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 most cases, this is simply not true.

In fact, super funds and investment funds that take an ethical and responsible approach typically perform better than their peers!

It pays to invest ethically
2019 analysis by the Responsible Investment Association Australasia (RIAA) shows Australian equities responsible share funds have produced an average return of 6.43% over 5 years and 12.39% over 10 years. This compares with returns of 5.6% and 8.91% respectively for the S&P/ASX 300 index.

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 that pay attention to social, environmental, governance and ethical issues are likely to be more resilient and perform better.

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. At the end of 2019, almost half of Australia’s investments are managed in accordance with responsible investment principles.

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.

In New Zealand the majority of investment managers believe that the number one driver of market growth is the strong financial performance of investments that consider environmental, social and governance factors.

This 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.