It is the rise of the generation of KeepCups, metal straws, reusable grocery bags and ethical consumerism. Companies are actively sourcing their inputs ethically, giving back to the communities in which they operate and are actively working to reduce their carbon footprint. But have you ever thought about what companies and industries you are supporting through your superannuation and investments? Why ethically invest your super?
Many of us forget to take concern with our superannuation. We open an account, assume our employer is contributing to it and then one day in the future hope there is enough money to retire. What you may not realise is, in many cases, your account provider is investing your money and its up-to-you to ensure where. So, ask yourself; “Why should I ethically invest my super?”
Why Ethically Invest?: The Rise of the Conscious and Ethical Investor
It is hard to deny society’s attitudes are shifting (and strengthening) when it comes to sustainability, corporate social responsibility, equality and other ethical issues. The 2010s saw the risk of conscious consumerism, characterised by demand gravitating towards businesses ‘doing their part’ for society and the environment. This forced businesses to clean-up their supply chains and ensure they were moving towards sustainable production. In 2020 alone, we have seen global climate change strikes demanding action and world-wide protest for equality and democracy. So, it comes as no surprise that this social trend is translating into the finance industry.
Generally, across the industry, ‘Responsible Investing’ is used as an umbrella term for the shift towards ethical, sustainable and impact investing, along with considerations of the company’s leadership, employee treatment, business relations and their environmental strategy (ESG factors). There is no ‘one-size fits all’ when it comes to responsible investing with portfolios differing on their ethical guidelines, social or environmental objectives and the ESG considerations. With values and preferences differing from investor-to-investor, there is no ‘Holy Grail portfolio’ that is perfectly sustainable and controversy-free.
Along with considerations of the company’s leadership, employee treatment, business relations and their environmental strategy (ESG factors).
Luckily, here in Australia we have (by a great margin) the most variety when it comes to choosing funds that incorporate ESG filtering techniques. The launch of sustainable funds (both active and passive) has been gaining great momentum since 2015 and shows no indication of slowing down any time soon. Morningstar, a provider of investment services and research, calculated a 30% increase in retail assets invested in sustainable investments over a twelve-month period (30 Sept. 2019 – 30 Sept. 2020). In the same period, 61% of Morningstar’s sustainable funds placed in the top half of their prospective categories – disputing the common misperception that sustainable investing comes at the cost of investor returns.
Why Ethically Invest?: How do I know what portfolios align with my ethics?
When portfolios are created, each provider has their own guidelines and categories by which they eliminate and include companies – this process is called screening. Common filters include market capitalization, growth rates, dividend payments and yields. When providers create their ‘responsible’ portfolios they may consider factors such as animal testing, gambling, controversial weapons, palm oil, coal mining, as well as net impact measures of fossil fuels, deforestation, clean energy and climate action.
There are a variety of funds on the market that take into consideration the United Nations’ 17 Sustainable Development Goals – including no poverty, good health and well-being, sustainable cities and communities, responsible consumption and production, climate action, gender equality and quality education.
What Vision can Do
Want to learn more about why you should ethically invest? Concerned that your superannuation or investments may be supporting companies that you would ethically stay away from? At Vision, we can help you with that. We will confirm where your funds are invested and help you find both super and investment options that best align with your values. Book an appointment with us today to for an investment switch you’ll hardly notice.