AUSIEX teams up with Morningstar Sustainalytics

Oksana Patron

21 March 2023

Australia’s wholesale trading platform, AUSIEX, has partnered with Morningstar Sustainalytics to offer environment, social, governance (ESG) risk ratings to its clients in response to ever-growing importance of risk management as a part of financial advice.

The ESG Risk Ratings was designed to help advisers and investors identify and understand financially material ESG risks and how they might affect the long-term performance, the firm said.

It measures each company’s exposure to industry-specific material ESG risks, and how well that company was managing those ESG risks. This is supplemented by further assessments including:

• Corporate and stakeholder governance,
• Industry level ESG issues, and
• Idiosyncratic corporate ESG issues,
• Assessing carbon risk ratings with emissions research, and
• Controversy assessment covering a large number of news and media sources every day.

These assessments generate a comparative risk score and insights into what the company management is (or is not) doing to manage ESG issues and these scores can then be compared against other companies.

“Investors need to be aware of highly leveraged companies, as money isn’t free anymore, let alone cheap. A larger slice of earnings will go to service debt,” Brett Grant, Head of Product and Trading at AUSIEX, said.

“Companies that can fund their own growth will have an advantage over their competitors. By contrast, companies with resilient earnings, normalised inventories and reasonable valuations should fare better. Producers of physical assets will likely receive more attention than those promising intangible upsides.”

Grant also said that a greater focus on ESG principles could form a defensive investment strategy, even help de-risk portfolios.

“Trading in the wholesale and sophisticated investor market is about much more than price of individual share trades, it is also about downside protection and these new tools can potentially provide advisers and investors with an added layer of protection should shocks materialise,” he added.

The AUSIEX ESG Risk ratings tool assesses indexes S&P/ASX200 companies and selected exchange traded funds (ETFs) providing dynamic scoring and ranking of ESG risk factors for companies through to whole portfolios.