Ethical Investor… ‘it was my Alan Bond moment’

Paddy Manning
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(Pictured: Paddy Manning)

by Greg Bright

Australian Ethical Investment has bought the pioneering publication Ethical Investor and will continue its fortnightly newsletter, no doubt as a loss leader. The publication has always been a labour of love. But its story is also reflective of the history of ESG investing in Australia.

Ethical Investor was the brainchild of Paddy Manning, now the business editor of and a well-regarded investigative journalist. He started the website in 1999 on his own and, to pay the rent, took a job with me at the former InvestorInfo, as a journalist on IFA Magazine.

At the time, in the excitement of the dotcom boom, InvestorInfo was preparing for an IPO and gave serious consideration to backing Paddy in his plans to expand the website into a magazine and event business focusing on the then-new notion of ethical investing. We decided not to and Paddy left us, much to my annoyance. He found another business partner with a liking for the ethical space, Michael Walsh, and launched the magazine in May 2001. But we stayed in touch.

Independent publishing is difficult, even in the good old days, and less than a year into the venture, with the magazine having booked some healthy advertising contracts for ethical funds which large fund managers such as AMP had launched, Paddy and Michael agreed to sell it to InvestorInfo for about $250,000 in cash and shares.

We hired Paddy back to run it but, more importantly from my perspective as publisher, to also work on our mainstream titles such as IFA. I remember thinking that even if ethical investing turned out to be a fad, which it did in a certain way, I’d be able to get my pound of flesh from Paddy in other areas. He was that good.

Michael Walsh, a former head of research at Asgard, had several other business interests including Givewell, a charities consultancy, and Corporate Monitor, which did research on ESG issues. Ethical Investor published the first-ever ESG rankings of ASX 200 stocks, supplied by Corporate Monitor. From an editorial perspective, it also attacked some serial ESG offenders in Australian corporate life, such as logging company Gunns. I like to think it made a difference.

Because of Paddy’s insistence, the magazine was distributed on the newsstand to a small-but-loyal readership – an expensive distribution channel. When advertising started to dwindle as fund managers realized investors would not buy “ethical funds” as standalone investments, InvestorInfo, which had become dysfunctional at the board level because of other disagreements, looked for an out. After probably losing another $200,000 or so on it, we sold the title back to Michael Walsh for $30,000 less than a year later. I was Michael’s ‘Alan Bond’.

Paddy left to pursue mainstream journalism as a freelancer and then at The Australian followed by the Sydney Morning Herald. But while at InvestorInfo he had hired Ethical Investor’s current editor, Ross Kendall. Kendall, another journalist committed to the ESG cause, will be retained by the new owners and continue to publish his 10-or-so stories a fortnight.

Michael Walsh, meanwhile, sold his various other business lines over the past few years, moved back into fund management at Hunter Hall in Sydney, where he was also a director, and then last year moved to Melbourne to take up the chief executive’s role at UCA Funds Management. UCA is controlled by the Uniting Church and has about $900 million under management, invested with a strong ESG flavor. Both he and Paddy are pleased with the home he found for Ethical Investor.

Walsh said last week: “I continued to nurse Ethical Investor along for those years. Readers liked the print format but advertising had moved on. I also stopped doing events [which publishers often use to prop up their media]… I initially repositioned the magazine as a trade publication [rather than newsstand] but it just became too expensive. I kept the newsletter going. We’ve published, I think, 435 issues and Ross (Kendall) has written in every one except when he was on holidays.”

Ethical Investor was, and is, a journal of record for the ESG movement. Walsh says it also gave a voice to the “more unheard” elements of the movement, such as small NGOs and charities, who want a say in the governance of companies and institutions.

Manning said last week: “The movement has changed. It’s becoming more and more mainstream. The divestment movement [such as super funds selling out of polluting companies] is growing.”

His recollection was that the 9/11 terrorist attack was the key turning point, for the worse, for Ethical Investor, when advertisers decided not to renew their contracts. Walsh believes it was more likely the pricking of the tech bubble and the Asian Crisis which were the main influences on the magazine’s demise.

For what it’s worth, I believe it was the more fundamental reason that people will not buy standalone “ethical” investments in sufficient numbers to justify specialist media activity. They incorrectly believe it will cost them.

But the good news is that, as Paddy says, ethical investing has become mainstream. All big super funds now look to integrate ESG principles in everything they do, especially their investments. Australian funds and managers represent the biggest single contributor to UNPRI membership.

Funds must look at ESG principles because there is now sufficient evidence to show that this will improve the risk/return profile of a portfolio.

However, people like Paddy Manning and Michael Walsh did it because they thought it was a ‘good’ thing to do. Notwithstanding my Alan Bond moment, they certainly didn’t do it to improve their own portfolios’ risk/return profiles.

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