Responsible Investment Benchmark Report Australia 2020.
On Tuesday 8 September 2020, the Responsible Investment Association Australasia (RIAA) released its landmark annual study, the Responsible Investment Benchmark Report Australia 2020.
In this year’s study, RIAA scored investment managers against its Responsible Investment Scorecard, which rewards managers not just for being strong stewards and accounting for ESG factors in investment decisions, but also for transparency (on Responsible Investment (RI) policies, holdings, stewardship activities and outcomes), avoiding harm and allocating capital towards solutions.
U Ethical is pleased to be recognised by RIAA as an industry leader, demonstrating strong behaviours and allocations to responsible investment. Of the 165 investment managers assessed in the study, just 44 (27%) were found to be practising a ‘leading approach’ to responsible investment.
In an annual snapshot of the state of the responsible investing sector in Australia, the report looks at the size, growth, depth and performance of the Australian responsible investment market over the 12 months to 31 December 2019.
Responsible investment funds outperformed the mainstream
The study revealed that companies which looked after their employees, minimised their impact on the environment, had good governance and protected human rights across supply chains were more likely to deliver superior financial returns to investors.
The evidence is now clearer than ever - Australian and multi-sector responsible investment funds outperformed mainstream funds over 1, 3, 5 and 10 year time horizons. This out-performance has continued despite the major market disruption brought on by COVID-19 – which has been the most substantial test for responsible investment to date.
A growing sector
The study reveals Australia’s responsible investment market grew by 17% in 2019, totalling $1,149 billion in associated assets under management. Responsible investment strategies now cover 37% of Australia’s total $3.155 trillion in professionally managed assets. This growth reflects the changing preferences of consumers, as another RIAA study released earlier this year found the overwhelming majority of Australians now expect their savings (87%) and superannuation (86%) to be invested responsibly and ethically.
The key drivers of market growth are demand from institutional investors, alignment to corporate mission statements and ESG factors impacting performance. Recent environmental calamities such as the summer bushfires in eastern Australia was a catalyst for demand from retail investors.
The responsible investing spectrum
A wide variety of strategies fall under the umbrella of ‘responsible investment’. Consideration of environmental, social, governance (ESG) factors is now the expected minimum standard of good investment practice, with $1 trillion of Australia’s AUM managed using ESG integration as a primary approach.
This approach is closely followed by corporate engagement and shareholder action. Negative screening remains an important responsible investment strategy, and weapons, tobacco, gambling and pornography are the most frequently screened categories.
U Ethical’s approach utilises negative screening, positive screening, engagement and advocacy as well as targeted alignment with the UN’s Sustainable Development Goals (SDGs). This allows us to build portfolios that both reflect the values of our clients, and deliver competitive market returns.