How do responsible and ethical investments perform?

There’s sometimes a misconception that investing responsibly or 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 that despite the economic setbacks which much of the economy has recently experienced connected with the COVID pandemic, responsible investment funds outperformed both the international share and multi-sector growth funds in 2020, and performed on par with the Australia Fund Equity Large Blend.

Many of these responsible investment products included in this analysis have been certified by RIAA and will be included when you conduct a search on Responsible Returns.

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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. The Australian responsible investment market continued to soar in popularity to $1.2 trillion in 2020, with responsible investment assets growing at 15 times the rate that overall Australian professionally managed investments have grown.

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.

The old myth, of having to trade-off your values or issues you care about for lower returns, can be buried once and for all. More and more people are recognising the benefits of investing in line with their values for better returns today, and a better world tomorrow.