17 May 2022
The rise of socially responsible investing
Ethical investment is on the rise. Australians are becoming more aware of the impact their investments can have. But what does this mean for you? And how can you know if your investment is ethical?
What is socially responsible investing?
Also known as ethical investing, this is the trend of investing in sustainable, environmentally friendly and socially conscious businesses that are looking to make essential contributions to our future. This trend is capturing the attention of many Australians. For example, 4 in 5 Australians feel environmental issues are important when it comes to the investment of their money. According to the Responsible Investment Association Australasia (RIAA), about $1tn of the $2.24tn in managed funds is classified as responsible.
Growing returns
Choosing to invest responsibly doesn’t mean that you have to miss out on your returns. In fact, the truth is quite the opposite. The RIAA’s Responsible Investment Super Study found that Australian super funds that comprehensively engage in responsible investment outperformed their peers over 1, 3, and 5-year time frames. The study also found that 67% of those who don’t currently invest in ethical companies, funds, or super funds would be likely to consider doing so in the next 5 years.
Different approaches to socially responsible investing
These are some of the most common approaches to consider when it comes to socially responsible investing.
- Negative screening: involves excluding industries that you don’t want to support. Some examples could include weapons, tobacco, alcohol, gambling, or animal cruelty.
- Positive screening: involves actively seeking out companies that are trying to make a difference. Some examples could include companies in renewable energy, education or healthcare.
- Impact investing: involves looking for companies whose business operations are focussed on solving some of the world’s biggest challenges. These are companies that are impact driven at the core of their mission.
- ESG integration: involves considering different Environmental, Social and Governance (ESG) factors to help choose a particular investment.
How do I find socially responsible investments?
The RIAA has created its Responsible Returns tool to help investors looking for ethical investment options based on the issues that matter to them most.
If you need help in developing a financial plan that considers ethical investing or providers, please contact your PSK financial adviser. If you don’t have a PSK adviser but would like some help, contact us today on 02 9324 8888.
Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
If you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser.
Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
