Australian Ethical has pulled the plug on a $5 million shareholding in Marsh & McLennan, pointing to the provision of insurance services to a mining conglomerate as grounds for the divestment.
The investment in Marsh & McLennan was held in the firm's Australian Ethical International Shares Fund and also its super fund.
In addition to Mercer, Marsh & McLennan is the parent company for insurance broking firm Marsh, reinsurance company Guy Carpenter, and strategy consultant Oliver Wyman.
Despite the divestment, Australian Ethical said it continues to have a relationship with Mercer, which provides administration services for the investment manager's super offering.
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"We have an ongoing contract with Mercer and we will continue to use this relationship to encourage stronger climate action and transparency across the Marsh & McLennan group," Australian Ethical head of ethics research Stuart Palmer said.
"We will be seeking proposals from alternative insurance brokers."
Palmer noted the divestment comes due to Marsh & McLennan's ties to Indian mining conglomerate Adani, currently in the process of developing a thermal coalmine in Queensland's Galilee Basin.
"We don't take divestment lightly. Our decision to sell our holding in Marsh & McLennan for ethical reasons came after months of engagement with the company about its policy on climate change," he said.
"When a company is judged to have acted unethically, we think investors in the company should look for opportunities to influence an appropriate response by the company to remedy errors and ensure they are not repeated.
"But if that can't be achieved, divestment is a powerful signal to the company and others like it."
Marsh & McLennan also failed to commit publicly to not providing services to projects like the Adani Carmichael coal mine in the future, Palmer said.
"We acknowledge Marsh & McLennan has made a public statement saying it may refuse work which is not aligned with its commitment to the UN Sustainable Development Goals, including climate change mitigation," he said.
"However, the statement was vague and lacked meaningful information about how the company would assess alignment with the Paris Agreement."
Greenwashed, general statements of principal are no longer sufficient, he said, encouraging companies to state clearly what they are doing to align their business on the path to achieve net zero emissions by 2050.
"We need tangible commitments and transparency about how the commitments will be implemented and who will be accountable for that implementation," Palmer said.
"Divestment is just one way we drive progress as an investor and shareholder."