Australian Ethical Posts 29% Profit Rise and $14.5bn FUM

Record Earnings and FUM Growth Amid Market Challenges

Australian Ethical Investment Ltd (ASX:AEF) has delivered a standout FY26 performance, with net profit after tax attributable to shareholders soaring 29% to $25.7 million and funds under management (FUM) reaching a new high of $14.5 billion. This growth comes despite a volatile market backdrop marked by geopolitical tensions and inflationary pressures.

The company’s underlying profit after tax rose 15% to $27.3 million, supported by an 11% increase in average FUM and positive organic net flows of $664 million; 13% higher than the previous year. Superannuation remains the core growth engine, accounting for 72% of total FUM and generating recurring contributions, including record super guarantee and voluntary contributions.

Operating revenue climbed 9% to $129.5 million, partially offset by a marginal dip in average revenue margin to 0.91%, mainly due to the full-year impact of the lower-margin fixed income assets acquired through the Altius acquisition. The company also introduced an insurance administration fee, balancing fee reductions elsewhere.

Strategic Execution Fuels Operating Leverage and Platform Strength

Australian Ethical’s disciplined execution of its multi-year growth strategy is evident in the improved underlying cost to income ratio (CTI), which tightened from 71.4% in FY25 to 69.8% in FY26. Operating expenses rose 7% to $90.4 million, driven by investments in people, technology, governance, and product capability, while fund-related expenses decreased by 1% thanks to efficiencies from platform transformations.

Key strategic milestones included the completion of the superannuation administration transition to GROW Inc, delivering cost efficiencies and a scalable digital platform that enhanced customer engagement and acquisition; new member joins jumped 20% in the second half of FY26. The insurance harmonisation project simplified member offerings, and the company launched a new retirement calculator, with a member app development underway for FY27.

On the investment front, Australian Ethical fully integrated Altius Fixed Income products under its brand and launched the Private Markets Growth Opportunities Fund, backed by a $125 million cornerstone investment from the Clean Energy Finance Corporation (CEFC). The fund focuses on climate and sustainability investments across themes such as decarbonisation and circular economy, marking a significant expansion beyond traditional superannuation offerings.

Ethical Leadership and Governance Amid Board Renewal

Australian Ethical continues to leverage its ethical investment leadership, with an expanded ethics team piloting AI augmentation to assess over 200 new investment opportunities, adding nearly 200 to its investible universe. The stewardship team actively engaged with major companies and government policy, including co-filing climate resolutions at NAB, QBE, and Macquarie AGMs, and advocating for ambitious national climate targets.

The business also maintained a top quartile employee engagement score of 77%, reflecting a purpose-driven culture that supports innovation and resilience. The Board underwent renewal with several director changes, including appointments bringing expertise in governance, risk, and digital transformation, reinforcing the company’s commitment to strong oversight, especially in light of APRA licence conditions.

Financial Strength Supports Growing Dividends and Philanthropy

Australian Ethical’s balance sheet remains robust, with no debt and a surplus of $22.7 million above regulatory capital requirements. The company declared a fully franked final dividend of 10 cents per share, bringing total FY26 dividends to 18 cents, up 29%, reflecting confidence in sustainable earnings growth.

The company’s commitment to social impact continues through the Australian Ethical Foundation, which received a record $3.4 million donation in FY26 to support climate justice, nature restoration, and First Nations empowerment initiatives. Cumulatively, the Foundation has allocated over $16 million since 2010.

Looking Ahead to FY27

Australian Ethical enters FY27 with momentum, expecting continued positive net flows supported by its superannuation business and growth in middle-market channels. The company plans to maintain revenue margins broadly in line with FY26, while targeting expense growth below revenue growth amid ongoing investment in digital transformation, member experience enhancements, and governance improvements.

With a diversified business platform, trusted ethical brand, and scalable operating model, Australian Ethical is poised to navigate market uncertainties and capitalize on structural growth drivers, including compulsory super contributions and rising demand for responsible investment solutions.

Investors will be watching how the company balances disciplined cost management with strategic investments to sustain operating leverage improvements and deliver long-term shareholder value.