RIAA’s Responsible Investment Benchmark 2017 showed that once again, Ethical Investment in Australia is growing rapidly, and delivering on performance.
RESPONSIBLE INVESTMENT ON THE RISE
This year’s report reinforces that a responsible approach to investing – one that systematically considers environmental, social and governance(ESG) and/or ethical factors across the entire portfolio – is the expected minimum standard of good investment practice in Australia.
As consumer demand grows, assets under management that adopt a responsible investment approach continue to grow, alongside increasing numbers of products that are delivering strong financial results. Responsible investments have more than quadrupled over the past three years to $622 billion in assets under management (AUM) in 2016, with nearly half (44%) of Australia’s assets under management now being invested through some form of responsible investment strategy.
CORE VERSUS BROAD RESPONSIBLE INVESTING
RIAA distinguishes between Core and Broad responsible investment, to better analyse the responsible investment industry and the degree to which responsible investment strategies are integrated into products and services. Broad responsible investment approaches – whereby ESG integration is the principal responsible investment strategy – continue to dominate the total responsible investment AUM (Assets Under Management), with 16 asset managers who manage $557.1 billion in AUM found to be demonstrating leading practices in ESG integration. Core responsible investment funds grew significantly during 2016, increasing by 26% to $64.9 billion. They now represent 4.5% of the total AUM held in Australia, increasing from 3.8% of total AUM in 2015. Core responsible investment approaches apply at least one of the following primary strategies: negative, positive or norms-based screening; sustainability themed investing; impact investing, community finance; or corporate engagement.
The Responsible Investment Benchmark Report 2017 includes an assessment of the performance of core responsible investment funds compared with their benchmark index and the average of equivalent mainstream funds. The results show that responsible investment funds are largely outperforming their average mainstream counterparts year on year, as the market for responsible investment grows.
• Australian shares: Core responsible investment Australian share funds outperformed large-cap Australian share funds and the benchmark for all periods except the one year term.
• International shares: Core responsible investment international share funds outperformed the average mainstream international share fund in the three and 10 year time horizons, but slightly underperformed over the one and five year terms.
• Balanced funds: Core responsible multi-sector growth funds (balanced funds) outperformed their equivalent mainstream multi-sector growth fund average for all periods except one year.
For more information see: RIAA Benchmark Report