Currently in Australia and New Zealand, approximately $180bn is invested in a responsible manner, or around 18% of total funds under management. Consumers have indicated that, in order to make investments ‘in their long term interest’, super funds need to consider ethical and environmental implications (40%) rather than simply maximising financial returns (36%).
In focus group research conducted by The Australia Institute and ISN, some consumers expressed concern that they had no information on the exact nature of their investments and suspected that certain fund managers act in ways that are ethically dubious or purely profit-driven. There was a feeling that money in super should contribute to nation-building and long-term infrastructure rather than speculation and profiteering.
“They’re putting all this super money into shopping centres and things we don’t need, rather than important stuff like infrastructure,” said one respondent.
Simon O’Connor, CEO of Responsible Investment Association Australia (RIAA), said the onus should be on planners to ensure their clients are aware of the strong performance of responsible funds (including ethical funds), and that the perception that ethical or responsible funds are more risky is “blatantly false”.
“Unfortunately, the financial planning sector lags behind the institutional investment market in terms of turning their attention to more responsible investment approaches (i.e. an approach that assesses environmental, social, governance and ethical practices of the companies they invest in in addition to core financial data.)”
He said responsible investment products are on the margins of planners’ offerings, despite rapidly entering the mainstream of the institutional investment community. “Our research indicates that the slow uptake of responsible investment practices is to the detriment of the ultimate customers the planning community represents in terms of both financial returns and broader impacts.”
A responsible investment approach generally entails more research at the point of stock selection, based on core financial data, and in addition, the assessment of environmental, social, governance and ethical risks that a company faces.
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