The Responsible Investment Association Australasia (RIAA) announced this week that Australia has hit a “major milestone” when it comes to responsible investing, with 55 per cent of professionally managed assets considered to be responsible investments in 2017.
That’s $866 billion and reflects a significant 39 per cent increase year-on-year from 2016’s $622 billion, RIAA said in its 2018 Responsible Investment Benchmark Report.
“Our research continues to show us Australians don’t want to build their retirement savings and other investments off the back of harmful activities without compromise to financial performance,” RIAA chief executive Simon O’Connor said.
“The investment industry is responding, by providing more investment opportunities that align with these values, but also building these considerations into the bulk of the market.”
He said the swing towards responsible assets is largely due to prominent investment funds moving to systematically negatively screen investments against environmental, social and governance (ESG) factors.
“We are now at a stage whereby issues such as climate change, human rights, corporate culture, diversity and a whole range of other important sustainability issues are right at the forefront of consideration by Australia’s finance community,” Mr O’Connor said.
Asset managers also said the relationship between ESG factors and positive performance was the main reason for the split.
“Responsible investment has this year reached an important tipping point, which we believe will only gain further momentum in light of growing calls for transparency and accountability across finance along with a growing consumer demand for investments that align with their values,” Mr O’Connor said.
According to RIAA assessment, core responsible investment Australian shared funds outperformed the benchmark across three-, five- and 10-year metrics.
However, it underperformed over one-year metrics.
|Australian share funds||1 year||3 years||5 years||10 years|
|Average responsible investment fund (between
8-14 funds sampled depending on time period)
|Large-cap Australian share fund average||12.2%||8.0%||9.7%||3.5%|
|S&P/ASX300 accumulation index||11.9%||8.8%||10.2%||4.0%|
Interestingly, the main headwinds to further uptake are a lack of retail investor awareness and misconceptions.
“Continued growth in the assets under management of responsible investment funds seems to be held back by a lack of good relevant advice and awareness of public/retail customers,” the researchers said.
“More work is needed to educate and advise retail investors in relation to responsible investment core funds and performance versus equivalent mainstream funds and to engage other stakeholders and influencers on the basis of misplaced perceptions.”