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Note from the editor - 16 November

Glenn Freeman  |  16 Nov 2019Text size  Decrease  Increase  |  
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The catastrophic bushfires across large parts of Australia's eastern states this week saw climate change discussion reach a new climax. Various politicians tied themselves in knots trying—and failing—to score points without appearing to politicise the issue.

But as our leaders chase their tails, big business and their investors are joining the dots between rising temperatures and bushfire frequency and intensity.

Sustainable investment principles—including limiting exposure to thermal coal producers—aren't new, but the ways they're applied and evaluated are becoming increasingly sophisticated. And so is Morningstar's environmental, social and governance rating system of managed funds, as discussed in this week's Fund Spy.

But while many ESG-tilted funds in larger markets like the UK and US are beating their non-ESG counterparts, the same can't always be said of those in Australia—at least not yet.

Concerns over investment performance are often (and unsurprisingly) most pronounced among those nearing retirement or already retired—most of whom fall squarely within the Baby Boomer demographic.

Graham Hand this week waded into the emotive issue of financial equality between generations in his examination of the Gen X, Y and Z versus Boomer arguments, spanning topics including superannuation, education costs and housing prices.

Looking at current property prices in the context of low interest rates, Nicki Bourlioufas checks how a handful of ASX 200 stocks directly linked with the sector—including REA Group, Lendlease, Stockland and Mirvac—have performed in 2019.

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Lending for mortgages was a key consideration in this week's quarterly update from Commonwealth Bank. Morningstar equity analyst Nathan Zaia assessed the sustainability of the CBA's home loan growth in the first quarter of fiscal 2020 and its dividend yield—even as rivals Westpac and NAB have cut their dividend outlook on the back of historically low rates.

And Peter Warnes weighs the likelihood of another RBA rate cut in December, in what he suggests would be another ineffectual attempt at kickstarting consumption. On the back of tepid wages growth and an uptick in unemployment, he doesn't predict much cheer among retailers this Christmas.

Bells of a different kind were rung by our Morningstar Investment Management team this week, when they marked the launch of the Morningstar International Shares Active ETF on the ASX. I caught up with Matt Wacher, CIO of Morningstar Investment Management—Asia Pacific on Tuesday to discuss what Morningstar's first active ETF can offer investors.

For those of you needing a refresher on the difference between an active and passive ETF, Emma Rapaport's article is a must-read.

is senior editor for Morningstar Australia

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