Socially responsible superannuation and managed funds that invested in a childcare operator where children were alleged to have been sexually abused have demanded the company respond to concerns over their child welfare and employee screening processes.
Joshua Dale Brown, 26, who has been charged with more than 70 offences relating to eight alleged victims – aged between five months and two years old – worked at 20 childcare centres across Melbourne between 2017 and 2025, according to police.
The 26-year-old childcare worker has yet to enter a plea and investigations are ongoing.
The centres were run by a variety of for-profit providers, including the private equity-backed Affinity Education and the ASX-listed G8 Education and they have denied accusations that profits may have been prioritised over welfare.
A spokesperson for major super provider Hesta said the fund had a small holding in G8 in one of its sustainable investment options.
“We are continuing to monitor the situation closely and the steps G8 takes to ensure child safety,” the spokesperson said.
A spokesperson for the Australian Retirement Trust, which also holds shares in G8, said the alleged conduct was abhorrent.
“We are seeking an explanation from G8 Education around their staff screening processes and ongoing child safety measures, what steps they will now take to improve these processes, and related governance issues.”
Future Super and Australian Ethical are also invested in G8, while UniSuper’s sustainable fund appears to have recently sold its shares in the childcare provider.
Funds that screen investments for ethical considerations would typically sell their share holdings if they deem a company’s response to an incident inadequate.
A G8 spokesperson said child safety and wellbeing were embedded into its leadership, governance and culture, and that the relevant reference, background and working-with-children checks were conducted.
“Parents of the children involved have been informed by the police and the Victorian government and our hearts break for those families,” the spokesperson said.
“As we learn more about what is unfolding, we are fully cooperating with Victorian police, the Victorian government and other relevant authorities as part of the investigation.”
A spokesperson for Affinity said “all educators and staff undergo thorough and relevant checks, including current working with children checks, in accordance with legal and regulatory requirements”.
“Running a sustainable, profitable business does not come at the cost of quality care, in fact it is essential to its delivery,” the spokesperson said.
“This model allows us to invest significant time, resources and over $70 million of capital in further improving our compliance, safety, care, systems and processes across our network in the past three years.”
Profit model
Australia’s childcare sector is highly fragmented, consisting of numerous small providers, which are often not-for-profit organisations. Formed by a syndicate of charities, Goodstart Early Learning is the biggest not-for-profit operator in Australia, with about 660 centres.
after newsletter promotion
Given centre operators tend to generate thin profit margins that are reliant on government subsidised childcare fees, for-profit groups routinely takeover other centres to increase their size and boost the rate of return for their owners.
Their major cost is staff wages, and the most significant profit metrics are tied to “occupancy rates”, referring to the number of children attending, as well as fees.
The listed G8 runs more than 400 centres, while the private equity-backed Affinity has in excess of 250, making them the two largest for-profit operators. Collectively, they control about 10% of the sector.
In 2024, G8 reported a $67.7m net profit, up more than 20% from the prior year. Affinity is owned by Quadrant Private Equity.
G8 had been enjoying a period of strong returns before the allegations of child sexual abuse appear to have sparked a share selloff due to investor concerns that parents may opt for a different childcare centre provider.
The federal government has also threatened to cut payments to centres not up to standard.
James Alexander, from the Sustainable Investment Exchange, said companies with shareholders tend to be primarily motivated by profit.
“It would be too much of a generalisation to say the for-profit sector is broken,” said Alexander, who has previously criticised G8 staffing arrangements.
“A for-profit entity in charge of vulnerable members of the community, such as kids or the elderly, should go beyond the minimum legal requirements for checking the suitability of staff.”
Some previous attempts to maximise profit in the childcare sector have not ended well.
The listed ABC Learning Centres famously built a network of about 3,000 centres across Australia, New Zealand and the US before collapsing under a heavy debt load at the height of the global financial crisis.
