Perpetual takes aim at ESG latecomers, greenwashing

Perpetual CEO and managing director Rob Adams has hit out at latecomers jumping on the ESG bandwagon and using spin to join the megatrend.

Perpetual CEO Rob Adams says investors will see through smart marketing by ESG ‘Johnny-come-latelys’.

Perpetual CEO and managing director Rob Adams has taken aim at latecomers jumping on the ESG bandwagon, blasting companies engaging in greenwashing and spin just because “it’s the thing to do”.

Speaking after handing down Perpetual’s full-year results, which showed its Boston-based ESG play Trillium had seen record inflows in the year, Mr Adams declared ESG a permanent megatrend and said it would be a key driver of the wealth manager’s growth.

“The fact that there’s a bunch of Johnny-come-latelys as compared to firms like Trillium, which was among the founding firms in ESG investing, is a core differentiation point,” Mr Adams said.

“It’s got to the point where it’s just the thing to do … like greenwashing or a marketing thing rather than what you truly believe.

“Investors are smart – they’ll see through that. And when they see through the greenwashing or smart marketing messages, they get to the core of what people do, what drives them. And for 40 years, ESG has driven Trillium.”

Perpetual announced the acquisition of the ESG pioneer a little over 18 months ago, marking its first big move into the US and boosting its assets under management by billions of dollars in the process. The deal was completed in mid-2020.

“ESG is now clearly mainstream, and it’s undeniably the dominant global megatrend. We have purposefully built leverage to this growth driver across the Perpetual group,” Mr Adams told analysts.

“To have Trillium as a key part of Perpetual is significant, both for the growth that we have already begun to evidence, and that we can continue to generate for them, but also for the expertise that Trillium brings to help advance our own thinking on sustainability across Perpetual.”

Mr Adams lamented that Perpetual had not done more in the past to highlight its ethical foundations.

“We’ve been doing a lot of this stuff for years and we probably made a mistake in not leading more with these skills and strengths … things that were embedded in our process, we’re lifting to the fore.”

While Trillium saw record net inflows through the year, boosting the overall result, $2.8bn flowed out of Perpetual’s Australian arm, with billions more flowing out of another big bolt-on, value manager Barrow Hanley.

The outflows came even as value stocks staged a turnaround from November 2020, which Mr Adams put down to timing.

“There’s always a lag; it doesn’t happen immediately. The good news is we have seen really strong outperformance across our range of Aussie funds. Across every sector and every fund. That’s unusual,” he said.

“That leads to more positive discussions with clients, and over time it will lead to both inflows increasing and outflows decreasing.”

Looking ahead, Mr Adams tipped higher inflation for longer than many expected.

“I’m a firm believer that we’re more likely to go into a period of sustained inflation, but time will tell. Most central banks continue to say that inflation is going to be transitory, but thousands of companies that we talk to the world over are seeing pricing pressures across industries across sectors. It’s almost universal.”

Perpetual’s Trillium and Barrow Hanley acquisitions weighed on its 2021 full-year result, with its net profit dipping 9 per cent as it booked one-off costs associated with its international expansion.

But underlying profit jumped 26 per cent to $124.1m as its bolt-ons boosted its overall assets under management. Revenue rose 31 per cent to $640.6m due to the higher AUM and a lift in performance fees.

The underlying result beat expectations on higher-than-expected revenue and slightly lower costs, while the final dividend, at 96c per share, was also higher than the market had expected.

Its international operations delivered revenue of $139.2m and underlying profit of $40.7m, but its Australian division saw revenue drop 5 per cent to $165.7m and underlying profit sink 24 per cent amid legacy product repricing.

Mr Adams said the overall result was solid with a strong uplift in earnings.

“The year was truly transformational for Perpetual and saw our continued evolution from a largely Australian focused business with $28.4bn in AUM, to now managing close to $100bn in AUM, with a global footprint, a global client base and a strong forward-looking growth profile,” Mr Adams said.

“While the external environment continues to face some challenges as a result of an uneven global recovery from the pandemic, we enter fiscal 2022 with positive momentum across all our businesses and we are well placed to benefit from both of these thematics to support our growth.”

Assets under management for the international business totalled $73.6bn by the end of the year on the back of positive market movements, investment performance and positive net flows for Trillium.

Assets under management in the Australian business were 8 per cent higher by the end of the year compared with the end of fiscal 2020.

Credit Suisse analysts said it was “a decent earnings beat” for a stock trading on 15 times earnings. Perpetual shares fell 0.9 per cent to $39.12.