A recent report has revealed that over half of all investments in Australia are responsible investments.
The 17th annual Responsible Investment benchmark Report 2018 from Responsible Investment Association Australasia is a comprehensive review of the responsible investment sector in Australia, with the most recent findings demonstrating the importance of responsible investing to Australians.
Environmental, social and corporate governance (ESG) and ethics considerations now sit cleanly alongside financial considerations as important parts of our investment decisions.
Key findings of the report include:
- Responsible investments in Australia has reached $866 billion - 55 per cent of all professionally managed assets in Australia
- There has been 39 per cent growth of the sector year on year, up from $622 billion in 2016
- Core Responsible Investments that use negative or positive screening, sustainability themed investments, impact investing and community finance have reached a record high of $186.7 billion, representing 12 per cent of all professionally managed assets - tripled between 2015 and 2017
- ESG factors that positively affect portfolio performance are now the greatest driver of growth in responsible investment, up from 20 per cent year on year
These numbers indicate that a major shift has taken place in Australia, with it now clear that Australians are committed to responsible investing. Climate change, human rights, corporate culture, diversity and other important sustainability issues are now being considered and challenged where it counts: investment dollars.
Mainstream funds are now making the shift to responsible investments, with screening, assessments, and engagement influencing investment decisions.
The research looked into the Broad Responsible Investment strategies of 112 asset management companies in Australia, with 24 offering leading strategies for ESG integration, with around $680 billion in assets under management. This is up by 22 per cent year on year.
Performance of ESG funds
There is surging demand for ethical, sustainable and impact investments, with negative screens more regularly excluding weapons and tobacco investments. Core responsible investment Australian share funds were shown to have outperformed their benchmarks over the three, five and 10-year tracking periods.
Responsibly invested international share funds outperformed their benchmarks in the 1-3-year time periods. Comparable performance was seen over 10 years, with responsibly invested balanced portfolios outperforming their benchmark over the three, five and 10-year periods.