Australian Ethical Investment Foresees Higher Cost Outflows For 2H22

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Australian Ethical Investment Foresees Higher Cost Outflows For 2H22

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  • Funds Under Management up 9 per cent for 2H22 ended 31 December 2021
  • 1H22 Underlying Profit after Tax up 8 per cent at $5 - $5.5 million
  • Share price up 81.83 per cent compared to this time last year

Among Australian market leaders to see bright performance continuing into 2022, Australian Ethical Investment Limited (ASX:AEF) is a fund that is well-positioned to cater to a growing consumer sentiment towards supporting sustainability. Already into the new year, the company sees tangible progress made with growth to its Funds Under Management (FUM) and strong net flows.

Continuing its positive trajectory into FY22, the company reports growing its FUM to $6.94 billion — up 6 per cent for the three months leading to 31 December 2021. This prevailing growth of its FUM represents a confirmation of its performance since 30 June 2021, which saw a total FUM increase by 9 per cent for the half year. In its update to shareholders published today, the company attributed this growth as being the result of strong investment performance and continuing net flows.

Since updating its earnings guidance last month, the company has presented a focus in developing interests within the Sentient Impact Group, and updates changes to the holdings of existing shareholders. The company’s minority stake acquisition in Sentient Impact investment is reflective of its high-growth strategy, which synergistically aligns with the company’s ethos on championing private investment towards industrial decarbonisation.

Australian Ethical’s investment of $5.2 million into Sentient presents a considerable example of how the company continues to shed light on other funds and projects within the sustainability space. Additionally, the company’s minor acquisition is one that lends further credibility to funds like Sentient, which is likewise focused on the creation of long-term value during a time that sees the world’s industries committing themselves to measurable decarbonisation targets.

Commenting on the synergies between the funds, Sentient’s Chief Executive Officer (CEO) Oliver Yates mentioned, “We are delighted to be working closely with Australia’s leading ethical fund manager to create additional opportunities for investors to deploy capital into initiatives that reduce emissions, value nature and enhance biodiversity, and support equality and a better quality of life for all Australians.”

What it Would Take for Australian Ethical to Press On into 2H22

Australian Ethical anticipates continued momentum into its second half of FY22, despite CEO John Murdo acknowledging the present challenges brought by the still-unfolding pandemic. Regardless, the company remains steadfast in its commitment to mobilise private finance to address climate change-related outcomes. True to its founding principles and high growth strategy, Australian Ethical will continue to identify and leverage market movers within this space. As such, it anticipates a higher outflow of funds for the second half of FY22, as it implements its strategic roadmap.

Providing specifics into how the additional outflow of costs would be deployed, the Australian Ethical CEO described further investment in the company’s customer service, product development, and technology platforms. Additionally, these costs are anticipated as a means of extending the company’s reach within intermediated channels, and investing in the development of its brand. Despite the anticipated cost outflows, Australian Ethical remains well-entrenched within a market category that will only continue to see mounting interest in global efforts to achieve net zero carbon targets for the foreseeable future.

Louis Mosmann

Louis Mosmann is a Private Wealth Client and Research Assistant at KOSEC- Kodari Securities. Louis covers macroeconomic events, global markets and ASX300 company announcements, allowing clients to make more informed investment decisions. Email Louis at l.mosmann@kosec.com.au.

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