Ethical AND Financial: That’s huge!

This week saw something momentous happen, at least in the eyes of Words/Matter. Admittedly it was more about something that was done, rather than something that was said, but nevertheless was very important for the way it was explained.

The dumping of Transfield stock by industry super fund HESTA was a momentous act for 2 key reasons.

Firstly, the fund divested its 3.5% stake worth approx $23m because of what HESTA CEO Debby Blakey described as: “a substantial body of evidence pointing to the negative impacts of prolonged mandatory detention of asylum seekers [and the] breach of human rights laws.”

With this move, we have seen a corporate organisation react strongly to the negative value of an asset, based on ESG (Environmental, Social and Governance) factors, rather than the” usual” profit and loss factors.

But secondly, and most importantly from a Words/Matter perspective, this move was explained by Ms Blakey as a decision ‘ultimately based on financial rather than ethical considerations’ (as reported by the SMH).

This moment must be savoured: Not only is this matter very much based on clear and strident ethical issues, those ethical issues are being seen as intrinsic to financial value. And that moment is simply momentous.

ESG factors have long been part of the make-up of corporate frameworks and business structures. But they are typically a ‘nice-to-have’ that tend to take a back seat to profit considerations. And certainly there is usually more internal emphasis on the G (governance) than any strong external focus on the E (environmental) and the S (social).

But that is clearly changing. As the Transfield story has revealed, HESTA is not the only investor staying clear of the stock, with others including First State Super. These 2 funds in particular highlight why this is just as much ethical as financial.

Both HESTA and First State have memberships that comprise a large majority of people working in healthcare and community services, and many have apparently been actively calling for their funds to blacklist Transfield. As has also been reported: “Many doctors, nurses, and other workers in the sector have protested the Border Force Act, which came in to effect on 1 July. The Act makes it illegal for healthcare professionals to report child sexual abuse in offshore detention centres.”

Organisations are increasingly judged by their social good as much as any other commercial good they may have. And the fact that this is seen as part and parcel of financial value is critical, for there really will be no escaping the importance of ESG factors once they are essential to the bottom line.

The HESTA story confirms this shifting trend, and organisations which are already in-step are enjoying not only competitive advantages in customer relationships, but are also leading the HR battle to attract the best talent. As Words/Matter has to concede, sometimes actions do speak louder than words.