Responsible Investments Streaking Ahead

Responsible investments are in many cases outperforming mainstream investments in Australasia, a new report has revealed.

According to the 2014 benchmarking report by the Responsible Investment Association of Australasia (RIAA), when compared to the ASX 300 benchmark and the average returns of mainstream funds, core responsible investment funds have on average outperformed across the majority of fund categories and time frames.

According to the report, the research “puts to bed the old fashioned myth that responsible investments are the underperforming younger brother of mainstream investments.”

“Responsible investment assets managed by fund managers, super funds, banks and advisers continue to grow strongly and perform strongly.”

The analysis is the 13th annual benchmark report prepared by the RIAA, and considered industry data on the size and growth of the Australasian responsible investment market (defined as Australia and New Zealand) over the 12 months to 31 December 2013 and compared it with Australasia’s broader financial market.

It found total funds under management in the “responsible” investment sector in Australia and New Zealand have increased by 13 per cent to $153 billion, with investments in core responsible investment – ethical, socially responsible, impact investments, community finance and sustainability themed investments –  growing by 51 per cent year on year to just under $25 bill in assets under management (AUM).

According to the report, there was also a small but significant increase in people choosing to invest their money responsibly. Public demand for responsible investments had increased to above 2 per cent of TAUM for the first time in 10 years.

“Pleasingly, for the first time in a decade, the report shows a small but significant increase in people choosing to invest their money responsibly, with a distinct increase in public demand for responsible investments,” the report said.

“With increasing consumer interest in superannuation and other areas of banking and finance, we expect responsible investment to continue to grow as an influential force for the finance sector at-large.”

Ethical or responsible investment is about considering social, environmental and corporate governance factors as well as financial returns.

The United Nations is promoting a framework for responsible investing, with the signatures of fund managers and companies with assets of $34 trillion to date.

“Increasingly, investors are using a combination of approaches to get the best investment outcomes. Indeed, we have fund managers and asset owners who now apply ESG integration, screen companies, use sustainability themed investments and are making impact investments whilst also generating strong financial results,” according to the report.

“The long-term value that responsible investments are delivering is great news for Australians who are investing their savings with a focus on financial security and resilience in their retirement.”

Read the full report here.