Good investors have long known that there is more that drives investment returns that just what is published in financial reports.
They understand that companies or assets won’t thrive when they ignore the important issues such as environment (pollution, climate change, water and other resources scarcity), society (local communities, employees, health and safety), corporate governance and ethical behaviour (prudent management, business ethics, strong boards, appropriate executive pay).
In formal terms, responsible investment is a process that takes into account environmental, social, governance (ESG) and ethical issues into the investment process of research, analysis, selection and monitoring of investments.
At the Responsible Investment Association Australasia (RIAA) we see an array of methods that investors use to manage these extra-financial risks and opportunities – excluding companies involved in controversial industries; identifying the most sustainable companies; analysing ESG risks and opportunities; and using the power of company ownership to engage with their boards and seek changes in corporate behaviours.
We also see how well these responsible investment products perform and in many cases, outperform against their mainstream equivalent.
This diversity of approach is a plus for the investors who can now find options that match their own values, concerns, risk profile and life stage. Take a tour of Responsible Returns to see what you find.