Australian product providers have failed to meet investor demand for quality ethical investment strategies, says Morgan Stanley.
Speaking to InvestorDaily, Morgan Stanley Wealth Management executive director Nathan Lim said Australian investors’ ethical investment needs had been “unmet”.
Ethical investment products in Australia, “while innovative, just wasn’t really hitting the mark”.
“I just feel that what has slowed down the growth of this industry or this sub-industry within finance is that there's too much ‘greenwash’ out there.
“There’s too much ‘light-green’ product that really obfuscates the good from the bad products, so to speak,” he said.
He pointed out the market share difference in Australia’s responsibly invested assets compared with that of the US was 5 per cent and 25 per cent, respectively.
Australia’s lower figure was not a question of education, he asserted, but rather the “absence of good quality product and services”.
He referred to Morgan Stanley’s ‘Investing with Impact’ initiative that aims to better inform clients about their portfolio and the business activities that those companies were involved in.
Following a portfolio review, clients can choose between one of four approaches to investing ethically or impactfully: restriction screening, ESG integration, ‘thematic exposure’, and ‘impact investing’.
Most Australian investors tended to fall within the first category of restriction screening, Mr Lim said.
“The thing that I observed in here in Australia versus the US is that the Australian responsible investor is a lot more focused in the avoidance bucket than anything else.
“A lot of people talk about ESG integration and thematics, but really, when you sort of get down to it, it always starts off with: ‘I don't want anything to do with company ‘x’, or I don't want anything to do with that activity,” Mr Lim said.
“So, what’s happened is that I felt that there hasn’t been enough product in the market in the various asset classes that do enough on restrictive screening.
“Because that's what Australians want, and that hasn’t really been there.
“It’s not that it’s been growing slowly, it's just that it had nowhere to grow into,” he said.
He also pointed out that investors may not realise companies they invest in were involved in business activities the investor might not agree with, using major retailer Woolworths’ ownership of poker machines as an example.
“Everybody knows that, right? But does everybody know that they’ve got more pokie machines than The Star and Crown [Casino] combined?
Additionally, 15 per cent of multinational packaging company Amcor’s revenue came from cigarette boxes, while 0.1 per cent of Telstra’s revenue came from distribution of pornography.
The ‘Investing With Impact’ initiative was geared towards transparency and “add[ing] some sensibility to that industry,” Mr Lim said.
Correction: A previous version of this article incorrectly stated that 50 per cent of Amcor's revenue came from cigarette boxes.