Recent research from the Responsible Investment Association Australasia (RIAA) shows that 92% of Australians expect their super and investments to be invested responsibly and ethically. The same research found that over 60% of Australian’s expect their financial adviser to incorporate their values or consider the societal or environmental implications of their investments. So what exactly is responsible and ethical investing?
Ethical investing is investing according to a core set of values, whilst Responsible Investing is looking at the environmental, social and governance policies of companies and determining whether they add value. Responsible investors tend to see that all businesses and therefore investments have an impact on people and the planet in a positive or negative way.
55% of professionally managed assets in Australia are now classified as Responsible Investments. This has been a growth year on year recently of over 40%. The manager will consider environmental concerns, social issues such as workplace safety records, governance – corruption/independence and ethical factors. In Australia the top two issues identified were animal cruelty and human rights abuses.
Merryl Lynch, a large American bank, has reported that environmental, social and governance are the single most important signal of future investment risk. Plainly, if companies are not considering these issues they are a riskier investment.
In Australia, managed funds with a responsible investment approach built in have outperformed their benchmarks over three, five and 10 years. There are numerous studies now that have demonstrated that companies with strong corporate social responsibility policies are sound investments. Incorporating social responsible investments are not detrimental to returns.
If you have an interest in investing responsibly, without impacting your potential for good returns, the TJL Financial Management team can assist. Call our Forster office on (02) 6554 9511 or Taree on (02) 6552 3233 for an obligation-free consultation.