How do responsible and ethical investments perform?
There’s sometimes a misconception that investing ethically means accepting a lower financial return. But in many cases, this is simply not true.
In fact, there is a growing body of evidence that shows super funds and investment funds that take an ethical and responsible approach often perform better than their peers.
It pays to invest ethically
2021 analysis by the Responsible Investment Association Australasia (RIAA) shows responsibly invested international share funds outperformed their mainstream peers over 1, 3, and 5 year timeframes, and responsible investment multi-sector growth funds (which invest in a combination of asset classes including shares and property) outperformed across all year time frames. (Importantly, there's been much analysis of financial performance since the onset of the COVID-19 pandemic that reaffirms this trend of outperformance).
Many of these responsible investment products have been certified by RIAA and will be included when you conduct a search on Responsible Returns.
RIAA’s research also shows that Australian super funds that comprehensively engage in responsible investment are, on average, outperforming their peers over 1, 3 and 5-year time frames.
You don’t have to be a finance whizz to see that that ethical and responsible investing can lead to better investment outcomes, as well as benefiting people and the planet. Study after study shows that companies which look after their employees, minimise their impact on the environment, have good governance and protect human rights across supply chains are more likely to deliver superior financial returns to investors.
Sustainability, by its very definition, involves thinking long-term. And if there’s one investment you want to perform well in the long-term, it’s an investment like your super fund or your savings account.
Going mainstream
The popularity of ethical and responsible investing is growing in line with the strength of financial returns. By the end of 2019, more than a third of Australia’s investors could demonstrate a leading approach to responsible investment, contributing to real world outcomes. In New Zealand over half of investors (52%) can demonstrate a leading approach to responsible investing.
Interest has spread; methods of gauging the sustainability credentials of a company – such as considering environmental, social and governance factors when making an investment - are now being adopted by mainstream investors as key indicators of risk. It’s just smart investing.
Subscribe to RIAA Window to receive updates on responsible investment market developments, hear about events, meet leaders in the field and learn about new certified products. We will also send you occasional emails about new research we are publishing or invite you to industry events.