Our Sustainable Alpha approach

Sustainable investing - an investment proposition

We aim to identify companies with attractive long-term growth supported by better social and environmental alignment. However, no matter how attractive the environmental and social credentials of a company, if the organisation does not meet our financial criteria assessments they will not be chosen for investment.

Sustainable alpha model

AMP Capital has developed a proprietary model to manage Sustainable portfolios. We call this the Sustainable Alpha Model. The model comprises two distinct components, that when combined create the opportunity to deliver sustainable investment performance from an Australian equities portfolio.

1. Corporate Social Responsibility (CSR)

CSR is a bottom-up evaluation of how each company balances the needs of different stakeholders in its business. We assess how a company fulfils its financial and legal responsibilities to its stakeholders in the marketplace (eg shareholders, suppliers and customers), as well as how it manages its workplace and environmental, supply chain issues, and its reputation in the communities it operates in.

2. Industry Sustainability (IS)

IS is a macro framework for assessing broader social, economic and technological trends that are deemed likely to have a tangible impact on a company’s future strategic and financial position. As its starting point, IS recognises that there are long-term global pressures on industries to adopt practices and sustain growth rates that do not substantially detract from the living standards of future generations.

Does Sustainable Investing make a difference?

AMP Capital has undertaken a study (see below) to assess whether there is a financial payback from considering sustainability issues in the investment decision making process.

Although the results of this study are specific to AMP Capital’s Sustainable Alpha approach, there is evidence to support the view that companies with a higher corporate social responsibility rating have performed better than less socially responsible companies over the long term. The industry sustainability tests are less clear statistically, however, after excluding the aberrant performance of the IT&T sector there appears to be a positive influence. For details see below.

Financial payback from environmental and social factors in Australia
March 2005 (PDF 193Kb)