Australian Ethical turns ethical investing scale into 29% profit growth

Profit growth and higher dividends

Australian Ethical Investment Limited (ASX:AEF) has paired a difficult year for parts of its ethical investment universe with a stronger bottom line. Revenue rose 9% to $129.5 million, underlying profit after tax increased 15% to $27.3 million, and net profit attributable to shareholders climbed 29% to $25.7 million.

The board declared a fully franked final dividend of 10 cents per share, taking FY26 dividends to 18 cents, up from 14 cents a year earlier. The final payment is scheduled to be made in September 2026. Underlying cost to income improved to 69.8%, from 71.4%, as savings from the GROW administration and State Street custody transitions helped offset higher employee and technology costs.

Record FUM despite uneven investment returns

Funds under management reached a record $14.5 billion at 30 June, up 4% on FY25. Organic net flows rose 13% to $664 million, led by $527 million of superannuation inflows, while investment performance added $187 million. The result builds on the $14.5 billion FUM milestone, which was reported after a strong final quarter contribution of $650 million.

The headline figure masks a sharp split across asset classes. International equities, fixed income and private markets performed well, while Australian equities, healthcare, technology and emerging companies were pressured by rising rates, geopolitical uncertainty and strong performance from major miners and energy producers that Australian Ethical excludes under its Ethical Charter. The Australian Shares Fund returned negative 9.7% for the year, while the Emerging Companies Fund fell 14.8%; by contrast, the International Shares Fund returned 14.7% and the Infrastructure Debt Fund 7.9%.

Private markets become the next growth engine

Australian Ethical is positioning private markets and institutional distribution as a second engine alongside superannuation. The Growth Opportunities Fund, launched in March, received a cornerstone commitment of up to $125 million from the Clean Energy Finance Corporation, alongside a $500 million seed investment from Australian Ethical Super. The fund returned 21.2% gross for the 12 months to June 2026, against a long-term target of 11% to 13%, although the short operating history means that result should not be treated as a durable performance measure.

The strategy also produced $173 million of institutional net flows and $54 million from new middle-market clients. Australian Ethical says further middle-market inflows are expected in early FY27, while the loss of a $250 million Australian Unity Bank mandate had only a small revenue impact because it was a low-margin mandate. The earlier $125 million private markets fund is now part of a broader push beyond the group’s traditional superannuation base.

Technology investment meets regulatory scrutiny

The company completed the final tranche of its three-year migration to GROW, harmonised insurance arrangements across its superannuation membership and rolled domestic and international equities, along with fixed income, onto the Charles River investment platform. The remaining multi-asset implementation is due in the first half of FY27. A new member mobile app is also being developed, with launch expected in FY27.

That expansion is occurring alongside unfinished governance work. Australian Ethical says its superannuation trustee made progress during FY26 in addressing APRA licence conditions imposed in November 2025, while an EY review identified further enhancements to the oversight of related-party outsourcing arrangements. The company expects to continue that work in FY27, making regulatory execution a less glamorous but important test of whether the new operating platform can support the growth being promised.