Forum Topics Is a demerged Woolworths business actually ethical?

Environmental, social, and governance criteria are operational requirements used by socially concerned investors to analyze possible investments. Environmental criteria look at how a corporation behaves as a steward of the environment. Social criteria look at how it deals with employees, suppliers, customers, and the communities in which business operates. Those guys who are using the ESG strategy of investing have good software for cash flow forecast . That's why their investing strategies are bringing money.

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elpaso96
2 days ago

It's much more complex than that.... 

Sometimes Woolworths is in one ESG fund manager portfolio and sometimes it isn't for another ESG fund manager (most likely due to S - Social as Woolworths have history of underpaying staff). Please read the investment mandate and it does not matter if you are mom or dad investor. Really important document to understand, as it shows how they define the criteria and how they invest.  

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Briggsy09
2 weeks ago

I get annoyed at these fund managers. They are meant to be investing cash on behalf on the people. I find it ironic that these funds speak on my behalf about what is ethical and what isnt. Everyones super outcomes etc are tied up with them and all i want to know is that your doing the best you can for my retirement etc. Now dont get me wrong there are limits and boundaries to what 'Im' willing to accept from an unethical aspect but i find it intersting that mining companies are being targeted by fund managers to make changes for ESG prposes or face shareholders money being pulled. When the times are good, like now, their not afraid to put their hands out for the dividends eg FMG RIO BHP WOW etc. Pick a side mate.

I did hear through a podcast that when a demerger happens the spin off company does 20 -30% (i think this was the stat) better than the parent company. So on that note id say buying woolies shares before the split maybe a good thing.

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elpaso96
2 days ago

I would assume Woolies appreciate in value when they spin off Endeavour. Usually the underlying entity become more profitable than the spin off entity.  

Yea with fundies it is entirely dependant on the investment mandate and unfortunately there is no standard ESG component that applies to all ESG investment. Depending on who write the mandate, they can exclude investments from Oil and Gas etc.. However, if the Oil & Gas company transform into Solar energy company the investment mandate could restrict the fund manager from rebuying shares.

Hence, it is extremely important to read the investment mandate before you invest in a fund manager. Each mandate have a different definition of what they mean by ESG. It's not as simple as it looks unfortunately. Someone should set up a global council and put it into law so that every mandate with the ESG component is the same with clear definitions of exceptions. Wishful thinking on my part.  

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Hi all,

I've heard and read a lot of commentary that the demerged Woolworths business will attract new capital flows from investors with ESG screens.

I have no doubt this will be the case however I was wondering if the demerged Woolworths meets your standards for ESG investing?

Personally I'm on the fence given that:

1) Woolworths will still hold a 15% stake in Endeavour Group (although I anticipate they will sell down)

2) My understanding is that a deep ongoing partnership between Woolworths and the drinks business will be in place. I'm not sure if the gaming venues will be part of this as well. Can anyone shed some light?

What does everyone think?

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colinp
2 weeks ago

I think there's two separate things you're asking here that will get conflated; first is whether the Endeavour spinoff will draw institution money and second is about our personal ESG views.

On the first question I think it is a guaranteed yes that WOW spinning off Endeavour will attract insto money. Fund manager pressure to spin off the liquor and gaming to satisfy ESG filters seems to have been the primary driver for the spinoff in the first place, so I don't believe WOW would do it in a way that wasn't going to satisfy the instos that have been bugging them about it. While you're correct WOW won't suddenly become 100% 'pure', they will be structuring the change in a way that ensures they are pure enough to pass at least the ESG filters of big players like Blackrock, Vanguard etc. even if it doesn't pass some stricter ESG funds.

 What we all personally think about it is a separate question to how instos will respond.Personally I don't understand why anyone who isn't a teetotaler would run an ESG filter on alcohol, it seems weird to apply a filter to investments that people don't apply to the actions of their life (all power to you Peregrine if you are a teetotaler, but most people aren't so my point is just that I'm surprised how prominent alcohol is in ESG filters). If public health is the logic, then I don't see why alcohol gets excluded but selling sugary and fatty junk food are ok. Sure it's easier to point the figure at acute rather than chronic causes, but the fact it's easier doesn't mean it isn't terrible logic.

Ditto for gambling; most people have the occasional flutter in some form so to me it's a double standard if people refuse to invest in a behaviour that they themselves engage in. In gambling I see more space for individual variation though - I personally distinguish between pokies and other forms of gaming as I just personally loathe pokie machines; so my personal filter excludes any company involved in pokies but would not exclude other gambling companies (e.g. I would be comfortable owning online betting site Pointsbet).

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Hi Colinp,

I think I agree with pretty much everything you said.

I see where you're coming from regarding running an ESG filter on alcohol and tend to agree as well (I do drink)

I also remembered that Woolworths sells tobacco - I guess someone has to do it.....

 

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embe
2 weeks ago

Ethics are personal - every investor should just apply their own filters - and also murky territory for forums! I do agree on the point below on alcohol vs. high suger/ fatty foods etc. I also can't deny the pokies or my distaste for gambling and it's dangers. 

But I know the WOW business quite well and from an investment standpoint, the demerger turns one very well run business into two, with obvious advantages for both. Added to that Endeavour has been setting up to demerge for a few years now but Covid shelved it temporarily. What has emerged is a business that has accelerated 3 years of digital transformation into under 12 months (as did WOW). Both are in great shape. 

I don't hold but really want to, while wrestling with the ethical conundrum. (For disclosure I have held DGE - Diageo - in the UK for a couple of years now and it is a great performer). 

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Pudawocky
2 weeks ago

My two cents for what it's worth and I don't hold WOW. WOW should be making business decisions that are based on what is good for the business.  I do buy my groceries from them but prefer to support the corner bottleshop, butcher and bakery.  Ethics are murky.  Almost everyone on the planet says one thing and does another.   I do invest according to my own ethics and there are many companies I would not touch. Are they held by my Super? Probably.  I personally try to avoid anything that I am aware of that uses slave or indentured workers or destroys the rainforests but that doesn't stop me buying chocolate, shampoo and corn chips.  My clothes are made offshore.  I also drive a diesel 4WD and go camping off-road to escape. I won't invest in casinos but will go to an RSL for a meal from time to time.  I used to smoke but would never invest in tobacco.  I rarely drink anymore but am not teetotal central. Nothing is straightforward and WOW should do what is right for the business, do that and the investors will come.  

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