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Australian responsible investment funds outperforming the mainstream



Photo: Lee Bailey

Responsible investment funds are outperforming their conventional equivalents in Australia, a new report has revealed.

The Responsible Investment Association Australasia’s (RIAA) annual Benchmark Report finds that core responsible investment equities funds have consistently outperformed both the ASX 300 index and the large cap Australian equities fund average.

“Core responsible investments outperforming the average fund returns in all categories over five and 10 years is a further demonstration of the sustainability of responsible investments, both in their returns and also the impact that they deliver,” the report says.

It continues, “This report again puts to bed the old fashioned myth that responsible investments are the underperforming younger brother of mainstream investments.”

Significantly, it also reveals that the number of investors demanding to see their money used responsibly has grown for the first time in ten years. Now, around 2.3% of all funds under management by asset managers and financial advisers are invested responsibly.

While this sounds like relatively little progress, the report also reveals that the sums invested are no small change. 

Australian ethical, socially responsible, impact and sustainable investments grew by 51% year-on-year to just over $25 billion (£13.9bn) in assets under management, as of the end of 2013.

Meanwhile, “broad” responsible investment grew by 13% to $153.1 billion (£84.9). 

The report also details a number of key trends in the Australian responsible investment market. For one, the movement to ditch shares in tobacco companies has gathered pace.

Over the last two years, 16 super funds have divested from tobacco, shifting $1.2 billion (£670m) out of the industry. 

Investors are also becoming more engaged, opening discussions with companies over issues like human rights and climate change, the report observes. 

“The context of this report […] shows interesting times ahead for the sector at large, with many major investors currently divesting from tobacco, assessing their exposure to fossil fuels – and at the same time there is a trend towards increased consumer interest and scrutiny on the sector,” said RIAA chief executive, Simon O’Connor.

The RIAA’s report is far from the first to suggest a link between responsibility and improved returns. Further studies have found that UK ethical and sustainable investment funds generally performed better than their mainstream counterparts in 2013.

A study by Moneyfacts found that the average ethical fund delivered returns of 24% over a 12-month period, compared with the 18% growth displayed by the average non-ethical fund.

Photo: Lee Bailey

Further reading:

‘Illustrate links’ between money and the real world to boost sustainable investment

‘Saints’ reap better returns than ‘sinners’ in new sustainable investment analysis

John Ditchfield: ethical investment wins on price, performance and the planet

Financial returns from ethical investment funds ‘better than mainstream’ in last 12 months

The Guide to Sustainable Investment 2014


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