Sustainability-themed investments are growing strongly

Responsible investment funds are outperforming their average mainstream counterparts year on year as the market for responsible investment continues to grow in Australia, according to the Responsible Investment Benchmark Report 2017.

Launched yesterday by the Responsible Investment Association Australasia (RIAA), the report shows ‘core’ responsibly invested Australian share funds and balanced multisector funds have outperformed their equivalent mainstream funds over three-, five- and 10-year horizons. Responsible investments have more than quadrupled over the past three years to $622 billion, with nearly half (44%) of Australia’s assets under management now being invested through some form of responsible investment strategy.

“More and more Australians are wanting their investments and savings to align with their values, and are reaping the rewards with strong financial performance,” said RIAA CEO Simon O’Connor. “The market is recognising the opportunities to create value for clients, with a surge in responsible investment products over the past year — including many focused on delivering positive social or environmental impact.”

The Benchmark Report also found:

• ‘Core’ responsible investments — including positive and negative screening, sustainability-themed investments and impact investments — have grown by 26% over the past year to $64.9 billion, representing 4.5% of total assets under management.
• Environmental, social and governance (ESG) integration is the primary ‘broad’ responsible investment approach. 91 asset managers were assessed in this study, with 16 managers who manage $557 billion found to be demonstrating a leading approach to incorporating ESG considerations into investment analysis and decision-making.
• The use of screening, both positive and negative, continues as the most popular strategy for core responsible investments, growing year on year by 36%. The report shows an increase in negative screening against weapons, tobacco and gambling, as well as increases in exclusions based on nuclear power and human rights.
• Sustainability-themed investments grew by 18% to $27.2 billion.

“It is a long-outdated myth that financial returns must be sacrificed to invest responsibly or ethically. The performance figures and trends we are now seeing each year are telling us the opposite story,” said O’Connor.

“Responsible investors are increasingly focused on investing in the sectors that are rapidly becoming the sustainable backbone of our future global economy. It’s this approach that will continue to deliver growth and performance for investors, and this will only build as regulatory frameworks shift to keep up with social expectations and these industries continue to grow.”

The report can be read at http://responsibleinvestment.org/resources/benchmark-report/.