Introduction

As daily conversation in Australia is increasingly dominated by concerns about the environment and global warming, more and more investors are looking at how they can make a difference and choose sustainable or ethical investments as part of their portfolio mix.

So what exactly is an ethical investment?

The answer can vary depending on your own personal values and attitudes, covering a range of issues usually referred to as ESG standards or Environment, Social and Governance criteria.

Introduction

In recent years, ethical investing or socially responsible investing (SRI) has become increasingly popular. Driven by the growth in demand for businesses that are profitable and ethical, along with regulatory frameworks to address challenges such as climate change and modern slavery, there has never been a better time to gain exposure to ethical investments.

What are ethical investments?

Ethical investments provide exposure to companies with strong environmental, social and corporate governance (ESG) structures and practices. The Responsible Investment Association of Australia estimates there is almost $1 trillion invested in ethical companies and strategies across the country, equating to 44 per cent of the entire $2.24 trillion managed by professional investors in Australia.

Introduction

Millennials – take a bow. Not only are you concerned about how your super is invested, you are more likely than other age group to act on your beliefs when choosing a super fund.

Research commissioned by the Responsible Investment Association Australasia (RIAA) reveals that ....% of Millennials prefer to invest in a responsible super fund than one that only considers maximising financial returns. Well ahead of Gen X on ...% and Baby Boomers on ...%.

Across all demographics, the proportion of people who would rather invest in a super fund that “considers the environmental, social and governance (ESG) issues of the companies it invests in and maximises financial returns”, as opposed to a fund that focuses solely on maximising returns, has risen by ...% since 2013.

That’s a pretty strong trend which sends a clear message not only to superannuation and investment fund managers, but also to the wider corporate community - people care about more than just profits. They also want their investments to contribute to the greater good.

What makes an investment ethical?