Sustainability-Related Statements
Table 1 – General Terms
| Term | Definition |
|---|---|
| Ethical Screens | Categories of a variety of ethical filters which investors may apply to exclude companies operating in or profit from those areas or industries which do not align with the investor’s own ethical framework. |
| Ethical Tilts | Rules which the investor can apply to their investment strategy to focus more of their investment on companies which align with their own ethical framework. |
Methodology for Integrating Sustainability-Related Considerations
Nucleus Wealth differentiates itself by offering investors a system of investment that is personalisable, transparent, and safe.
Rather than dictating the ethical framework under which investors are required to operate, Nucleus Wealth’s approach accepts that individual investors may reject or accept various ESG-related sectors and activities for varying reasons that are much more nuanced than they are black-and-white.
Nucleus Wealth provides investors with a range of ‘screens’ and ‘tilts’ which can be applied to an investor’s portfolio either to exclude companies operating or benefitting from industries or practices or focus greater parts of their investments towards strategies and sectors. By applying screens and tilts, investors can tailor their investment approach in a manner that best aligns with their ethical preferences.
Once the portfolio has been customised to suit the investor’s needs, Nucleus Wealth provides the investor with a company profile, access to detailed performance dashboards and monthly performance reports to ensure the investor is well-informed as to the relevance of the company’s inclusion in their portfolio.
Nucleus Wealth considers itself to be ethical including instilled integrity, honesty, and reliability within its operations. From an investment standpoint, investors may choose from over 30 different ethical overlays over their portfolio so that Nucleus Wealth do not purchase stocks that conflict with an investor’s beliefs.
Table 2 - Nucleus Wealth's screens list
| Activity | Revenue Materiality |
|---|---|
| Climate Change | |
| No Fossil Fuels (Worst Offenders) | Removes the worst polluters, in particular, companies that use lignite coal or create oil from tar sands |
| No Fossil Fuels (Any) | Removes companies where more than 10% of the company is involved in coal, oil or gas |
| No Coal Seam Gas or Fracking | Removes companies who are involved in coal seam gas extraction and fracking |
| No Nuclear Power | Removes companies with nuclear power stations or producers of uranium |
| No Old Growth Forest Logging | Remove companies that are involved with logging old growth forests |
| War | |
| No Arms (Worst Offenders) | Removes companies that are known to produce cluster munitions and landmines |
| No Arms (Any) | Removes companies that are known to directly produce weapons or ammunition |
| No Nuclear Weapons | Removes companies that are known to produce nuclear weapons |
| Human Rights | |
| No Undemocratic Countries | Removes companies from countries that score below 7 on the Democracy Index (from the Economist Intelligence Unit). Note this category removes some countries that are rated as Flawed Democracies like Singapore, Hong Kong or Brazil. Also removes companies where more than 20% of the company is owned by a government organisation from a country that rates below 7. |
| No Morally Repressed Countries (Worst Offenders) | Removes companies from countries that rate Insufficient Moral Freedom or below as assessed by the World Index of Moral Freedom. Note this category removes countries like Singapore, South Korea or China. Also removes companies where more than 20% of the company is owned by a government organisation from a country that has low or very low moral freedom. Religious freedom, bioethical freedom, drugs freedom, sexual freedom, and family and gender freedom are assessed. |
| No Morally Repressed Countries (Any) | Removes companies from countries that score below High Moral Freedom on the World Index of Moral Freedom. Note this category removes countries like Japan, Singapore, South Korea or China. Also removes companies where more than 20% of the company is owned by a government organisation from a country that rates poorly |
| No Immigration Detention | Removes companies involved in immigration detention centres |
| No Jails | Removes companies involved in running jails |
| Lack of Gender Diversity (Worst Offenders) | Removes companies that have less than 10% of their board or board + top 5 executives being female. Note: This will remove many Japanese stocks from your portfolio |
| Lack of Gender Diversity | Removes companies that have less than 20% of their board or board + top 5 executives being female. Note: This will remove many Japanese stocks from your portfolio |
| Health | |
| No Fast Food | Removes companies that produce products with significant amounts of sugar (for example Coca Cola) or operate fast food restaurants. |
| No Genetically Modified Foods | Remove companies that grow food using genetically modified organisms |
| Vices | |
| No Gambling | Removes companies that have more than 5% of sales from gambling |
| No Alcohol | Removes producers of alcohol |
| No Pornography | Removes companies where pornography comprises more than 5% of revenue |
| No Tobacco | Removes companies that manufacture tobacco products |
| No Cannabis | Removes companies that produce cannabis products |
| Animal Rights | |
| No Fur or Specialty Leather | Removes companies that are known to produce fur or specialty leather |
| No Animal Testing (Any) | Removes companies that test products on animals according to Peta. Note: This will remove many healthcare companies who are mandated by law to test on animals. Healthcare makes up a relatively large proportion of our portfolios. |
| No Animal Testing (Worst Offenders) | Removes companies that test products on animals for non medical purposes |
| Religion | |
| No Contraception | Removes companies that manufacture contraceptive products |
| Only Sharia / Islamic | Confines your investment to companies within the MSCI AC World Islamic index |
| No Human Stem Cell Use | Removes companies that are known to use human stem cells or fetal tissue research |
| Social | |
| No Australian tax dodgers | Removes companies that are in the Michael West top 40 tax dodgers. This is a list of companies who are most aggressive both in paying little or no tax on their profits (or more precisely: taxable income) but also in deliberately wiping out their profits in Australia (offshoring it to low tax jurisdictions). |
| No Economically Repressed Countries (Worst Offenders) | Removes companies from countries that rate either Repressed or Mostly Unfree as assessed by the Index of Economic Freedom (Wall Street Journal and the Heritage Foundation). Also removes companies where more than 20% of the company is owned by a government organisation from a country that is Repressed or Mostly Unfree. |
| No Economically Repressed Countries (Any) | Removes companies from countries that are not either Free or Mostly Free as assessed by the Index of Economic Freedom (Wall Street Journal and the Heritage Foundation). Note that this category removes many European countries like Spain or France - the Worst Offenders version does not. Also removes companies where more than 20% of the company is owned by a government organisation from a country that is Not Free or Mostly Free. |
| Asset Class | |
| No Australian Shares | Removes all Australian listed shares from the portfolio |
| No International Stocks | Removes companies from countries that are not listed on the Australian Stock Exchange |
| No Government Bonds | Removes all government bonds from the portfolio |
| No Foreign Cash | Removes all foreign exchange cash positions from the portfolio |
| Thematic | |
| No Australian Banks | Removes Australian banks from the portfolio |
| Limit Australian Housing Exposure | Remove any property developers, REITs, Australian banks, housing related consumer discretionary |
| No GICS sector Communication Services | Removes companies from the GICS sector: Communication Services |
| No GICS sector Consumer Discretionary | Removes companies from the GICS sector: Consumer Discretionary |
| No GICS sector Consumer Staples | Removes companies from the GICS sector: Consumer Staples |
| No GICS sector Energy | Removes companies from the GICS sector: Energy |
| No GICS sector Financials | Removes companies from the GICS sector: Financials |
| No GICS sector Health Care | Removes companies from the GICS sector: Health Care |
| No GICS sector Industrials | Removes companies from the GICS sector: Industrials |
| No GICS sector Information Technology | Removes companies from the GICS sector: Information Technology |
| No GICS sector Materials | Removes companies from the GICS sector: Materials |
| No GICS sector Real Estate | Removes companies from the GICS sector: Real Estate |
| No GICS sector Utilities | Removes companies from the GICS sector: Utilities |
| No GICS Industry Group Transportation | Removes companies from the GICS Industry Group: Transportation |
Table 2 - Nucleus Wealth's tilts list
| Activity | Revenue Materiality |
|---|---|
| Investment Style Factors | |
| Quality Stocks | This is a rules based approach to choosing stocks that rate well on quality metrics. We rate quality stocks on a variety of measures that include lower levels of debt, higher margins, lower volatility of earnings and a higher return on invested capital. We target 12 of the largest stocks globally, provided that they are listed in a developed market |
| Value Stocks | This is a rules based approach to choosing stocks that rate more cheaply on valuation measures. We rate value stocks on a variety of valuation measures including value vs the broader market, value vs peer and value vs historical ranges. Cashflow valuations have the largest influence, then income valuations and finally balance sheet. We target 12 of the largest stocks globally, provided that they are listed in a developed market |
| Growth Stocks | This is a rules based approach to choosing growth stocks. We rate value stocks on a variety of growth measures across both cashflow and income. We also look at both historical and forecast growth. We target 12 of the largest stocks globally, provided that they are listed in a developed market |
| Defensives | This is a rules based approach to choosing stocks that primarily defensive in terms of share price and earnings. They typically include telecommunications, real estate and utilities. We target 12 of the largest stocks globally, provided that they are listed in a developed market |
| Climate Change | |
| Battery Supply Chain | This is a rules based approach to choosing stocks that are involved in battery materials. We target 6 of the largest global stocks involved in either manufacturing batteries or that produce commodities primarily used in batteries. We typically choose companies listed in developed markets |
| Clean Energy | This is a rules based approach to choosing clean energy stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Nuclear Power | This is a rules based approach to choosing nuclear power stocks. This includes both energy utilities and uranium producers. We target 6 of the largest stocks globally, provided that they are listed in a developed market |
| Technology | |
| Large Technology Stocks | This is a rules based approach to choosing technology stocks. We target 6 of the largest stocks globally, provided that they are listed in a developed market |
| Cloud Computing Stocks | This is a rules based approach to choosing stocks that are involved in cloud computing. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Artificial Intelligence | This is a rules based approach to choosing artificial intelligence stocks. It includes companies who produce these products or provide ancillary services that will benefit from the growth of this sector. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Cybersecurity | This is a rules based approach to choosing cybersecurity stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Robotics | This is a rules based approach to choosing robotics stocks. It includes companies who produce these products or provide ancillary services that will benefit from the growth of this sector. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Consumption | |
| Video Gaming | This is a rules based approach to choosing video gaming stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Luxury Goods | This is a rules based approach to choosing luxury goods stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Travel | This is a rules based approach to choosing travel stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed marke |
| Logistics | This is a rules based approach to choosing logistics stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Commodities | |
| Oil & Gas Stocks | This is a rules based approach to choosing oil & gas stocks. We target 6 of the largest stocks globally, provided that they are listed in a developed market |
| Gold Stocks | This is a rules based approach to choosing gold stocks. We target 6 of the largest stocks globally, provided that they are listed in a developed market |
| Gold (physical, unhedged) | This is an exposure to a gold ETF investing in physical gold. |
| Gold (physical, hedged to AUD) | This is an exposure to a gold ETF investing in physical gold hedged in Australian dollars. |
| Agribusiness | This is a rules based approach to choosing agribusiness stocks. Companies will be a mix of farm equipment, fertilizer and seed producers. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Health | |
| Weight Loss Drug Producers | This is a rules based approach to choosing stocks that have active weight loss or obesity drugs. We currently target Eli Lilly and Novo Nordisk. We may add more stocks if they have drugs approved. |
| Military | |
| Defense Contractors | This is a rules based approach to choosing defense contractor stocks. These are companies that are involved in the manufacture of weaponry. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| GICS Sectors | |
| Global Consumer Discretionary | This is a rules based approach to choosing consumer discretionary stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Consumer Staples | This is a rules based approach to choosing consumer staples stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Communication Services | This is a rules based approach to choosing communication services stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Energy | This is a rules based approach to choosing energy stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Materials | This is a rules based approach to choosing materials stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Industrials | This is a rules based approach to choosing industrial stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Financials | This is a rules based approach to choosing financial stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Health Care | This is a rules based approach to choosing healthcare stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Information Technology | This is a rules based approach to choosing information technology stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Real Estate | This is a rules based approach to choosing real estate stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
| Global Utilities | This is a rules based approach to choosing utility stocks. We target 8 of the largest stocks globally, provided that they are listed in a developed market |
