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Challenging conversations needed for responsible investment

The royal commission into banking shows more challenging conversations are required around responsible investment, according to the CEO of the Committee for Economic Development of Australia.

CEDA’s CEO, and non-executive director of Woodside Petroleum & Australian Unity, Melinda Cilento, was highlighting responsible investment as a growth area of investment, despite it being “very, very, very complex to do this well.”

“What exactly does responsible mean in the context of investment?” she asked, before querying who this responsibility falls to.

Often, Ms Cilento said, “when we talk about responsible investment, what you get into a conversation with people about is what sort of filters are applied to investment decisions,” using alcohol and tobacco companies as “obvious” examples.

For the CEO, “the sunlight of the royal commission has revealed some practices that have quite simply been shocking.”

She questioned the crowd at the Governance Institute of Australia National Conference for 2018, that “when a bank is delivering net profit after tax growth of over 12 per cent, in an economy where nominal GDP growth is three per cent or less, in a mature market, with plenty of competitors, for which there is not an unlimited demand for services and products, who in the investment community, was or should have been raising questions about the sustainability of those results and whether they were responsible?”

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The point Ms Cilento made “is that these are complex issues that require sophisticated approaches, conversations, and analysis.”

Highlighting some of the conversations she has with investors going “to these issues,” she said a focus should be “squarely, and I think importantly, on long term value creation and the challenges to that.”

“Personally, I would like to have more of those challenging conversations,” Ms Cilento noted.

Lawyers Weekly previously covered the implied nature of social licences to operate, and how critical they are for business

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