The Responsible Investment Association Australasia‘s (RIAA) new Responsible investment benchmark report 2017 has found sustainability themed investments have grown significantly, with responsible investment funds outperforming their average mainstream counterparts year on year, as the market for responsible investment continues to grow in Australia.
The report has found ‘core’ responsibly invested Australian share funds and balanced multi-sector funds have outperformed their equivalent mainstream funds over three, five and ten-year horizons. It shows that sustainability themed investments have grown significantly to $27.2 billion (from $23.1 billion), an increase of 18 percent. This increase was largely led by sizeable institutional investment into themed funds such as sustainable agriculture/forestry funds, green-themed property funds, as well as a strong emergence of low carbon funds.
“It is a long outdated myth that financial returns must be sacrificed to invest responsibly or ethically,” says Simon O’Connor, chief executive officer of RIAA. “The performance figures and trends we are now seeing each year are telling us the opposite story.”
Responsible investments have more than quadrupled over the past three years to $622 billion, with nearly half (44 percent) of Australia’s assets under management now being invested through some form of responsible investment strategy – from negative screening, impact investing, sustainability themed funds and the integration of environmental, social and governance (ESG) considerations.
“More and more Australians are wanting their investments and savings to align with their values, and are reaping the rewards with strong financial performance. The market is recognising the opportunities to create value for clients, with a surge in responsible investment products over the past year, including many focused on delivering positive social or environmental impact,” says O’Connor.
“Responsible investors are increasingly focused on investing in the sectors that are rapidly becoming the sustainable backbone of our future global economy. It’s this approach that will continue to deliver growth and performance for investors, and this will only build as regulatory frameworks shift to keep up with social expectations and these industries continue to grow,” says O’Connor.
The Benchmark Report also found:
- Investments in ‘core’ responsible investments – including positive and negative screening, sustainability themed investments and impact investments – has grown by 26 percent over the past year to $64.9 billion, representing 4.5 percent of total assets under management.
- ESG integration is the primary ‘broad’ responsible investment approach. There were 91 asset managers assessed in this study, with 16 managers who manage $557 billion found to be demonstrating a leading approach to incorporating environmental, social and governance considerations into investment analysis and decision-making.
- The use of screening, both positive and negative, continues as the most popular strategy for ‘core’ responsible investments, growing year on year by 36 percent.
- Sustainability themed investments grew significantly by 18 percent to $27.2 billion.
“While recent conversations dominating this sector have been predominately focused on fossil fuel divestment, the report shows an increase in negative screening across the market, particularly against weapons, tobacco, gambling, as well as significant increases in exclusions based on nuclear power and human rights. This tells us the market is connecting strongly into other areas of concern for consumers,” O’Connor says.
Survey respondents also identify a lack of qualified advice and expertise around responsible products, a factor that RIAA has sought to address with the launch of the Responsible Returns webtool, that connects consumers who care about responsible and ethical investing, with products that match their interests and concerns.
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