Australian fund manager divests Commonwealth Bank over misconduct

SYDNEY: Wealth manager Perpetual Ltd said it has divested Commonwealth Bank of Australia from its A$1.3 billion (£727.58 million) ethical fund due to revelations of corporate misconduct, the first big institutional investor to do so.
The move by one of Australia’s best-known share managers could encourage other socially minded stock pickers to divest from Australia’s “Big Four” banks on ethical grounds.
CBA has suffered a string of scandals over the past year that have included rate-rigging charges, breaches of anti-money laundering laws, and fees charged to dead clients.
Perpetual’s divestment, disclosed in an investor update, places further pressure on Australia’s banking sector to clean up its act as a powerful inquiry airs allegations of bribery, fee-gouging and board-level deception across the industry.
Perpetual’s decision applies to its ethical Australian share product, which listed CBA as one of its largest holdings as recently as April. The fund manager has, however, retained its large CBA holding in its mainstream equities product.
A Perpetual spokeswoman said in a statement its ethical fund filters were tightened at the start of June.
“This included widening the definition of its governance (socially responsible investment) filter to capture more instances of corporate misconduct,” the spokeswoman said.
An additional 25 companies were caught by the screens, Perpetual said in a statement to Reuters, without disclosing the names of the affected stocks.
CBA said in a statement it had nothing further to add to Perpetual’s disclosures.
The “sustainable, responsible and impact” (SRI) investment sector housed $23 trillion (£17.88 trillion) around the globe at the end of 2016, according to the most recent biennial survey by the Global Sustainable Investment Review.
While Europe is the dominant region for such funds, SRI investments have increased rapidly in fossil-fuel-rich Australia from $148 billion to $516 billion between 2014 and 2016.
Revelations of poor practices have been flowing from the country’s most powerful type of inquiry, called a Royal Commission, testing the ethical screens of Australia’s SRI funds. — Reuters