Philanthropist Martyn Myer AO and his family have a saying: “ban the boring and back the bold”.
The maxim is behind the Myer Foundation immediate past president’s November departure with the Foundation’s Sidney Myer Fund 90 per cent invested in Environmental, Social and Governance (ESG)-aligned assets; targeting 100 per cent by the end of 2022.
Prompted by younger members of the retail-turned-philanthropist family to commit more to social impact investing, Myer (pictured) says the Fund began its ESG journey two years ago and committed to the 100 per cent focus last year.
“Our view is that if you invest in good funds and ESG aligned funds you’ll be doing good in any case and if the returns are strong then we can make lots of grants,’’ Myer says of the Foundation’s annual investment in the community.
“We aim for a total return of 4.5 to 5 plus inflation and we have earned double digits for over 25 years. If we can continue to deliver that, you can make terrific grants and we’re happy to invest in all sorts of high-risk things. In fact part of our philosophy is that the philanthropic dollar should be taking the highest risk in the market for initiatives and projects to help the community.
“If we’re not making investments on high-risk initiatives then we’re not doing our job.
“We have a little expression: ‘ban the boring and back the bold’ that’s what we want to do. If we’re earning good returns from ESG-aligned funds, then we can do more of that and time our portfolios working for us on the community-benefit front as well.”
But high-risk philanthropic investment is based on the Fund’s strong commitment to growth assets which has “stood them in good stead” since it was established in the 1950s by Martyn’s father Kenneth and uncle Baillieu. Martyn’s grandfather Sidney Myer founded the famous department store.
“It’s not a balanced portfolio in the conventional superannuation fund terms,’’ Myer says.
“It’s very heavy growth orientated with Aussie equities, a strong bias there because of the franking credits and the high yield. (We have) international equities because of the growth in infrastructure. We don’t hold bonds or fixed interest-type long-duration assets.
“We like the income, we aim to spend our income every year so we try and maximise that. Having said that, we do run the portfolio on a total-return basis and because we don’t pay tax, we are in the end agnostic as to whether our return comes from capital growth or income.” Myer says.
Listen to the full interview with Myer on Investment Magazine’s Market Narratives podcast series here.
Myer says the Fund favours investments with good cash yields and sees good opportunities with companies aligned to good environmental, social and governance strategies.
“I could foresee in a decade’s time when this is all run of the mill and there’s no capacity to generate alpha by investing in this way, but that’s probably a decade away,’’ he says.
“I think there’s a terrific investment period in front of us where good fund managers who do this well who invest in companies who do this well there’s a great opportunity to create serious alpha.
“I have to say there was a large push from younger members of the family to move along this ESG journey. I would say their interest was “ESG 1.0” – a simple exclusionary strategy – ‘let’s sell Woodside and BHP and that’s a negative screen.
Myer says his “good exposure” to exclusionary strategies as investment committee chairman at the University of Melbourne prompted him to consider how to better deliver ESG investments.
“I wanted to do it where it was a positive driver of performance rather than just a negative screen. I charactertise that as ‘ESG investing 2.0’,’’ Myer says.
“The whole point here is it makes good investment sense. You are investing in companies that have a tailwind behind them; the whole community, the economy, the governments around the world are pushing in this direction so your’ investing in companies that are investing with a tail wind instead of investing in companies that are battling into headwinds,’’ he says.
“So by definition, growth for these companies can be much higher than GDP growth rates, enormous growth rates some of them. It makes good investment sense.”
He says the Fund chose Mercer for its ability to survey 10,000-plus investment strategies across the world and knew who were the ESG -aligned managers and who was likely to perform well.
“So I just understood that Mercer could help us on that journey to speed up that process and make that transition and after one year, we are at 90 per cent aligned and the last 10 per cent will be a little difficult because we are in some long-dated, closed-end funds that are difficult to transition but they will over time,” Myer says
Alexis Cheang, Mercer Head of Responsible Investment, Asia Pacific, who joined Myer during the interview says sustainable investing works best within an active management style.
“Not all companies will want to be sustainable. You need insight into the trends that are driving the market. You can zero in through active management and capture that alpha,’’ she says.
