New research suggests responsible investment is on the rise in Australia and the RIAA is urging seniors and baby boomers to ensure they ask the right questions in order to ensure their money is invested ethically.
The organisation’s 17th annual Responsible Investment Benchmark Report suggests 58 per cent of baby boomers expect their money to be invested ethically.
The report also reveals that 55 per cent of all professionally managed assets in Australia are now being managed as “responsible investments”, representing a total of $866 billion in investment money.
This figure has risen from $622 billion in 2016 and RIAA chief executive Simon O’Connor said the reality that the majority of funds were now being invested ethically was a “major milestone”.
“We are now at a stage whereby issues such as climate change, human rights, corporate culture, diversity and a whole range of other important sustainability issues are right at the forefront of consideration by Australia’s finance community,” he said.
He said mainstream investment funds were making a switch to incorporate responsible investment.
Measures being taken included incorporation of negative screening and systematic assessment of environmental, social and governance factors in order to influence corporate Australia.
“Nearly two decades of progress in responsible investment has this year, reached an important tipping point,” he said.
He said the organisation believed the push towards more ethical investment would only gain more momentum with growing consumer demand for investment opportunities that aligned with their values.
Simon said it was important for investors who wished to invest ethically to ask the right questions.
He suggested five core questions which could help people make a more informed decision about the merits of investment opportunities:
- How do you stay up to date on the responsible and ethical investment issues that are impacting your investment returns?Increasingly, environmental, social governance (ESG) and ethical considerations are having significant impacts on investment returns and the financial performance of listed companies. These factors are now moving markets and if your adviser is not staying on top of these considerations and risks, then they are putting your portfolio at risk.
- Do you have responsible and ethical investment options available on your approved product list, or do you have research that helps you make informed investment decisions? Advisers often rely on their Approved Product List (APL) as the list of investment options they can place your investments into. If they don't have responsible or ethical investment options on their APL, then they simply can't offer you an investment option that aligns with your values.
- Do you agree that clients should be able to invest in line with their values and still achieve strong returns? A strong body of evidence shows that there is no reason to give up returns when you invest ethically. On the contrary, the weight of evidence shows these strategies are helping to enhance risk adjusted long term returns. Many advisers still aren't up to speed on this research, and have an outdated mindset that ethical investing means giving up returns. If this is your adviser, walk out the door.
- What professional association are you aligned with that helps you keep your responsible investing knowledge up to date?Increasingly, professional bodies are working to improve adviser knowledge in this area so it should be on your adviser’s radar if they are registered with a major professional association. If they are not, this could be another reason to consider your options elsewhere.
- Have you been certified as qualified to provide responsible and ethical investment advice? For those looking for the most knowledgeable advice in this area, look for financial advisers who have been certified to deliver responsible and ethical financial advice by RIAA.
For more information, click here.
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