If you’d like your money to make a difference to the world as well as your future, responsible investing may be for you.
Almost 9 in 10 (89%) Australians feel it’s important their financial institution invests responsibly and ethically across the board1.
Ethical, social and governance (ESG) investments accounted for $1,281 billion—or 40%—of assets under management in Australia at the end of 20202, growing at 15 times the rate of the overall investment market.
What is responsible investing?
As we continue to battle the extremes of bushfires, drought and floods, consumers are increasingly looking for investment managers to take into account ESG issues as well as financial performance.
While environmental concerns are a hot topic, ESG investing also encompasses social issues, as well as how companies make decisions and manage risks.
- Environmental issues—climate change, carbon emissions, waste production, pollution, management of natural resources.
- Social concerns—working conditions, human rights, community engagement, health and safety, employee relations, diversity.
- Governance of companies—executive pay, political lobbying, bribery and corruption, board diversity and structure, tax strategy.
How does ESG investing work?
There are plenty of ways investment managers incorporate ESG into their processes—two common methods are negative and positive screening.
- Negative screening is where investment managers exclude companies or sectors based on specific ESG criteria for example those involved in controversial or unethical business practices, such as human rights abuses, animal testing or selling harmful products like firearms and tobacco.
- Positive screening is where investment managers look for companies or sectors with a strong record in positive solutions and sustainable practices such as renewable energy.
How ESG investing can influence returns
A common concern about responsible investing is that incorporating ESG factors into the investment process, or screening out certain companies, may compromise investment performance. But recent research shows responsible investment can make financial sense, with ESG assets under management matching or outperforming mainstream funds over most time frames and asset classes3, despite the impact of COVID-19.
One thing to be aware of is many of these investment options are still relatively new so their long-term performance is hard to gauge at this stage.
Why choose to invest responsibly?
Aside from the possibility of a better night’s sleep knowing your money is supporting more responsible business practices, opting for a responsible investment option could be your chance to contribute to positive change in the world.
Australians are choosing to invest responsibly for a variety of reasons. These span from a desire to help the environment or to support a cause you’re particularly passionate about, to engaging and holding companies accountable for their actions, or simply ‘putting your money where your mouth is’4.
What ESG investment options are out there?
If you’re looking to contribute to positive change in the world, the good news is there’s more choice than ever. The Responsible Investment Association Australasia has now certified over 200 responsible investment products.
But there’s still some way to go to match investment options with consumer preferences.
As well as fossil fuels, consumers tend to care most about human rights abuses and animal cruelty, while investment managers offer products that most commonly exclude tobacco and weapons.
How to get started with responsible investing
- Think about what’s important to you—everyone’s values are different so identify the areas where you don’t want to see your money invested and the areas where you could put your money to make a positive impact.
- Ask where your money is invested—a good place to start is online, where many super funds or investment managers have information about sustainability and ESG.
- Do your research—there are many responsible and ethical super funds, investment products and fund managers out there, such as MyNorth Sustainable Managed Portfolios .
- Ask for help—if you need assistance finding out what you’re invested in or how to access more ethical investment options, ask your financial adviser.
Investing responsibly with North
- MyNorth Sustainable Managed Portfolios can help you invest based on your values with the help of your financial adviser.
- Diversified funds are selected by experts based on their ability to meet their investment objectives and how they consider ESG in their investment process, while avoiding exposure to companies involved in activities that negatively affect the environment and community.
- There’s an expanding number of ESG investment options available on the investment menu for MyNorth Super, Pension and IDPS investors. View the full menu here or contact your financial adviser to find out more.
1 Responsible Investment Association Australasia, From values to riches 2020 Charting consumer expectations and demand for responsible investing in Australia p5
2 Responsible Investment Association Australasia, Responsible Investment Benchmark Report 2021, p5
3 Responsible Investment Association Australasia, Responsible Investment Benchmark Report 2021 p10 figure 10
4 Institutional Shareholder Services. Rating as of 2 June 2021. More information is, available on the ISS website.
What you need to know
The information on this page has been provided by NMMT Limited ABN 42 058 835 573, AFSL 234653 (NMMT). It contains general advice only and you should consider whether this information is appropriate for you before making any decisions. It’s important you consider your circumstances and read the relevant product disclosure statement and/or investor directed portfolio services guide and target market determination, available from northonline.com.au or by contacting the North Service Centre on 1800 667 841, before deciding what’s right for you.
You can read the Financial Services Guide online for more information, including the fees and benefits that companies related to NMMT, N.M. Superannuation Pty Limited ABN 31 008 428 322, AFSL 234654 (N.M. Super) and their representatives may receive in relation to products and services provided. You can also ask us for a hard copy. NMMT issues the interests in and is the responsible entity for MyNorth Managed Portfolios through which MyNorth Sustainable Managed Portfolios is offered.
MyNorth is a trademark registered to NMMT.
All information on this website is subject to change without notice.