Hi Carl,
That’s a very fair question, and it’s not the first time this week that a member has raised ethical or ESG considerations with us. For example, we know some members are uncomfortable with our exposure to coal, even though roughly 60% of NSW’s electricity still comes from fossil fuels.
Our general position has been consistent over the years: Market Matters does not run with a specific ethical investing mandate, and we try not to impose our own ethical framework on members. These issues are often deeply personal, and different investors will draw the line in different places. Our preference is to provide clear analysis, outline the risks and opportunities, and let members decide whether a company or sector fits within their own values.
However, you are right to point out that our comments on Credit Corp (CCP) last week moved beyond pure investment analysis and reflected our own view on the nature of that business. Given that, it is appropriate that we explain how we think about the distinction between debt collection and gambling-related companies such as Light & Wonder or Aristocrat.
We absolutely acknowledge that gambling can have serious negative consequences, particularly for vulnerable people, and that gaming machine manufacturers are highly sophisticated in designing products that encourage engagement and repeat use. We are not dismissive of that risk, and it is something investors should consider when assessing these companies.
The distinction for us, rightly or wrongly, comes down to the level of consumer agency and the circumstances in which harm can occur. With gambling, while there are clearly social harms and vulnerable users, the act of putting money into a machine is still a relatively visible and immediate consumer decision. With debt collection, the path that leads someone onto a debt ledger can be far more complex. Consumers can enter into credit arrangements with good intentions, often through dense and difficult-to-understand documentation, and later find themselves under pressure from a business they may have never dealt with directly.
That distinction is important to us. We are strong believers in individuals being able to make their own decisions where clear and fair information is available. It’s actually a very important part of why we started Market Matters over 10 years ago – to try and provide clear information around what can be a complex subject – investing. We are less comfortable in areas where the playing field appears less balanced, particularly where consumers may not fully understand the risks they are taking on at the outset.
That said, we also accept that this is not a clean or perfect distinction. Some members will quite reasonably argue that gambling-related businesses should be treated just as cautiously as debt collection businesses, and we respect that view. Others may be comfortable investing in both, provided the investment case stacks up. That is why we do not have a formal list of “red-line” sectors or companies that we will never invest in.
In practice, we assess each company on its own merits, including its financials, valuation, industry structure, governance, regulatory risk, and social licence to operate. Ethical considerations may influence our comfort level around a stock, but we do not apply a blanket exclusionary screen across Market Matters portfolios.
In hindsight, our comment on Credit Corp did step into our own ethical judgement more than we usually would. Given that we did, your question is entirely reasonable, and the best answer is that we try to avoid imposing our values on members, but we will still be upfront when a company’s business model makes us uncomfortable from both a social and investment-risk perspective.
