Investing Ethically in Superannuation
What exactly is ethical investing or responsible investment?
“It is when an investment is selected to complement views on moral, environmental or political matters”.
Ethical investment is reasonably new & just ten years ago, ethical investing was still largely seen as a fringe activity.
The Responsible Investment Australasia (RIAA) figures in a 2017 report estimated that the total funds under management in responsible investment portfolios in Australia totaled $622 billion assets as at 31 December 2016 compared to just $13.9 billion in 2002.
Pros of Ethical Investment
- Over 80% of Australian Investors now base their investment decisions on “Non-Financial Factors”.
- You can feel good about how you’re investing your money.
Cons of Ethical Investment
- You may receive less financial benefit from ethical investments if social responsibility becomes more important than getting returns on your investments.
- Finding genuine ethical investment options may involve you conducting your own research with no clearly defined rules or definitions around the term.
- The fees associated with socially conscious investment funds can sometimes be higher than regular funds.
How Do You Decide If an Investment Is Ethical?
There is no clear definition of an ethical superannuation fund & it can be hard to decipher what is ethical. Different people have different views & ethical investments can range from green energy to companies that don’t produce weapons to staying away from tobacco.
Ethical Investment Is Now A Growing Trend
The Australian Human Rights Commission (AHRC) revealed that there has been a significant increase in the integration of environment, social & governance factors into consumer’s investment decisions. David Macri from Australian Ethical Investment has stated that – “Thanks to the information & digital age, ethically aware people who are also investors & linking the values with their money are demanding more from their Funds.”
Source: Justine Davies, CANSTAR