In 2017, Core responsible investment Australian share funds outperformed the average large cap Australian share funds over three, five and ten year time horizons
According to research released by Responsible Investment Association Australia (RIAA), 9 out of 10 Australians expect their super and other investments to be invested ethically and responsibly. In practice, however, this may not be the case. One possible reason for this is that you may not have taken a close look at where your money is invested.
The term “ethical, responsible and sustainable investing” has such a broad definition and will mean different things to different individuals. On one side of the spectrum, we have people who want to invest in companies that consider environmental, social and governance (ESG) factors as part of their investment strategy. On the other side, we have people who target companies that have business models that generate profits from sustainability themes (eg clean energy, green property) but also the impact that these companies have on the environment (eg banks who do not lend to fossil fuel producers). Most people will sit somewhere in between and want to invest in companies that “do the right thing.”
Doing the right thing does lead to long term sustainable performance. Why? Those companies who pollute the environment, who underpay employees, who breach human rights in their supply chains, or ignore community concerns, who rip off their customers, risk making significant damage to their brands and their share price. Responsible investment has now proven itself to be an important element of understanding the full value of investments, underpinning strong risk-adjusted investment returns. As of 2017, core responsible investment Australian share funds outperformed the average large cap Australian share funds over three, five and ten year time horizons. Core responsible international share funds outperformed large cap international share funds over one and three year time horizons and matched the ten year performance. Thus debunking the myth that responsible investing leads to poor performance.
As at 31 Dec 2017, responsible investing constituted $866 billion (55%) of the $1.56 trillion of total assets professionally managed in Australia. This amount is up by 39% from the previous year and quadrupling since 2014. It is clear that this investment trend is not going away soon and is instead building momentum, as most professional investment managers now have some sort ESG overlay built into their fundamental analysis.
Things you might consider:
Speak to us today and we can help you put together your plan to help you achieve this and many of your other goals.