Australian Ethical expands into impact investing

The Australian Ethical Investment Limited (ASX: AEF) share price is rising after announcing it has bought a stake in Sentient Impact.

Australian Ethical acquisition

The Australian Ethical share price is up more than 2% after revealing it has bought a minority stake in impact investment business Sentient Impact Group. This investment is for $5.2 million and will be funded from cash reserves.

Australian Ethical is making this move as part of its high growth strategy as it responds to the demand for ethical investing and the opportunity to build a bigger, more impactful business.

Sentient will continue to manage and control business operations and investment processes. Australian Ethical will get a non-executive seat on the Sentient board.

What does Sentient Impact do?

Its investments are across four key areas:

Clean energy – investments in producing, storing, using or converting renewable energy.

Land, water and air – investments in enhancing Australia’s unique natural resources.

Resource efficiency – investments in optimising, reusing, reducing, recycling of energy, water, and products.

Place and social impact – investments in improving health, reducing inequality and promoting empowerment.

What might this investment lead to?

Australian Ethical management said that the investment is an important step in extending its own capability in the impact investing arena while delivering on its purpose of investing for a better world.

Sentient’s CEO said that this can 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.

Management comments

Australian Ethical CEO John McMurdo said:

“This is a strategic opportunity that brings together two deeply aligned organisations who are committed to using money as a force for good.

“As was made clear at COP26, shifting capital flows is an essential part of the decarbonisation process and there’s no solution that doesn’t involve the financial sector deploying capital to support the transition.

“For our customers who have long prioritised measurable impact alongside financial returns, we believe that our relationship with Sentient will lead to more opportunities to make money matter in addressing the environmental and social challenges the world faces.”

Summary thoughts on this investment and the Australian Ethical share price

It seems like a smart move by the ethical fund manager. Expanding capabilities and options for investors could lead to more fund flows over the longer-term, as well as a positive for the country and planet.

The Australian Ethical share price seems conventionally expensive when compared to its trailing or near term earnings. It has strong tailwinds, with both ethical investing and the growth of the superannuation pool of money. I’d be willing to ‘buy the dips’ when they happen, but I’m waiting for a better price.

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Jaz Harrison

Jaz is a keen investor who loves to thoroughly poke holes in an investment idea before it has a chance of making it into her portfolio. Jaz invests for the long-term and doesn't sweat the small stuff. She strongly believes that empowering people with knowledge is the best way for them to take charge of their finances, which is exactly the approach she takes with her own money and investments.