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Going against the grain
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I'm reading
Going against the grain
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Pass it on
I'm reading
Going against the grain
Pass it on
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Articles
8 July 2019

Going against the grain

Australian Ethical’s Phil Vernon on how we can challenge the status quo

Written by Phil Vernon

This article is sponsored by our friends at Australian Ethical Investment.

What does this mean?

This article is sponsored by our friends at Australian Ethical Investment.

What does this mean?

It was Gunns that did it for me. That was the piece of corporate skulduggery that made me realise, once and for all, that investors cannot avoid responsibility for the behaviour of companies they own.

But first, some history. Gunns was a Tasmanian logging company that went bankrupt in 2012. In 2004 the company sued 17 individuals and three organisations in the Victorian Supreme Court. Gunns, which at the time was Australia’s largest export woodchipper, was seeking $6.3 million for “ongoing damaging campaigns and activities” by environmental activists against its operations. The people who sued became known as The Gunns 20. Counted among their number was former Greens Senator Bob Brown and, on a personal note, a member of my family. The defendants were worried about losing their homes and their livelihoods.

Bob Brown immediately described the legal action as a “broad scale attack on our Australian right to protest for the nation’s heritage.” Author Richard Flanagan later wrote that the Gunns action would, if successful, “have redefined the practice of democracy as the crime of conspiracy.” This type of litigation is known as a SLAPP (Strategic Lawsuit Against Public Participation) and was most notably used by McDonald’s against environmental activists Helen Steel and David Morris in the UK McLibel case. In the Gunns case, both the Australian public and the legal sector rallied to the side of the defendants. The ensuing legal battle lasted for five years and ended in victory for The Gunns 20 after a series of claims were either thrown out, settled or dropped by the logging company.

Throughout all of this I was working in mainstream financial services at Perpetual, which happened to be the largest shareholder in Gunns. There were calls for Perpetual to divest but my initial position was that we should retain our stake. My thinking at the time was that Perpetual had an ethical fund as well as a mainstream fund focused on delivering financial returns, so customers could choose the one that worked for them. But after witnessing the way Gunns was treating the activists, including my family member, it became less about environmental issues for me and more about social justice. I couldn’t see why Perpetual, as an investment house, wouldn’t care about the damage being done to individuals—and I began to advocate for more responsible investment practices within the business.

This story originally ran in issue #59 of Dumbo Feather

This story originally ran in issue #59 of Dumbo Feather

This was right in the middle of the global financial crisis, and I felt that investment markets were operating completely unsustainably. They were focused on the short term and driven by individual self-interest with no view of the collective impact that decisions were having on the broader system. Many people were concerned but were powerless to prevent it. I developed a belief that given its increasing influence on the future of our planet and society, global capital had a broader stewardship responsibility and needed a “moral compass” to instil this collective responsibility into individual decision-making. There had to be a better way.

Ethical investment was still on the fringes of financial services at the time but I quickly realised that was where I wanted to devote my time and energy. So when the opportunity to become the CEO of Australian Ethical popped up in late 2009 I leapt at it. The company was still finding its feet at the time. It was founded in 1986 at a horticultural conference as an investment club and has been though several iterations since then. Today I’m proud to say Australian Ethical is a thoroughly professional organisation and a shining example that yes, you can have your cake and eat it—ethical investing does not mean sacrificing performance.

We have five core beliefs that shape out business, but there is one I always come back to: individuals can make a difference through their investing and purchasing decisions. Our managed fund clients and superannuation members are putting their money where their mouths are by aligning their ethics with their investments. It’s just one way people can make a change to the world we live in, but it’s a really important one.

Another core belief is that a focus solely on profits places our planet at great risk. The argument that corporations are only about maximising shareholder profit is not only immoral, it’s legally wrong. I believe companies should consider the interests of all stakeholders, whether they’re customers, shareholders or people affected by business operations. That includes the people whose health is damaged by logging, the animals that are displaced or killed, and the activists targeted in the process. To this day activists are still fighting to preserve native Tasmanian forests from logging. The victory of The Gunns 20 was an important part of that fight but the battle is far from over. For me personally, Gunns was a formative example of people challenging the status quo and winning. I learned a lot from the experience and it has shaped the way I think about investment and social justice ever since.

Phil Vernon

Phil Vernon is the managing director and CEO of Australian Ethical Investment.

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