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Responsible investment FUM hits $630 billion

Responsible investment strategies now account for half of total assets under management in Australia, according to a new report.


The 2015 Responsible Investment Benchmark Report, released today, found the total responsible investment industry accounted for $629.5 billion as at 31 December 2014.

The report, prepared by the Responsible Investment Association of Australasia (RIAA), points to Morningstar figures placing total assets under management in Australia at $1.270 billion – which means total responsible investment portfolios represent 50 per cent of the industry.

The report divides the sector into 'broad' responsible investment (defined as those investors integrating environmental, social and governance – ESG – issues) and 'core' responsible investment (ie. investors who apply screening, sustainability themes or impact investments).

'Broad' responsible investment accounted for $598 billion in assets under management, while 'core' responsible investment grew by 24 per cent throughout the year to hit $31.6 billion.

The sector has also provided investors with solid returns – with the report finding that responsible Australian equities funds and responsible balanced funds both outperformed their relevant benchmarks over one, three, five and 10 years.

RIAA chief executive Simon O'Connor said there is a mounting global consensus that responsible funds management outperforms over the short, medium and long term.

"Those who believe investing with your values means lower returns have their heads in the sand," Mr O'Connor said.

"There is currently a convergence of factors that are resulting in a very compelling case to invest responsibly, from consumers demanding investments that do no harm through to the evidence that investment value is inextricably tied to ESG factors.

"Off the back of these two factors, we’ve seen significant focus in particular around investor responses to climate risk and fossil fuels, an increase in funds excluding entire sectors from portfolios, as well as the emergence of impact investing attracting strong interest as another way to generate financial returns alongside social impact.

"The notion that Australians are disengaged from their superannuation has started its terminal decline and we anticipate that this will only result in greater interest in these issues. Those investors who are taking account of environmental, social and ethical issues in addition to financial issues are well positioned to capture this wave of growing demand," Mr O'Connor said.

 

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