Figures released by the Responsible Investment Association Australasia (RIAA) in its Benchmarking Impact, Australian impact investor insights, Activity and Performance Report 2020 support this, with 67 per cent of Australians believing ethical or responsible banks perform better in the long term, and 62 per cent believing ethical or responsible superannuation funds perform better in the long term. A big shift from 2017 when only 29 per cent believed this.
The report also found that Australians have high expectations with nine in 10 (89 per cent) feeling it’s important that their financial institutions invest responsibly and ethically across the board.
It’s easy to understand. To me, it‘s having the opportunity to use the investments that are under your management to create positive impacts in the community and lasting change.
It’s not just about thinking in financial terms, but about doing good through the power you have with investment decisions.
Dr Ameeta Jain, senior lecturer in the Faculty of Business and Law at Deakin University, agrees. Dr Jain has noticed we are seeing more people, especially younger people and women, developing an awareness of environmental and social outcomes and a desire for their investments to align more closely with their values and contribute to positive outcomes, or at least not contribute to negative outcomes, for people and the planet.
In a breakdown from RIAA’s From Values to Riches 2020, 88 per cent of Gen Z, 86 per cent of Millennials and 76 per cent of Gen X compared to 70 per cent of Baby Boomers believe investment decisions can influence things like climate change and health and wellbeing. It found that 91 per cent of women, compared to 82 per cent of men, are also more likely to think Australia’s financial services sector has a role to play in generating positive social and economic outcomes for the country.
This has been what’s most surprising about recent trends. The industry has started talking more about impact investments, defined as investing in something that’s about having a positive social outcome, and people are taking notice.
A good example is Teachers Mutual Bank, which for the eighth year running has made it into the Ethisphere institute’s World’s Most Ethical Companies list and is the only Australian company to do so.
The bank has certification from the Responsible Investment Association of Australasia for all its retail deposits, mortgages and wholesale funding.
The certification symbol is recognised by investors and consumers across the region as providing confidence that a product or provider is delivering on its responsible investment promise and meeting the Australian and New Zealand standard.
Reports show that interest in responsible and ethical investing is at an all-time high, however that’s tempered with findings in the RIAA From Values to Riches 2022 report that show Australians expect investment products to be verified as delivering on their promise. Some 75 per cent of Australians say they would be more likely to invest in an organisation, fund or product that has been certified by an independent third party for its responsible investment practices.
It’s this transparency that’s key. It’s one thing to say you’re a responsible investor but you need to be able to stand up and prove it.
Dr Jain agrees. "Companies need to focus on adequate disclosure and reporting. The quality of this information is improved by ensuring credible third party assurance."
While RIAA’s From Values to Riches 2022 report suggests three quarters of Australians would consider moving their banking, super or other investments to another provider if they found out their current provider was investing in companies engaged in activities not consistent with their values, this may not be the best approach.
It’s an easy option for investors to sell their shares in protest if a company does something that goes against its values, and there may be a time when that is necessary, however it’s possible to have a better opportunity for changing company behaviour by using your power of influence as a voting shareholder.
There’s more to be done from the inside at times rather than leaving in protest as the first reaction.
The last word
So as the Millennial and Gen Z cohorts grow their wealth and flex their investor dollar voice, it’s clear that the finance industry will be listening. But it’s broader than that too. With the impact of climate change, the 2020 bushfires as well as COVID-19, more Australians want their savings and investments to have a positive impact and now seem willing to take some action to ensure this happens.
There’s an expectation from people who give you money that you are doing the right thing with their investment. A trend that’s not just happening here, but the world over.
Emma Sakellaris, CEO, Foresters Financial