Making an investment decision is not always based on the possible return you may receive from that investment. An increasing number of people are basing their choice of fund, or company, on issues around social responsibility, sustainability and corporate governance.
In Australia, ethical investing started in earnest in 1986 with the launch of Australian Ethical, followed in 1994 by Hunter Hall (which merged with Pengana in 2017). In those early days, it was sometimes difficult to persuade investors that there was no correlation between investing in an ethical manner and mediocre performance. In fact, quite the opposite is true and, according to the Responsible Investment Benchmark Report 2016 released by Responsible Investment Association Australasia (RIAA), almost half of Australia’s investments are now being invested responsibly, with consumer demand being a major driver of this increase.
This consumer demand is being driven by two factors; people want to invest in companies which fit their sensibilities and people want a good return on their investment. The performance of various funds within the ethical space can vary significantly, but as you can see in the table below, you do not have to sacrifice returns to invest with your conscience.
|Manager||Fund||1 year (%)||3 years (% p.a.)||5 years (% p.a.)|
|Morphic Asset Management||Global Opportunities Fund||15.5||7.7||15.9|
|AMP Capital||Responsible Investment Leaders International Share Fund – Wholesale||14.65||6.0||15.1|
|Australian Ethical||International Shares Fund||11.0||6.0||15.0|
|Perpetual||Wholesale Ethical SRI Fund||0.9||4.6||9.2|
|Maple-Brown Abbott||Responsible Investment Fund||-2.3||1.3||6.3|
* Returns are as at 31 March 2018 and are net of fees. Source: Each fund’s website.
These funds are just a small sample of what is on offer in the ever-growing ethical investment space, and each has their own set of exclusions (their negative screen) and inclusions (their positive screen). Managers describe their products from “light green” to “deep green” and the specific ethical objectives of these funds are detailed on their websites and in their charters.
Responsible Returns, an initiative of RIAA, has a comprehensive listing of funds on their website, including their mandates, which can be found here. Some of the more common possible exclusions include fossil fuels, logging, tobacco, nuclear energy, uranium mining, human rights abuses, labour rights violations, armaments, cruelty to animals, alcohol and gambling, and some funds screen ‘in’ companies that provide renewable energy, clean water or endeavour to provide a product or service that many would deem beneficial to the planet. This means you are sure to find a fund that suits your preferences.
BDH Leaders can advise you on your investment portfolio strategy. More information on our services can be found here.
The information in this article is general guidance only should not be interpreted as an endorsement of any particular fund. Past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice.