Nucleus Wealth Responsible Investing Disclaimer

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 sugar or are fast food restaurants. Note this does not exclude companies that may be otherwise involved, for example packaging or transporting
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
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
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
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
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
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