So-called responsible or ethical investments have more than quadrupled over the past three years to roughly $622 billion, new private research shows.
Responsible investments are considered those made in areas such as healthcare or clean energy, avoiding ties to industries such as coal, weapons, gambling, tobacco, weapons or oil.
The new research shows ethical Australian share funds have actually outperformed their equivalent mainstream funds over the past 10 years.
Phil Vernon, managing director of Australian Ethical, which oversees just over $2 billion, said the success of his fund speaks for itself.
“We don’t believe you have to [lose out financially if you want to invest ethically] at all, and our track record proves that,” Mr Vernon said.
“The company’s been going for 30 years. The track record of our Australian Ethical shares fund has been going for over 20 years and it’s returned about 10 per cent per annum over that period.
“[That] is about 3 per cent more than the market that we benchmark against.”
He said fund managers can make a difference to the environment through where they choose to invest.
“Yes absolutely, it would make a big difference, and that’s a firm belief of ours — an underlying philosophy,” he said.
“We actively engage with the companies, so we’ll for example move out of fossil fuels or avoid things that we want, take a stronger stance on climate change, things like that.”
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The performance of Australian Ethical has been recorded in the Responsible Investment Benchmark Report 2017.
The key finding in this year’s report, which focused on 91 asset managers, is that ethical investing is taking off in Australia.
It found responsible investments have grown by 26 per cent over the past year to $65 billion, representing 4.5 per cent of total assets under management.
Simon O’Connor, chief executive of the Responsible Investment Association, said ethical investment is increasingly popular.
“Today in Australia we see that one in every $2 is invested under some form of responsible or ethical investment strategy,” Mr O’Connor said.
“So if you want to do business, you really need to be considering deeply responsible and ethical issues.”
Mr O’Connor said responsible investors now more than ever appear to be getting better bang for their buck.
“What’s really pleasing is that the evidence we provided in today’s report, and other evidence out there, has highlighted that you just don’t have to give up returns to invest in line with your values,” he said.
“Examples like that I think have really sold the case to investors that this stuff matters, this stuff is critical to determining what are going to be the companies that make the best investments.”