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Paul BensonMember of Ethical Advisers Co-op Australia & Practice Principle of Guidance Financial Services
Paul Benson is the Practice Principal of Guidance Financial Services, a financial planning practice based in Essendon in Victoria. Paul holds a Bachelor of Business in Economics & Finance, is a Certified Financial Planner, a SPAA accredited Self-Managed Super Fund Specialist, and member of the Responsible Investment Association of Australasia. “In the past, financial planners would ask prospective clients about their attitude to risk, what they earn, what they owe, and hopefully what they would like to achieve in the future. Whilst this is a good start, I believe we need to dig deeper to understand a client’s ethical viewpoint, and tailor their consequent investment strategy with these considerations front and centre.” |
Responsible investment becoming mainstream
The concept of responsible investment is that through well considered allocation of investment capital, positive change is made to our world. Businesses doing good are rewarded with capital to fund growth, whilst those with negative impacts on the planet or society are slowly starved of capital and wither.
This is a great concept, but for it to work there has to be a certain “weight of money”. An investor selling a tiny fraction of a company isn’t likely to have any influence on management decisions. However when a large investment fund decides to shift investments on ethical grounds, as we saw with the ANU divestment of mining stocks last year, companies takes notice.
It’s impossible to pin-point the commencement of the responsible investment approach. Many religious organisations have applied their particular moral filter to investment selection for many many years. However in a practical sense, for most investors, investment options that incorporated ethical considerations in portfolio construction became available in the 1980’s and 90’s.
Lacking scale, the early offerings were often expensive, but they laid an important ground-work for considering more than just which investment is likely to deliver the highest return.
It has taken some time, but skip forward to 2016 and all the major superannuation funds in Australia offer some form of ethically screened investment option. The terms vary somewhat – the option may be called “Socially aware”, “Sustainable”, or “Ethical” for example. But the evolution from a very niche concept around 30 years ago, to where it stands today is truly remarkable.
The Responsible Investment Association of Australasia’s recently released benchmark report found that 47% of Australia’s professionally managed assets now consider environmental, social and governance (ESG) issues. At the end of 2015, the total responsible investment industry accounted for $633 billion in assets under management.
Pleasingly the report also found that investors allocating their money in this way actually benefited in terms of investment return with Australian and International share funds showing out-performance compared to market benchmarks.
The responsible investment approach has come of age. Yet still too few Australians know of the options available to them. Ethical Investment Week, starting 24 October, is one way the word can get out on this great success story.
This is a great concept, but for it to work there has to be a certain “weight of money”. An investor selling a tiny fraction of a company isn’t likely to have any influence on management decisions. However when a large investment fund decides to shift investments on ethical grounds, as we saw with the ANU divestment of mining stocks last year, companies takes notice.
It’s impossible to pin-point the commencement of the responsible investment approach. Many religious organisations have applied their particular moral filter to investment selection for many many years. However in a practical sense, for most investors, investment options that incorporated ethical considerations in portfolio construction became available in the 1980’s and 90’s.
Lacking scale, the early offerings were often expensive, but they laid an important ground-work for considering more than just which investment is likely to deliver the highest return.
It has taken some time, but skip forward to 2016 and all the major superannuation funds in Australia offer some form of ethically screened investment option. The terms vary somewhat – the option may be called “Socially aware”, “Sustainable”, or “Ethical” for example. But the evolution from a very niche concept around 30 years ago, to where it stands today is truly remarkable.
The Responsible Investment Association of Australasia’s recently released benchmark report found that 47% of Australia’s professionally managed assets now consider environmental, social and governance (ESG) issues. At the end of 2015, the total responsible investment industry accounted for $633 billion in assets under management.
Pleasingly the report also found that investors allocating their money in this way actually benefited in terms of investment return with Australian and International share funds showing out-performance compared to market benchmarks.
The responsible investment approach has come of age. Yet still too few Australians know of the options available to them. Ethical Investment Week, starting 24 October, is one way the word can get out on this great success story.