Investing grows in responsibility
Exclusive: Consumers’ desire for investments with positive environmental and social impacts is giving a small Australian organisation a global profile, writes Joe Hildebrand
AN eye-watering $40 trillion from all over the world is banking on a net zero economy, with the number of businesses backing sustainable investments tripling in the past five years alone.
It’s all being done through a humble Australian nonprofit that few everyday punters have ever heard of.
The Responsible Investment Association of Australasia was founded 20 years ago and entirely unknown outside local financial circles.
It now has 450 members managing more than $40 trillion in assets, up from 150 members and $9 trillion just five years ago.
These include banking giants NAB and CBA, super fund behemoths Australian Super and Cbus, international wealth advisory firms JB
Were and KODA Capital and insurer QBE.
Mega-government departments, such as DFAT, are also members, along with some of the largest global fund managers, namely Blackrock, Fidelity, Franklin Templeton and Vanguard.
“Our research highlights that consumers are increasingly concerned about the social and environmental impacts that their super and investments are having and RIAA members are working hard to respond to this demand,” RIAA executive manager of programs Estelle Parker said.
“What’s become clear is that it’s no longer good enough to simply claim you’re investing responsibly. If you’re not doing it well, then there’s a high risk of losing business.”
RIAA has the world’s longest running responsible investment certification program, which differentiates quality, true-to-label responsible investment products that meet the Responsible Investment Standard.
In other words, it separates the wheat from the chaff,
identifying and certifying companies that have genuine quality control and genuinely invest only with sustainable and responsible businesses.
This is in contrast to the 21st century phenomenon of “greenwashing”, in which a company publicly claims to be an environmental do-gooder while in fact not doing good.
In Australia, ASIC has reviewed the prevalence of greenwashing in the marketplace as many managers have sought to ride the wave of popularity of movements such as impact investing and so-called “rainbow washing” – trying to cash in by claiming an affinity with the Pride movement.
The RIAA’S Certification Program grew by 21 per cent last year alone and now boasts more than 200 super, banking and investment products.
That same year the Australian responsible investment market soared in popularity to $1.2 trillion, with responsible investment assets
growing at 15 times the rate of professionally managed investments overall.
While the majority of the mainstream investment market claims it is responsibly invested, those funds engaging in leading practice responsible investment have seen an explosion in assets under management, growing 30 per cent in 2020. This has come at the expense of the remainder of the market, where the value of assets has shrunk by 11 per cent – a wipeout of $234bn.
In short, investment managers committed to responsible investment have money pouring into their funds as those with ineffective policies or poor processes are being left behind and the capital flows out.
The move also appears to be customer-driven, with thousands of consumers each month flocking to an RIAA online portal that helps them search for funds that align with their interests. The number of searches grew 27 per cent in the year to June.
“With increasing numbers of products coming to market, there’s a need to distinguish quality and we are experiencing unprecedented demand for products to be certified,” Ms
Parker said.