our Ethical Investing approach –
which is applied across all investments – results in
our portfolio maintaining an emissions intensity well
below the relevant Benchmark.
5.2x
5.2x the listed share investments
in renewables and energy
solutions than Benchmark13^*
Investment in clean energy
Investment in renewable power generation and
other clean energy solutions is critical to support
the massive global shift to renewables required to
limit warming to 1.5°C. Our analysis this year showed
that our listed share investment in renewables and
energy solutions is proportionately 5.2 times that of a
comparable share market Benchmark.^
Climate-related engagement,
voting and advocacy
In FY24, our stewardship action in pursuit of our
climate ambition included:
• Engagement and advocacy to help stop finance for
expansion of the fossil fuel sector; to help stop and
reverse land clearing and deforestation for animal
agriculture; and to help increase the development
and use of low carbon building materials supporting
the net zero transition of the real estate sector15.
• Seeking to leverage the collective power of
aligned investors by leading and participating in
collaborative engagements with high emissions
companies, including through the global initiative
Climate Action 100+.
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151
• Work to encourage better government climate
policy, including through active participation in the
Investor Group on Climate Change (IGCC). During
the year we elevated climate policy advocacy to a
strategic priority for stewardship and commenced
work on an investor initiative, co-ordinated via the
IGCC, seeking corporates exercise their influence
positively to encourage the Australian government
to set a science-based national climate target for
2035.
Further detail on progress from our engagement and
advocacy efforts is available in our FY24 Stewardship
and Proxy Voting reports.15
Foundation giving targeting
emissions reduction
The Australian Ethical Foundation targets initiatives
that directly and practically address climate change,
with key focus areas for funding including stopping
sources of carbon and supporting carbon sinks.
Read highlights of our Foundation’s work on page 172.
Carbon footprint of our listed share investments 2024
The carbon footprint of our investments is one way to check the effectiveness of our ethical investment
approach to manage climate risk and to support the transition to a net zero-emissions economy and society.
We report three carbon footprint measures for our listed share investments.
Measure
Carbon intensity of
earnings
Carbon emissions
share
Carbon exposure
(WACI)
Description:
Investor share of
company carbon
emissions / Investor share
of company revenue
Investor share of
company carbon
emissions / Amount
invested
Average carbon intensity
of companies invested
in (weighted by % of
investment portfolio)
also known as
WACI (weighted average
carbon intensity)
Significance:
Measures carbon relative
to value of products and
services
Measures carbon relative
to $ invested
Measures portfolio
exposure to carbon
intensive companies
Metric:
tCO2e per $m revenue
tCO2e per $m invested
tCO2e per $m revenue
Scope 1 & 2 emissions
AE listed share investments:
33
17
33
Benchmark#
129
60
87
AE % below Benchmark
75%
71%
63%
Total emissions (Scope 1, 2 & 3)
AE listed share investments:
242
126
280
Benchmark16:
1,210
558
1,076
AE % below Benchmark
80%
77%
74%
The table includes three carbon metrics for our listed share investments. The carbon intensity of those
investments remains about one quarter of the share market Benchmark, 75% lower than the market considering
scope 1 and 2 emissions only. Scope 1 and 2 emissions arise directly in the business operations of investee
companies (from things like car and truck fleets, and furnaces and boilers) and from their purchase of fossil fuel-
based electricity.
We also present the same metrics extended to include additional ‘upstream’ and ‘downstream’ emissions
sources (scope 3 emissions) of our investee companies. Upstream may include emissions of the companies’
suppliers and from transport of business inputs. Downstream scope 3 may include emissions from customers’
use of purchased products and services including transport of goods to the end consumer, fossil fuel
energy used to power an item purchased, and from ultimate disposal at end of a product’s life. While scope
3 emissions involve more uncertainty than scope 1 & 2 emissions, they are also significant in scale and
importance to the climate challenge.
Our portfolio has even lower relative emissions (as much as 80% below Benchmark) when scope 3 emissions
are included. This is a result of our strong restrictions on investment in fossil fuel companies, whose scope 3
emissions include the burning of these fossil fuels (coal, petrol, gas) by their customers.
16 Comparison based on shareholdings at 30 June 2024 and analysis tools provided by external sources which cover ~95% of the
listed companies we hold shares in by value. The comparison Benchmark is a blended Benchmark of the S&P ASX 200 Index (for
Australian and New Zealand share holdings) and MSCI World ex Australia Index (for international fund share holdings). There is more
information about the calculations and metric limitations on page 176.
15 For more information on our Stewardship activities in FY24,
see our Stewardship Report at australianethical.com.au/why-
ae/ethical-stewardship/ and for our Proxy Voting Reports see
australianethical.com.au/shareholder/corporate-governance/
ANNUAL REPORT 2024
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152
Who are the most carbon intensive companies in our portfolios?
Even for low carbon portfolios like ours, it's important to check the ethical rationale for our investment in any
higher emissions companies. The table below lists our most carbon intensive companies and why we still
invest in them under our Ethical Charter.
Portfolio Issuers with Highest carbon intensity
Company
Country
Carbon intensity
AUD*
Positive under our Ethical
Charter
NEXTDC Limited
Australia
925
Data centres. They are energy
hungry but overall help efficient
use of resources.
Veolia Environnement SA
France
481
Water and waste management
and treatment
Digital Realty Trust, Inc.
USA
467
IT servers and data centre
infrastructure
Contact Energy Limited
New Zealand
348
Renewable electricity (hydro and
geothermal)
Cleanaway Waste Management
Limited
Australia
327
Recycling and waste management
Canadian Pacific Kansas City Ltd
Canada
307
Lower emissions transport (rail)
Canadian National Railway Co
Canada
269
Lower emissions transport (rail)
Owens Corning
USA
235
Building materials including
insulation
Redeia Corporacion, S.A.
Spain
228
Electricity transmission
infrastructure
Equinix, Inc.
USA
221
Data centres
*
tCO2 e (Scopes 1&2) / A$M revenue.
# In addition, Australian Ethical has no metallurgical coal reserves but we do not calculate this for the Benchmark.
Fossil fuel reserves
Carbon footprinting doesn’t capture all important climate risks. Fossil fuel reserves aren’t included in emissions
totals while they remain in the ground, but they will frustrate all efforts to limit global warming if they are
extracted and burned. To supplement our carbon footprint comparison, the following table shows how our zero
listed share investment in fossil fuel reserves compares to the share market Benchmark.
Potential emissions from fossil fuel reserves per A$1,000,000 invested*
Our listed share investments
Share market Benchmark
Thermal coal reserves#
Zero
1,935
Gas reserves
Zero
335
Oil reserves
Zero
226
Oil sands, shale oil and shale gas
Zero
134
Our clean energy investment
Our carbon footprint metrics capture the emissions of
renewable energy companies from their production
of electricity from sources like wind, solar, hydro
and geothermal. But the metrics don’t capture the
emissions-lowering effects of these companies
when they create new renewable energy capacity
which displaces higher emissions fossil fuel energy.
That’s one of the reasons we measure our listed
share investment in renewable power generation
and other clean energy solutions, which this year
is proportionately 5.2 times that of a comparable
share market Benchmark.14 This includes investment
in renewable energy generation from wind, solar,
geothermal, biomass, small scale hydro (25 MW
or less) and wave tidal energy. Also included are
biofuels, waste-to-energy, renewables equipment
(e.g. solar inverters and wind turbines), transmission
of renewable energy, and batteries and other energy
storage supporting renewable energy.
Investing in climate transition minerals
Our ethical assessment of investments in the mining
sector balances three factors: the value that the
mined mineral has to the well-being of society; the
harms of the mining process and mineral for people,
planet and animals; and the scarcity and recyclability
of the mineral.
Considering these factors, we restrict+ investment
in most mining companies, including those mining
fossil fuels and uranium.
’Transition minerals‘ may be investible where they
meet our ethical criteria which address:
• the balance between positive and negative uses of
the mineral, and
• the projected growth in demand for the mineral
over the period to 2030 to help transition the
economy to net zero emissions.
Lithium, copper and nickel satisfy our transition
minerals criteria, recognising that the production
of these minerals need to grow significantly for
decarbonisation of high emissions sectors like energy
and transport.
Individual mining companies are ethically assessed
based on the proportion of their revenue earned from
transition minerals and other minerals. In addition, we
examine whether the mining company is responsibly
managing its impacts on people, planet and animals
in their mining and processing operations.
Climate metrics calculation and limitations
Company carbon and other climate-related data
often includes estimates and errors, and so footprint,
reserve and clean energy calculations need to
be used with caution. There are also different
measurement methodologies and metrics which
can be used to assess climate performance. There is
more information on page 176.
Assurance
KPMG have provided limited assurance over key
metrics in sustainability disclosures, including
some carbon metrics. KPMG's assurance opinion is
available on pages 178 to 179.
14 Compared to a blended share market Benchmark of S&P ASX200 Index (for Australian and NZ shareholdings) and MSCI World ex
Australia Index (for international shareholdings). Based on shareholdings at 30 June 2024 and analysis tools provided by external
sources which cover ~95% of the listed companies we hold shares in by value. See page 176 for more information about this
comparison.
+ Our investment restrictions include some thresholds. Thresholds may be in the form of an amount of revenue that a business
derives from a particular activity, but there are other tolerance thresholds we can use depending on the nature of the investment.
We apply a range of qualitative and quantitative analysis to the way we apply thresholds. For example, we may make an investment
where we assess that the positive aspects of the investment outweigh its negative aspects. For information on how we make these
assessments for a range of investment sectors and issues such as fossil fuels, nuclear power, gambling, tobacco, human rights,
and many others, please read our Ethical Criteria: australianethical.com.au/globalassets/pdf-files/why-ae/ae-guide-to-our-ethical-
investment-process.pdf
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155
North America
27.8%
Canada
1.9%
United States
25.9%
Pacific Rim
66.0%
Australia
55.9%
Hong Kong
0.3%
Japan
2.1%
New Zealand
7.4%
Singapore
0.2%
Western Europe
6.3%
Belgium
0.1%
Denmark
0.4%
Finland
0.1%
France
1.0%
Germany
0.6%
Italy
0.2%
Netherlands
0.9%
Norway
0.1%
Spain
0.4%
Sweden
0.3%
Switzerland
1.0%
United Kingdom
1.2%
Indicative proportion of equities in our portfolio by country as at 30 June 2024.
Equities – by country
Our investment process
considers human rights
In line with element xi of our Ethical Charter we strive
to avoid any investment which is considered to
unnecessarily contribute to the inhibition of human
rights. Assessing human rights and modern slavery
risks has growing importance in an environment
where companies and supply chains can be
increasingly global and decreasingly transparent.
The human rights framework embedded in our ethical
assessment process means every investment is
assessed through this lens, and guides us to focus
on high-risk companies and sectors.
At a high level, we may choose to exclude
companies where:
1. The company is considered high-risk and their risk
management efforts do not meet our policy and
due diligence expectations,
2. The company’s actions (or lack thereof) do not
indicate genuine efforts to fulfil its human rights
responsibility, or
3. The company fails to respond to an identified
human rights breach.
Social Supplier Standards
Though the principles of our Ethical Charter mean we
have applied enhanced Social Supplier Standards as
part of our investment assessment process (outlined
above) and to the way we have operated our business
for nearly 40 years, we continue to adopt and learn
from evolving standards and frameworks. In late 2024
we will publish our next Modern Slavery Statement,
building on the initial statement we published in 2020.
Our equities portfolio is heavily weighted to companies in Australia, the United States and Canada.
We restrict+ investments in companies operating in occupied or disputed territories where they are
supporting illegitimate government control of those territories. We also avoid investment in companies
that have connections with authoritarian regimes that prevent them from fulfilling their human rights
responsibilities Read more here: australianethical.com.au/why-ae/our-positions/.
+ Our investment restrictions include some thresholds. Thresholds may be in the form of an amount of revenue that a business
derives from a particular activity, but there are other tolerance thresholds we can use depending on the nature of the investment.
We apply a range of qualitative and quantitative analysis to the way we apply thresholds. For example, we may make an investment
where we assess that the positive aspects of the investment outweigh its negative aspects. For information on how we make these
assessments for a range of investment sectors and issues such as fossil fuels, nuclear power, gambling, tobacco, human rights,
and many others, please read our Ethical Criteria: australianethical.com.au/globalassets/pdf-files/why-ae/ae-guide-to-our-ethical-
investment-process.pdf
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156
Australian Ethical S&P/ASX 200 & MSCI World ex. Australia
The sectors we invest in
While we are more likely to invest in renewables and energy generation solutions than the Benchmark
(5.2 times15 more likely in fact), we find opportunities to invest in ethical companies across most sectors.
This means our portfolio is overweight in Charter-positive sectors such as Health Care, Communication
Services and Information Technology, and underweight in Materials, Energy and Consumer Discretionary and
Consumer Staples making it look quite different to the mainstream. Here’s a snapshot of how we compare with
some examples of stocks per key sectors.
PEXA
PEXA (Property Exchange Australia) is a world-first
digital settlement platform that has revolutionised the
way we exchange property in Australia by providing
quicker access to the proceeds of a sale and near
real-time tracking on property settlements.
PEXA's mission is to reduce the time and paperwork
traditionally associated with conveyancing. This
streamlined efficiency not only expedites processes
but also translates into substantial time and cost
savings for clients. Amidst the pressing challenge
of homelessness and housing stress in Australia,
PEXA collaborates with Homes for Homes, a social
enterprise, to mobilise resources and allocate
grant funds to community housing providers. This
partnership is geared towards creating a sustainable
impact by bolstering the supply of affordable and
social housing.
PEXA’s innovative solutions contribute to a more
reliable and efficient process for the purchase and
sale of property.
This is where many of
our renewable energy
investments sit.
We only invest in
financial companies
aligned to our Ethical
Charter.
We invest in IT
companies that
improve efficiency,
encourage innovation
and reduce
environmental
footprint.
We invest in
healthcare, from
hospitals to biotech
companies.
Where we invest more compared to the market16
Financials
Information Technology
Health Care
Industrials
Communication Services
Real Estate
Utilities
25.8%
25.2%
6.2%
4.8%
9.5%
5.2%
10.3%
7.7%
13.6%
10.7%
19.7%
12.3%
4.8%
1.4%
Examples
ACL Healthcare
Australian Clinical Laboratory Healthcare stands
out for its commitment to patient well-being and
sustainability, demonstrating its alignment with both
ethical principles and long-term financial viability.
Sustainable healthcare ensures long-term access
to quality medical services while prioritising patient
well-being. It safeguards health resources, minimises
waste, and promotes holistic, enduring health
outcomes. The company’s commitment to early
disease detection, health education, and community
engagement reduces the burden of chronic illnesses
and promotes healthier living.
ACL Healthcare's green building designs, energy-
efficient equipment, and investment in renewable
energy sources reflect its commitment to
environmental responsibility, contributing to a more
sustainable healthcare industry.
With our investment in ACL Healthcare, Australian
Ethical is supporting healthcare practices that
prioritise patient health and well-being, while
fostering a more sustainable and environmentally
responsible healthcare sector.
15 See page 148.
16 Compared to a blended share market Benchmark of S&P ASX200 Index (for Australian and NZ shareholdings) and MSCI World
ex Australia Index (for international shareholdings). Based on shareholdings at 30 June 2024 and analysis tools provided by external
sources which cover ~95% of the listed companies we hold shares in by value. See page 176 for more information about this
comparison.
Our portfolio looks different
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159
+ Our investment restrictions include some thresholds. Thresholds may be in the form of an amount of revenue that a business
derives from a particular activity, but there are other tolerance thresholds we can use depending on the nature of the investment.
We apply a range of qualitative and quantitative analysis to the way we apply thresholds. For example, we may make an investment
where we assess that the positive aspects of the investment outweigh its negative aspects. For information on how we make these
assessments for a range of investment sectors and issues such as fossil fuels, nuclear power, gambling, tobacco, human rights,
and many others, please read our Ethical Criteria: australianethical.com.au/globalassets/pdf-files/why-ae/ae-guide-to-our-ethical-
investment-process.pdf
Materials – transition minerals
Our ethical assessment of investments in the mining
sector balances three factors: the value that the
mined mineral has to the well-being of society; the
harms of the mining process and mineral for people,
planet and animals; and the scarcity and recyclability
of the mineral.
Considering these factors, we restrict+ investment
in most mining companies, including those mining
fossil fuels and uranium. However, we will invest in
Examples
Pilbara Minerals is a producer of lithium, a
resource in increasing demand as the world pursues
a sustainable energy future.
The company’s stated focus is environmentally
responsible mining of essential resources, such as
lithium and tantalum, key ingredients in batteries.
Pilbara Minerals says it aims to use innovative
technologies and efficient processes to reduce water
usage and waste generation in mining operations.
This approach can not only mitigate environmental
harm but also reduce regulatory risks. While Pilbara
has a longer-term net zero target and has completed
a PV solar farm for its Pilangoora project, we would
also like to see the company set shorter-term
emissions reduction targets to help it achieve the
transition of its operations in line with the Paris
Climate Agreement.
Australian Ethical S&P/ASX 200 & MSCI World ex. Australia
Energy
We restrict+
investment
in fossil fuel
companies
which make
up most of the
energy sector.
Materials
We have low exposure to the materials sector which includes the mining of non-renewable resources.
Our ethical framework for the mining sector defines criteria for investable 'transition minerals'
Where we invest less compared to the market
Energy
Consumer Staples
Materials
Consumer Discretionary
0.0%
5.1%
4.6%
8.4%
3.1%
14.3%
2.4%
4.9%
approved lithium mining companies, recognising
that the production of minerals such as lithium and
copper need to grow significantly for decarbonisation
of high emissions sectors like energy and transport.
More lithium is needed to help expand battery energy
storage for the transition from fossil fuel to renewable
energy. More copper is needed for the electrification
of transport and of many emissions intensive
industrial processes.
Pilbara Minerals reports its approach to modern
slavery and human rights risks and impacts –
serious matters in the mining industry – in its annual
Modern Slavery Statement. Through responsible
labour practices and procurement they aim to
safeguard against forced labour or exploitation in
their operations and supply chains. They also report
positive relationships with Traditional Owners.
By investing in Pilbara Minerals, we are supporting the
growth of lithium production needed for the transition
to net zero. At the same time we would like to see
continuous improvement in their initiatives to protect
the environment and human rights.
161
ANNUAL REPORT 2024
160
Our alignment to the SDGs
0.4x
2.1x
10.5x
0.6x
1.0x
0.0x
3.4x
2.6x
4.7x
8.6x
0.0x
1.9x
5.6x
Sustainable impact solutions
Affordable Real Estate 1 11
E.g. Seniors & other affordable housing
Alternative Energy 7 13
E.g. Renewable wind, solar, hydro & geothermal energy
Connectivity 9
E.g. Telecommunication networks
Education 4
E.g. Digital tools for teachers, learners & researchers
Energy Efficiency 11 12 13
E.g. Rail, insulation, electric cars & batteries
Green Building 11 13
E.g. Certified commercial & residential green buildings
Major Disease Treatment 3
E.g. Medicine for blood, kidney & breathing disorders
Nutrition 2 3
E.g. Basic food products incl. fresh fruits & vegetables
Pollution Prevention 12 14 15
E.g. Recycling of metal, electronics & food
Sanitation 6
E.g. Cleaning products, toilets & washbasins
SME Finance 8
E.g. Loans to small & medium business
Sustainable Agriculture 2 12
E.g. Sustainably sourced fruit & vegetables
Sustainable Water 6 14
E.g. Water supply, treatment & recycling
$0
$25,000
Alignment with the SDG targets
This graph shows the revenue of ‘sustainable impact’ products and services produced annually by
Australian and international companies in which we invest, per $million invested, compared to Benchmark.17
AE shares
AE vs Benchmark
We support the Sustainable Development
Goals (SDGs), a set of 17 interconnected
global objectives established by the United
Nations in 2015 to address a wide range
of social, economic and environmental
challenges facing the world, including
climate change. The SDGs are designed as
a blueprint to guide global efforts toward a
more sustainable, equitable and prosperous
future for all by 2030. You can find out more
about these important goals here:
sdgs.un.org/goals.
Our investments can provide products and services
that can contribute toward the SDGs. We can
compare the revenue earned from these products
and services from companies in our portfolio, with
that of the companies in the Benchmark portfolio, to
determine if our portfolio is meeting or exceeding the
market’s contribution to the SDGs. We use the MSCI
Sustainable Impact Metrics framework and data to
make this comparison.17
17 Carbon intensity (tonnes CO2-e /$ revenue), sustainable impact solutions revenue, and investment in renewables and energy
solutions measures all relate to the listed companies whose shares we invest in across our funds and options for which we have
relevant data. This should not be considered representative of individual funds or options which will have their own mix of share and
other investments. See page 176 for more information about this comparison. For our analysis we use sustainable impact criteria and
revenue data from external sources which aim to measure revenue exposure to sustainable impact solutions and support actionable
thematic allocations in line with the U.N. Sustainable Development Goals (SDGs), EU Taxonomy of Sustainable Activities, and other
sustainability related frameworks. More information available on page 176. Compared to a blended share market Benchmark of S&P
ASX200 Index (for Australian and NZ shareholdings) and MSCI World ex Australia Index (for international shareholdings). Based on
shareholdings at 30 June 2024 and analysis tools provided by external sources which cover ~95% of the listed companies we hold
shares in by value. See page 176 for more information about this comparison
Related SDGs
Through this analysis we can see how our
investments (categorised under 13 of MSCI’s global
impact themes) are helping to support the delivery of
the SDGs.
Highlights:
• Overall, revenue from sustainable impact solutions
is 2.3 times the sustainable impact revenue for an
equivalent investment in the Benchmark.
• Revenue from sustainable water and agriculture
and pollution prevention solutions is 4.7 times
Benchmark.
• On the climate front, revenue from Alternative
Energy is 3.4 times Green Building 2.6 times and
Energy Efficiency is 2.1 times that of the Benchmark.
• In terms of human flourishing, our investments in
Education are 8.6 times that of the Benchmark and
in Connectivity (an enabler of social interaction and
efficiency) we are 10.5 times the Benchmark.
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163
Examples of companies we invest
in and their alignment to the SDGs
Circularity European Growth Fund
The Circularity European Growth Fund (CEGF)
actively champions the principles of the circular
economy and demonstrates continued environmental
responsibility.
By investing in companies that prioritise resource
efficiency, waste reduction, and recycling, CEGF
actively supports the transition towards a more
sustainable economy.
Some examples of businesses the Fund invests in are:
• Winnow, a monitor to help chefs measure, monitor
and design out food waste;
• Grover, a consumer electronics rental platform,
which stretches the life cycle of a product by re-
using, repairing and redistributing; and
• REBIKE®, a market leader in premium eBike rental
and remanufacturing.
• CEGF's focus on advancing the circular economy
and environmental responsibility makes it a
standout ethical investment. By investing in CEGF,
Australian Ethical supports initiatives that not only
align with our values but also contribute to a more
sustainable, eco-conscious, and resource-efficient
future.
Veolia
Veolia designs and provides water, waste and
energy management solutions that contribute to
the sustainable development of communities and
industries.
The company focuses on environmental stewardship
and promotes circular economy principles. Waste
management reduces pollution, water treatment
ensures clean water access, and energy efficiency
lowers resource consumption. Collectively these
activities are vital for environmental preservation,
public health, and resource conservation in a
sustainable future. Veolia's carbon-neutral footprint
and investments in renewable energy projects
underscore their dedication to mitigating climate
change.
As a pioneer in the circular economy, Veolia is
actively promoting resource efficiency and recycling.
By minimising waste generation and adopting
innovative recycling practices, the company is
significantly contributing to the conservation of
natural resources.
SDG contribution
Affordable and clean energy 7
Climate action 13
SDG contribution
Clean water and sanitation 6
Sustainable cities and
communities 11
Climate action 13
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ANNUAL REPORT 2024
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People with purpose
18 The full PRN charter is available at: australianethical.com.au/shareholder/corporate-governance/
Our team enjoying a 'Feast for Freedom' event in our office in
support of the Asylum Seeker Resource Centre, Natalie Tam and
the team receiving recognition at the Investment Leadership
Awards 2024, Russell Menzies and his family enjoying his paternity
leave – we now offer 20 weeks parental leave for all staff.
The PRN Committee oversees the people and culture
policies and practices designed to attract, retain,
develop and motivate employees. It reviews and
oversees the effectiveness of initiatives designed
to achieve our desired organisational culture. From
a diversity and inclusion perspective, the PRN
Committee sets the targets, monitors our ongoing
progress and assesses the effectiveness of our
diversity and inclusion policy and initiatives18.
Diversity, Equity & Inclusion
We’ve held targets for achieving gender diversity at
board level, senior management level, the investment
team and across the workforce for a number of years.
We have been tracking well against these targets.
(Please see the sustainability metrics table on page
145 for more information).
Our purpose-driven, high-performance culture allows us to attract and retain high
calibre talent and is driven from the top. As set out in our Corporate Governance
Statement, our Board plays a critical role overseeing all aspects of our human
capital. The Board’s People, Remuneration and Nominations Committee
(PRN Committee) has been tasked by the Board to fulfil its responsibilities to
shareholders and regulators in relation to our key people governance activities.
The gender pay gap: how do we compare
Total
Remuneration
average
Total
Remuneration
median
Base Salary
average
Base Salary
median
National
21.7%
19%
17.2%
14.5%
Insurance & Superannuation
30.1%
33.5%
28.1%
34.4%
Australian Ethical
12.1%
9.4%
4.7%
7.6%
We report generational data quarterly to the Board’s PRN Committee. Last year we conducted a
diversity census which we published in our FY23 Data Book. We will repeat this every two years.
In terms of diversity-focused training we have compliance courses on Diversity & Inclusion
via Safetrac. Training for people leaders and staff are being rolled out later in 2024.
In FY24, we set ourselves a new stretch target to have
women represent 40% of our investment team (30%
previously); by the end of FY24 we had 36% female
representation in the team. Please see our 2024
GRI Index and Data Book for more of our diversity
reporting
We submitted our first Workplace Gender Equality
(WEGA) Report for 2023-24. The Gender Equality
Report provides an analysis of gender pay gaps
among private sector employers with 100 or more
employees. The full public data report is available
at: australianethical.com.au/shareholder/corporate-
governance/#reporting and includes information
on our policies, strategies, and actions on gender
equality and workforce statistics. One of the key
metrics used to represent equality is the gender pay
gap. The table below demonstrates that Australian
Ethical compares favourably to both national and
industry cohorts.
Initiatives to support Diversity & Inclusion
Australian Ethical partners with Future IM/Pact, an
organisation that helps women launch a career in
investment management while empowering all
professional investors to elevate their leadership
impact. During FY24, members of our investment
team took part in a number of activities organised by
Future IM/Pact including university student mentoring
circle, early career mentoring and advocacy program,
university student investment competition and others.
We again recognised International Women’s Day and
raised awareness of the remarkable contributions of
women worldwide. This year, we marked this special
day by welcoming Rebecca Lloyd, CEO of Love
Mercy, one of our 2023 Visionary Grant winners, to
recognise and honour womens’ achievements and to
promote gender equality.
This year we updated our Parental leave policy
and launched our gender-neutral 20 weeks paid
parental leave, which can be taken flexibly, to support
employees to care for their newborn child or for
a child placed with them for adoption, fostering
or via a surrogacy arrangement. We believe the
enhancements are transformative and inclusive for
men, women, and LGBTQIA+ people and better
reflects the reality of work and care arrangements for
many working families today. Since implementing
the proportion of males accessing parental leave has
increased.
At Australian Ethical, we have and always will
advocate for the LGBTIQA+ community. We embrace
and celebrate diversity and encourage everyone to
share stories and experiences as we try to spread
compassion and awareness. This year we celebrated
and recognised Mardi Gras, Pride Month, IDAHOBIT
day and Wear It Purple day.
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167
Employee engagement of 79%
In June 2024, 76% of our employees completed our annual employee engagement
survey. The overall engagement score was 79 (up from 70 in the prior year).
This is measured by a positive response to five key questions:
• 94% of respondents answered favourably to “I am
proud to work for Australian Ethical”
• 91% of respondents affirmed “I would recommend
Australian Ethical as a great place to work”.
• 88% of participants affirmed that “Australian Ethical
builds teams that are diverse”, and
• 88% of participants agreed “We have initiatives that
inspire a positive and inclusive environment”.
“I would recommend Australian Ethical as a great place to work”
“Australian Ethical motivates me to go beyond what I would
in a similar role elsewhere”
“I rarely think about looking for a job at another company”
“I see myself still working at Australian Ethical in two years'
time”
1
2
4
3
5
“I am proud to work for Australian Ethical”
Our strengths continue to be our commitment to
social responsibility and purpose, and our alignment
to Australian Ethical’s strategy and business plan.
Opportunities to improve employee experience
are known areas that we continue to work on.
‘Enablement’ continues to be a key focus area and
we are working hard to uplift systems, processes, and
data to allow our employees to perform their roles
even more effectively and efficiently.
Reconciliation
Reconciliation Australia endorsed our Reflect RAP
this year. The Reflect RAP provides a framework
for the work we have already been doing, along
with the focus areas we are committing to moving
forward. Australian Ethical’s current engagement in
reconciliation activities includes an ongoing focus to
identify and progress funding via the Australian Ethical
Foundation (The Foundation) for projects aimed at
improving outcomes for Aboriginal and Torres Strait
Islander peoples alongside environmental outcomes.
Secondly, our Ethical Stewardship activities focus
on identifying and progressing areas of support and
advocacy for First Nations Peoples. For example, our
Carbon Offsetting initiatives utilise carbon credits
generated by First Nations Ranger groups such as
the Karrkad Kanjdji Trust (KKT). This relationship is
closely informed by The Foundation’s work with KKT.
Our stewardship efforts also include participating in
the Responsible Investment Association Australasia
(RIAA) First Nations Peoples’ Rights Working Group
Meetings.
Internally, we incorporate Acknowledgement of
Country at weekly staff gatherings and help educate
staff with guest Aboriginal and Torres Strait Islander
speakers to inform and strengthen understanding
of First Nations cultures, current challenges and
successes. Within the office, our meeting rooms
include First Nations place names and recognition of
Aboriginal and Torres Strait Islander culture. We also
remain open for business on the 26th of January to
show support to Aboriginal and Torres Strait Islander
peoples on this date and post active communications
to stakeholders via our website to support the
‘change the date’ movement.
In FY24 we celebrated National Reconciliation Week
and NAIDOC week with special speakers and events.
Indigenous artist Emrhan Tjapanangka Sultan,
designed the cover of our Reflect RAP (above).
Some of the other key callouts from the survey:
The Australian Ethical Foundation is working with the Karrkad Kanjdji Trust (KKT) to support
Indigenous women rangers in West and Central Arnhem Land protect and restore Country.
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169
Wellbeing@AE
Wellbeing is an important part of employee
experience at Australian Ethical. Our Wellbeing@AE
program encourages our people to engage with their
financial, physical, emotional, and social wellbeing so
that they can bring their best selves to work.
We continued to raise awareness of the importance
of mental health with special guest speaker Craig
Semple who shared his experience as a career
Detective within the NSW Police Force for 25 years
and delivered vital education on Mental Health,
Wellbeing and Resilience. We also participated in
Onefootforward for Mental Health Month, and raised
$5,791 (plus a matching donation for AEI of $5,000)
for Black Dog Institute. Thirty-one team members
participated in raising funds and covered a total
distance of 3,324kms.
Also, over the year employees were able to access a
range of wellbeing offerings including:
• $299 personal wellbeing allowance health
memberships, subscriptions and fees, sporting
equipment and sporting clothing, home office
equipment to support ergonomic set up
• Flu vaccinations and skin checks
• Financial wellbeing workshop
• City2Surf, Bloomberg Square Mile Relay, Run
Melbourne
Refreshing our values
Our company is constantly
evolving, and with that evolution,
it's crucial that our values keep
pace to better reflect who we are
today and what is important to
us. This year we expanded and
refined our values. This was a
collaborative effort from across
the entire organisation to ensure
they truly represent who we are.
• Lunch time team sports competitions
• Five days additional wellbeing leave
• Counselling support via Allos our EAP partner
• Expert medical support and guidance at no cost
with 360Health Virtual Care
Pleasingly 83% of respondents to the employee
engagement survey affirmed “I believe wellbeing
is considered a priority at Australian Ethical and I
feel genuinely supported through the wellbeing
initiatives.”
Workspace
In January we opened a new floor space in our
Sydney office to accommodate our headcount
growth, additional meeting rooms including a new
client experience and collaboration areas and quiet
zones to enable new ways of working.
Viva Engage
Enhancing our Internal Communication and
information sharing, we launched Viva Engage,
an app within the Microsoft Teams suite. This app
connects people in a hybrid environment, allowing
them to share ideas, experiences, ask questions,
and connect with coworkers over shared interests,
continuing to foster our culture.
Volunteering and giving
Giving back to the community continues to be a
strong feature of our culture.
This year we introduced a new initiative, AE Giving,
a month-long volunteering event to bring our
purpose driven culture to life, by embodying our
commitment to ethical practices and showcasing
our dedication to social responsibility. During the
month we encouraged everyone to utilise one of their
two volunteering days to engage in a meaningful
opportunity with one of the five organisations we
have partnered with. Seventy-one volunteering days
were completed, improving company culture and
engagement, cross team bonding and collaboration,
creating a true connection to Australian Ethical’s
purpose and building valuable partnerships with local
charities and businesses, and make positive impact
on our local communities.
We also gathered everyone
together for a Feast for
Freedom event, and
welcomed Thanus Selvarasa
who shared his story as a
refugee from Sri Lanka and his
time in immigration detention
for eight years. We celebrated the values of freedom,
inclusivity, and unity, and it was chance to appreciate
the diverse backgrounds, cultures, and traditions that
make Australian Ethical a vibrant and unique place to
work. We raised vital funds for the incredible work the
Asylum Seeker Resource Centre (ASRC) do to provide
food, shelter and health services for over 7,000
people seeking asylum who need support settling
into Australia every year. Staff raised $3,100 with
Australian Ethical matching up to $2,000 for the ASRC.
We are driven to
achieve real change
through intentional and
meaningful steps.
We are compassionate
and conscious of our
impact on the world
around us.
We are genuine and true
to who we are, creating an
environment of trust and
acceptance.
We embody a sense
of belonging which
drives collaboration
and team success.
We have a mindset
in which we think
beyond the present
and into the future.
respondents to the employee engagement survey agreed
“Australian Ethical's commitment to social responsibility
(e.g. community support, sustainability, etc.) is genuine”.
98%
With ReLove
in Sydney
Volunteering at
Collingwood
Children's Farm,
Melbourne
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171
The Australian
Ethical Foundation
10%
yearly profits* donated
through the Australian
Ethical Foundation
*
After tax and before bonuses
In FY24 The Foundation allocated funding support
to over 25 charities fighting climate change and
protecting our natural ecosystems across our
strategic priority areas: stopping sources of carbon
pollution, supporting carbon sinks and empowering
women and girls.
A total of $500,000 was awarded as Visionary
Grants in January 2024 to 10 not-for-profit
enterprises working on a range of projects trialing
new approaches to solving climate change. The
projects ranged from advocacy and policy design
for electrification of low-income households,
to regenerating riparian ecosystems for carbon
sequestration and preserving First Nations culture.
Each organisation used the funding to test or scale
their projects.
The Foundation’s Strategic Grant program continued
to fund proven and effective charities working across
our focus areas. Projects spanned from progressing
alternative protein markets, developing clean
tech investment hubs, empowering First Nations
women rangers in Arnhem Land and advancing
environmental accounting standards.
$500,000
funded through Visionary
Grants program
24+
charities supported
fighting the climate crisis
Empowering Women and Girls
Pollinate Group
Pollinate Group seek to empower women living in
marginalised communities in India and Nepal by
training them as micro-entrepreneurs so they can
earn a living whilst distributing clean energy products.
To date, Pollinate Group has empowered 2100
women, benefiting 862,000 people living in poverty.
The community of women they have supported has
successfully distributed over 305,000 products,
reducing 1.66 million tonnes of CO2e and saving 1.92
billion INR by minimising the use of harmful fuels like
kerosene.
As part of the 2023 round of the Australian Ethical
Foundation’s Visionary Grants, we have supported
Pollinate Group in its work. We picked this project for
both the benefits it brings to empowering women
entrepreneurs in marginalised communities, as
well as its emissions reductions outcomes through
the clean energy products distributed throughout
their communities. The funding we have provided
supports Pollinate Group's Partnership Incubator
Fund to collaborate with a network of aligned NGO
partners actively engaged in India and Nepal. By
partnering with these NGOs, the organisation can
efficiently enlist large groups of women into its micro-
entrepreneurship program.
Stopping Sources of Carbon
Original Power
Original Power is a community focused Aboriginal
organisation engaged in realising community-driven
solutions and advocating for the rights and interests
of First Nations communities in the energy transition.
The organisation works with First Nations communities
to develop projects that overcome the structural and
policy barriers locking them out of the benefits of
lower cost, clean energy.
The Australian Ethical Foundation has been supporting
Original Power's ambitious initiative, the First Nations
Clean Energy Network, initiated in November 2021
in Alice Springs. The Network's establishment was
fuelled by the imperative to empower First Nations
communities and enable them to seize opportunities
arising from Australia's thriving renewables sector.
In early 2024 the Australian Ethical Foundation
provided funding for the final stages of Original
Power’s Marlinja Community Solar Microgrid Project.
The Project is replacing Marlinja's reliance on
expensive, polluting diesel-generated power with
clean, low cost solar and battery storage and wireless
distribution of electricity credit to all homes in the
community. This project showcases the benefits
of community-owned energy that can ensure First
Nations communities are not left behind in the
transition to cleaner, lower cost energy.
Our growing scale directly translates
to the amount we can contribute to the
Australian Ethical Foundation. Every
year we donate 10% of our profits* to
The Foundation, meaning the more we
grow, the more we’re able to donate to
organisations that are as passionate as us
about making the world a better place.
$1.8M
record allocation
by AEI to The
Foundation in FY24
$11M+
donated since
inception in 2000
Pollinate Group
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ANNUAL REPORT 2024
Memberships and certifications
Our wide-ranging memberships and certifications are
testament to our leading approach to ethical investing and an
important part of our authenticity.
Certifications
Certified Responsible Investment by
Responsible Investment Association
Australasia (RIAA)
Certified B Corp since 2014. The first
company on the ASX to achieve this.
Principles of Responsible Investment (PRI)
• Policy, Governance and Strategy
• Direct – Listed equity – Active fundamental
• Direct – Fixed income – SSA:
• Direct – Fixed income – Corporate:
• Confidence building measures:
Memberships, engagement and organisations we support
Longstanding member of the Responsible
Investment Association Australasia (RIAA)
On the Nature Working Group, Human Rights
Working Group and First Nation’s Peoples sub-
working group
Climate Action 100+
• Lead and support investor
Member of the Investor Group on Climate
Change
• IGCC Policy & Advocacy Working Group
• IGCC Corporate Engagement Working Group
GIIN - The Global Impact Investing Network
• Investor Council
Signatory to:
Principles for Responsible Investment
CFA Institute Asset Manager Code
FSC Women in Investment Management
Charter
RIAA Investor Statement on Human Rights
Finance for Biodiversity Pledge
The Finance Sector Deforestation Action
(FSDA) Initiative
Investors Against Slavery and Trafficking
APAC
Tobacco free
We have excluded investment in tobacco
production since we were established in 1986
and have been a Supporter of Tobacco Free
Portfolios since they started in 2018
Principles for Responsible Investment
The Financial Services Council, Fund
Management Board and Superannuation Board
Committee
Global Reporting Initiative (GRI)
Australian Chapter of the 30% Club
Farm Animal Investment Risk and Return (FAIRR):
Investor network
The Responsible Investment Certification Program does not constitute financial product advice. Neither the Certification Symbol nor RIAA
recommends to any person that any financial product is a suitable investment or that returns are guaranteed. Appropriate professional
advice should be sought prior to making an investment decision. RIAA does not hold an Australian Financial Services licence.
ANNUAL REPORT 2024
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175
+Investment Restrictions
Our investment restrictions include some thresholds.
Thresholds may be in the form an amount of revenue
that a business derives from a particular activity, but
there are other thresholds we can use depending
on the nature of the investment. We apply a range
of qualitative and quantitative analysis to the way
we apply thresholds. For example, we may make an
investment where we assess that the positive aspects
of the investment outweigh its negative aspects. For
information on how we make these assessments for a
range of investment sectors and issues, such as fossil
fuels, nuclear power, gambling, tobacco, human
rights, and many others, please read our Ethical Guide
available on our website at australianethical.com.au/
why-ae/ethics/ethical-criteria/
Sustainability information calculation and
limitations
The investment carbon footprint and other climate
and sustainable solutions metrics in this report are
presented for Australian Ethical’s aggregate listed
share investments at 30 June 2024 and for which
we have relevant sustainability data. This should not
be considered representative of individual funds
or options which will have their own mix of share
and other investments. Sustainability information
will change with changes to investments, the
sustainability performance of companies, and the
companies for which we have sustainability data.
The comparison share market Benchmark is a
blended Benchmark of the S&P ASX 200 Index (for
Australian and New Zealand share holdings) and
MSCI World ex Australia Index (for international fund
share holdings). The comparison share market indices
are based on the composition of the relevant share
markets, without selection of companies based on
ethical, sustainability or ESG factors. The industry mix
and other characteristics of companies comprising
the Australian Ethical investment portfolio and the
indices are different.
We have used carbon and sustainable impact
revenue data and analysis tools provided by global
research firm MSCI ESG Research LLC. This data
covers ~95% of Australian Ethical’s listed share
investments by value. We present the sustainability
information and the benchmark comparison only for
investment in listed shares in those companies which
have been analysed by MSCI ESG Research for their
carbon intensity and sustainable impact revenue.
MSCI ESG Research is not responsible for the way
we have used their data and tools to calculate the
amounts in this report.
Use of sustainability information
The sustainability information is limited to the
specific sustainability metrics reported. Sustainability
characteristics of an investment may or may not
be relevant to individuals’ investment decisions.
The sustainability metrics relate to the impacts of
companies which Australian Ethical invests in, and
they are not a measure of the impact of acquiring an
investment in those companies or in an Australian
Ethical fund. Investment decisions should take
into account the financial, risk, fee and other
characteristics of potential investments.
The information in this report is general information
only and does not take account of your individual
investment objectives, financial situation or needs.
Before acting on it, consider its appropriateness to
your circumstances and read the Financial Services
Guide (FSG), the Product Disclosure Statement
(PDS) and Target Market Determination (TMD) for
the relevant product available on our website for
information on the benefits and risks of our Funds. You
should consider seeking advice from an authorised
financial adviser before making an investment
decision.
Investing ethically and sustainably means that the
investment universe will generally be more limited
than non-ethical, non-sustainable portfolios in similar
asset classes. This means that the Portfolio may
not have exposure to specific assets which over or
underperform over the investment cycle. This means
that the returns and volatility of the Portfolio may be
higher or lower than non-ethical, non-sustainable
portfolios over all investment time frames.
Past performance is not a reliable indicator of future
performance.
Carbon footprinting and sustainability
measurement limitations
Investment carbon footprint metrics need to be used
with caution. Company carbon data is historical,
it often includes estimates or is incomplete, and it
may include errors and be out of date. Companies
make different decisions about what they do and
don’t include when calculating and reporting their
operational footprints. Data providers use estimates
for some companies.
More information
There are also different carbon metrics which can
be used to assess carbon footprint, each with
different strengths and weaknesses. We report three
carbon footprint measures for our share investments,
“Carbon intensity of earnings”, “Carbon emissions
share” and “Carbon exposure”. The TCFD reporting
recommendations compare these and other footprint
metrics here:
www.tcfdhub.org/Downloads/pdfs/E09%20-%20
Carbon%20footprinting%20-%20metrics.pdf
Similar limitations apply to measurement of other
types of impact of companies, such as their sale
of sustainable products and services. Company
reporting of the revenue they earn from different
products and services may be inaccurate or
incomplete, and MSCI may make estimates in
breaking down and categorising company revenue.
There are different methodologies and frameworks for
classifying sustainable products and services and for
taking account of negative impacts of a company’s
operations.
External tool and data provider MSCI ESG
Research LLC
We have used data and tools provided by MSCI
ESG Research when calculating the sustainability
information in this report about carbon intensity, share
of carbon emissions, carbon exposure, sustainable
impact revenue, fossil fuel reserves and investment
in renewables and energy solutions. We accessed
the MSCI tools and data for our calculations on
12 July 2024.
More information on MSCI carbon footprinting
methodology and metrics is available here:
https://www.msci.com/documents/10199/2043ba37-
c8e1-4773-8672-fae43e9e3fd0
The Sustainable Impact Solutions table in this
report shows links between MSCI’s categories
of sustainable impact solutions and selected
Sustainable Development Goals (SDGs). We have
determined these links based on our own assessment
of how MSCI’s criteria for their Sustainable Impact
Solutions relate to SDGs. There is more information
about MSCI’s categories here:
https://www.msci.com/documents/1296102/1636401/
ESG_ImpactMetrics-2016.pdf
and
https://www.msci.com/
documents/1296102/16472518/ESG_ImpactMetrics-
cfs-en.pdf
None of MSCI ESG Research LLC or its affiliates (MSCI
ESG Research) is responsible for the sustainability
information or the way we have used their data and
tools. MSCI ESG Research (1) retains copyright in all its
data; (2) does not warrant or guarantee the originality,
accuracy and/ or completeness of their data; (3)
makes no express or implied warranties of any kind,
and disclaims all warranties of merchantability and
fitness for a particular purpose; (4) has no liability
for any errors or omissions in connection with their
data or for our reporting and use of their data; and
(5) without limiting any of the foregoing, has no
liability for any direct, indirect, special, punitive,
consequential or any other damages (including
lost profits) even if notified of the possibility of
such damages. Information provided by MSCI ESG
Research may only be used for your internal use, may
not be reproduced or redisseminated in any form and
may not be used as a basis for, or component of, any
financial instruments or products or indices. Further,
none of the information provided by MSCI ESG
Research can in and of itself be used to determine
which securities to buy or sell or when to buy or sell
them.
Currency conversion for sustainability
Information
Some of the sustainability data we use is provided
to us in US$ terms, and some of this data has been
converted to US$ using exchange rates selected
by the data provider. Where we report sustainability
information in A$ terms, we have used an average
exchange rate as published by the Australian Taxation
Office for the 2024 Financial year.
ANNUAL REPORT 2024
176
177
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are
trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme
approved under Professional Standards Legislation.
Independent Limited Assurance Report to the Directors of
Australian Ethical Investments Limited
Conclusion
Based on the evidence we obtained from the procedures performed, we
are not aware of any material misstatements in the Selected Sustainability
Information, which has been prepared by Australian Ethical Investments Limited in
accordance with Management’s Reporting Criteria for the period ended 30 June
2024.
Information Subject to Assurance
The Selected Sustainability Information as presented in the Australian Ethical Investments Limited Annual
Report 2024 (“the Report”) available on the Australian Ethical Investments Limited (AEI) website, and is
comprised of the following:
Selected Sustainability Information
Value
Carbon intensity (Scope 1 & 2) of listed share investments compared to
Benchmark (%)
75%
Carbon intensity (Scope 1, 2 & 3) of listed share investments compared to
Benchmark (%)
80%
Proportion of our listed share investments in renewables and energy
solutions
5.2 x Benchmark
Proportion of listed share investments ethically evaluated (%)
100%
% proactive engagements followed by commitments to change
30%
Criteria Used as the Basis of Reporting
The applicable criteria used in relation to the Selected Sustainability Information as the basis of reporting
has been developed by AEI management (“the criteria”) and is included in the annual report.
Basis for Conclusion
We conducted our work in accordance with Australian Standard on Assurance Engagements ASAE 3000
(Standard). In accordance with the Standard we have:
used our professional judgement to plan and perform the engagement to obtain limited assurance that
we are not aware of any material misstatements in the information subject to assurance, whether due
to fraud or error;
considered relevant internal controls when designing our assurance procedures, however we do not
express a conclusion on their effectiveness; and
ensured that the engagement team possess the appropriate knowledge, skills and professional
competencies.
2
Summary of Procedures Performed
Our limited assurance conclusion is based on the evidence obtained from performing the following
procedures:
enquiries with relevant AEI personnel to understand the internal controls, governance structure and
reporting process of the Selected Sustainability Information;
reviews of relevant documentation;
analytical procedures over the Selected Sustainability Information;
walkthroughs of the Selected Sustainability Information to source documentation;
evaluating the appropriateness of the criteria with respect to the Selected Sustainability Information;
and
reviewed the Annual Report 2024 in its entirety to ensure it is consistent with our overall knowledge of
assurance engagement.
How the Standard Defines Limited Assurance and Material Misstatement
The procedures performed in a limited assurance engagement vary in nature and timing from, and are less
in extent than for a reasonable assurance engagement. Consequently the level of assurance obtained in a
limited assurance engagement is substantially lower than the assurance that would have been obtained
had a reasonable assurance engagement been performed.
Misstatements, including omissions, are considered material if, individually or in the aggregate, they could
reasonably be expected to influence relevant decisions of the Directors of AEI.
Use of this Assurance Report
This report has been prepared for the Directors of AEI for the purpose of providing an assurance
conclusion on Selected Sustainability Information and may not be suitable for another purpose. We
disclaim any assumption of responsibility for any reliance on this report, to any person other than the
Directors of AEI, or for any other purpose than that for which it was prepared.
Management’s responsibility
Management are responsible for:
determining that the criteria is appropriate to
meet their needs;
preparing
and
presenting
the
Selected
Sustainability Information in accordance with the
criteria; and
establishing internal controls that enable the
preparation and presentation of the Selected
Sustainability Information that is free from
material misstatement, whether due to fraud or
error.
Our Responsibility
Our responsibility is to perform a limited assurance
engagement
in
relation
to
the
Selected
Sustainability Information for the period ended 30
June 2024, and to issue an assurance report that
includes our conclusion.
Our Independence and Quality
Management
We have complied with our independence and
other relevant ethical requirements of the Code of
Ethics for Professional Accountants (including
Independence Standards) issued by the Australian
Professional and Ethical Standards Board, and
complied with the applicable requirements of
Australian Standard on Quality Management 1 to
design, implement and operate a system of quality
management.
KPMG
Sydney
27 September 2024
ANNUAL REPORT 2024
178
179
Shareholder information as at 30 August 2024
Security
Number of holders
Number on issue
Voting rights
Fully paid ordinary shares
13,004
112,782,052
One vote per share
Top 20 shareholders of fully paid ordinary shares
Shareholders
Balance
%
HSBC Custody Nominees (Australia) Limited
15,606,106
13.84
J P Morgan Nominees Australia Pty Limited
7,759,013
6.88
James Andrew Their
5,066,920
4.49
Citicorp Nominees Pty Limited
4,637,750
4.11
Ms Caroline Le Couteur
4,104,855
3.64
Mrs Judith Margaret Boag
2,300,000
2.04
Mr Trevor Roland Lee
2,150,000
1.91
Mrs Ann Marion McGregor & Mr Bruce Allan McGregor
2,014,827
1.79
Mr Howard Pender
1,648,359
1.46
Daisy Their
1,529,700
1.36
HB Sarjeant & Assoc Pty Ltd
1,507,000
1.34
National Nominees Limited
1,260,427
1.12
Pacific Custodians Pty Limited
1,251,039
1.11
Mr Anthony Scott Cook
1,061,800
0.94
Ms Patty Bik Yuk Tse
1,000,000
0.89
Mr Michel Beuchat & Mrs Ann Beuchat
966,700
0.86
Dr Judith Ingrouille Ajani
964,654
0.86
Mr Phillip Andrew Vernon
905,932
0.80
BNP Paribas Nominees Pty Ltd
803,171
0.71
Ms Patty Bik Yuk Tse
749,650
0.66
Total
57,287,903
50.80
Balance of register
55,494,149
49.20
Grand total
112,782,052
100.00
Distribution of Holdings
Range
Securities
%
Holders
100,001 and over
75,119,485
66.61
81
10,001 to 100,000
22,740,622
20.16
834
5,001 to 10,000
4,734,632
4.20
640
1,001 to 5,000
7,171,119
6.36
3,126
1 to 1,000
3,016,194
2.67
8,323
Total
112,782,052
100.00
13,004
On Friday, 30 August 2024:
•
AEF shares closed at $4.15
•
Accordingly, 120 or more shares constituted a marketable parcel
•
The Company had 1,815 shareholders whose holding was not a marketable parcel, these shareholders owned a total of 145,116
shares
Shareholder information
ANNUAL REPORT 2024
181
180
AEI Group
Responsible Entity
Australian Ethical Investment Limited
ACN 003 188 930
AFSL Number 229949
Registrable Superannuation Entity
Australian Ethical Superannuation
Pty Limited
ACN 079 259 733
RSEL Number L0001441
AFSL Number 526055
Australian Ethical Foundation Limited
ACN 607 166 503
Offices
Head Office
Australian Ethical Investment Limited
Level 8, 130 Pitt Street
Sydney NSW 2000
Registered office
Care of Company Matters Pty Limited
Level 12, 680 George Street
Sydney, NSW 2000
Phone +61 8280 7355
PO Box 20547
World Square NSW 2002
Share Registry
Link Market Services Limited
Locked Bag A14
Sydney South, NSW 1235
Phone +61 1300 554 474
Fax +61 2 9287 0303
Email registrars@linkmarketservices.com.au
linkmarketservices.com.au
Security Exchange Listing
Australian Ethical Investment Limited is
listed on the Australian Securities Exchange
ASX Code: AEF
Company directory
Directors
Steve Gibbs (Chair)
Mara Bûn (Non-Executive Director)
Kate Greenhill (Non-Executive Director)
Sandra McCullagh (Non-Executive Director)
Julie Orr (Non-Executive Director)
John McMurdo (MD & CEO)
Company Secretary
Karen Hughes
Banker and custodian
National Australia Bank Limited
Level 3, 255 George Street
Sydney NSW 2000
Administrator
For superannuation
Mercer Outsourcing (Australia) Pty Ltd
Collins Square
727 Collins Street
Melbourne VIC Australia 3008
Locked Bag 20013,
Melbourne VIC 3001
For managed funds
Boardroom Pty Ltd
GPO Box 3993
Sydney NSW 2001
Auditors and taxation
KPMG Australia
International Towers
300 Barangaroo Avenue
Sydney NSW 2000
Media enquiries
BlueChip Communication
Level 7, 333 George Street
Sydney NSW 2000
Contact us
Phone 1800 021 227
Email enquiries@australianethical.com.au
Reply Paid
GPO Box Centre Sydney
GPO Box 8, Sydney NSW 2001
australianethical.com.au
Image credits:
COVER: Top right Unsplash, Megan Clark / Top left iStock, kamisoka / Bottom right iStock, Micheal Perrott /
p1 Unsplash, Michael Tuszynski / p4 Top to bottom iStock, RyanJLane / iStock, VioletaStoimenova / iStock,
AerialPerspective Works / iStock, Ridofranz / p5 iStock, Jeremy Edwards / p9 iStock, Robert McGillivray /
p11 iStock, KarenHBlack / p20 Unsplash, Brian Asare / p24 Unsplash, Karl Hedin / p26 Unsplash, Rod Long /
p29 Unsplash, Justin Luebke / p51 Unsplash, Francesco Ungaro / p52 iStock, Orbon Alija / p71 Unsplash,
Christian Bass / p79 Unsplash, Guille-Pozzi / p91 Unsplash, Trevor Walton / p135 iStock, Outback to Coast /
p136 iStock, Bryce Crage / p138 Unsplash, Erico Marcelino / p141 Unsplash, Dan Meyers / p143 iStock, Rain
Ungert / p146 iStock, SaintM Photos / p149 iStock, RainervonBrandis / p152 iStock, tracielouise / p154 iStock,
shawshot / p156 Unsplash, Aarn Giri / p159 iStock, AnnaStills / p161 iStock, 3alexd / p162 Unsplash, David Clode
/ p164 iStock, nazar_ab / p165 iStock, David Orr / p172 Unsplash, Marko Blazevic / p183 Unsplash,
Chris Montgomery
The information in this report is general information only and does not take account of your individual
investment objectives, financial situation or needs. Before acting on it, consider its appropriateness to your
circumstances and read the Financial Services Guide (FSG), the Product Disclosure Statement (PDS) and Target
Market Determination (TMD) for the relevant product available on our website for information on the benefits
and risks of our Funds. You should consider seeking advice from an authorised financial adviser before making
an investment decision.
Past performance is not a reliable indicator of future performance.
182
183
ANNUAL REPORT 2024
Find out more
Phone:
1800 021 227
Email:
enquiries@australianethical.com.au
Website:
australianethical.com.au
Unless otherwise indicated, the photographs and drawings of assets in the report are not real assets connected to the Australian Ethical
Managed Funds investment schemes (managed funds) or the Australian Ethical Retail Superannuation Fund (Super Fund). Photographs
and drawings of public buildings, transport, or panoramic views do not depict Managed Funds or Super Fund assets. Where used,
photographs of the assets of the Managed Funds or Super Funds are the most recent available. Any views or opinions expressed are the
author or quoted person’s own and may not reflect the views or opinions of Australian Ethical. Copyright: No part of this publication may
be reproduced, stored in a retrieval system or transmitted in any form or by any means: electronic, mechanical, photocopying, recording
or otherwise without the permission of the publisher.
Image credit: iStock, mastersky