Responsible Investments continue to outperform

RIAA Responsible investment spectrum from the 2019 RIAA benchmatk report

RIAA Responsible investment spectrum from the 2019 RIAA benchmatk report

Responsible Investments continue to outperform

Here are the results from Responsible Investment Association Australasia (RIAA), which has just released its’ 2019 Benchmark Report.

What’s in the latest report ?

Overall growth in responsible investments (RI) in Australia

The RIAA 2019 report indicates that:

1. For 2018, 44% *of professionally managed assets in Australia now utilise a responsible approach to investing use, that is:

“one that systematically considers environmental, social and corporate governance (ESG) and/or ethical factors across the entire portfolio” and that,

a responsible approach to investing is increasingly seen to represent the minimum standard of good investment practice in Australia. #

2. The main RI strategy is ESG integration with

3. Strong growth in positive and negative screening strategies, together with sustainability-themed investments and community and impact investing – the latter via the growth of “ green bonds”

4. Whilst more investment managers utilise leading practice ESG integration#, the overall number is small.

Investment manager and consumer ‘ethical’ interests may be different

5. The main exclusions applied by Australian institutional investors are controversial weapons and tobacco while consumers look for funds that screen out fossil fuels and human rights violations (using RIAA on-line screening tool) .

6. Nevertheless, retail investors are increasingly opting for responsibly managed products (up to 42% of RIAA surveyed funds in 2018 vs 30% in 2017).

How about fund performance?

7. RI funds outperformed mainstream funds over most time frames and asset classes

  • Australian RI share funds outperformed mainstream Australian share fund benchmarks for all periods except the three-year term.

 

  • International RI share funds outperformed Morningstar average mainstream international funds over every time horizon

 

  • Responsibly managed multi-sector funds outperformed mainstream multi-sector growth fund average over every time horizon

 * Using ABS data to determine the market size for the first time this year has resulted in responsible investment reducing proportionally whilst growing in absolute terms year on year. ABS data will be used going forward, as it better reflects the broader dataset for this research.

# RIAA also distinguishes a Broad and Core RI approach to investing as:

  • A Broad approach sees investment managers explicitly include ESG factors into traditional financial analysis as part of a mainstream investment offering.

  • The Core approach can use many strategies in deciding how to invest such as positive and negative screening, a sustainability focus and impact investing (which primarily addresses social concerns).

Next steps:

Call for a quick chat or drop us a line to find out more about getting your savings working in line with your values and ethical beliefs.