A “seismic shift” is occurring in consumer attitudes towards responsible investing and the ongoing relative outperformance of ESG and green funds, according to one wealth management company.
During their latest market announcement, Australian Ethical has flagged the existence of a “seismic shift” in the market, with consumers said to be taking an active approach to where their money is invested.
According to the wealth manager, this shift helped it garner a 56 per cent lift in net inflows to $1.03 billion and a 50 per cent increase in funds under management to $6.07 billion.
Its superannuation service also experienced a 43 per cent bump in funds under management.
And while superannuation members are said to be swarming to ethical-based funds, Australian Ethical’s chief executive and MD John McMurdo pointed out they are actually increasing their retirement outcomes due to this ethical switch.
“Looking at our own performance, we continue to generate above-market and record returns across our portfolio of funds,” Mr McMurdo told InvestorDaily sister brand nestegg.
In fact, separate reporting from SuperRatings showed that Australian Ethical’s super option delivered 38.8 per cent returns over the last financial year, ranking it first over one, three, five, seven and 10-year periods.
With the ASFA estimating people who want a comfortable retirement need up to $640,000 for a couple and $545,000 for a single person, assuming they also receive a partial age pension from the federal government, increasing returns can have a life-changing impact on retirees.
Investors still see it as a morale issue
Despite superior returns, superannuation members are continuing to switch to a more ethical fund due to morals over performance.
Research released by the AustralianSuper showed that climate change and environmental factors have been, and will continue to be, the number one driver of investment decisions by those who consider ESG factors when making investment decisions.
“The pandemic and the climate crisis have been major driving forces for consumers who now realise that where they invest their money really matters. They’re choosing to invest in a more sustainable future,” Mr McMurdo said.
“Our consistently strong performance over the past years has shown that you can make more ethical investment choices without compromising returns.”
The CEO pointed to the recent Intergovernmental Panel on Climate Change (IPCC) report as a historic moment for investors and corporations to step up and support urgent and large-scale initiatives to reduce emissions.
Labelled a “code red for humanity” by UN secretary-general Antonio Guterres, the report explained that the globe is already 1.1 degrees Celsius warmer, with Australia alone having reached 1.4 degrees Celsius above pre-industrial temperature levels (1850-1900).
As such, Mr McMurdo believes investors are getting the message and are looking to align their superannuation with their morals.
“We strongly believe that profit and purpose can go hand-in-hand,” he said.
“Embedding ethics into the investment process can allow for excellent investment performance that also creates a positive impact for people, planet and animals, and addresses growing issues like climate change.”
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