Responsible Investment Funds Top Performers
Wednesday, 24th July 2013 at 10:05 am
Responsible investment funds are delivering better returns than the average mainstream fund in Australia, new research from the the Responsible Investment Association of Australasia (RIAA) suggests.
The industry body has released their 2013 Responsible Investment Benchmark Report, which compared the performance of responsible funds with mainstream funds across three major investment categories: Australian equities, international equities and multi-sector growth funds.
Core responsible funds came out on top in all but one category across one, three, five and ten year periods, and had better five year returns following the global financial crisis.
Core funds included specifically tailored managed funds, direct share portfolios managed by financial advisers, and also microfinance and microcredit offered by banks.
“The strong outperformance of ethical and responsible investment funds should finally put to bed the myth that a more responsible approach to investing leads to lower returns,” RIAA CEO Simon O’Connor said.
“With more of the region’s investments being made under responsible investment mandates, the extra analysis undertaken for every investment decision means responsible investors have a deeper understanding of their investments, so it should be no surprise they are earning better returns.”
Funds under responsible investment portfolios at December 2012 comprised 16 percent of all assets under management, at $152 billion, with three percent growth since 2011.
“With eight of the top ten investment managers in Australia having now declared themselves responsible investors by signing on to the UN Principles for Responsible Investment, it would be fair to say that responsible investment has become mainstream” said Simon O’Connor.
Responsible investment funds covered by the report included all ethical and socially responsible funds, as well as funds managed under ESG integration rated ‘above average’.
ESG integration was the dominant method of investing responsibly, making up 89 percent of the market total, having grown by 33 percent between 2011 and 2012.
Data for 2013 was sourced from 117 funds, over 100 advisers and 20 community finance organisations.
The RIAA has commissioned the research annually since 2002.
The 2013 report featured a section on impact investment for the first time.
Drawing on data from ‘IMPACT–Australia: investment for social and economic benefit,’ a study by the Department of Education, Employment and Workplace Relations, the RIAA spotlighted the significance of impact investing’s emergence in Australia.
“As societies grow so too do their needs. Unmet needs present opportunities for investors to innovatively address this gap in the market. Impact investing supplies capital for this. It creates the opportunity for entrepreneurship and where infrastructure is concerned, it also creates jobs in the process.
“RIAA is supporting this outlook and encourages the growth of impact investment in Australia,” the report said.
Read the full report here.