Planet Earth is in trouble.
We’re heading towards hotter summers and colder winters. Overfishing is a serious problem and our love affair with fast fashion means the average Aussie contributes 23kg to landfill annually in textiles alone.
If we do nothing now, the world in 2040 will be 1.5°C hotter than it was before the industrial revolution and sea levels will rise between 26 and 77 centimetres by 2100.
Make that 2°C and we can add another 10 centimetres.
To put that into perspective, a sea level rise of this magnitude would drive millions of people from their homes in low-lying countries like Bangladesh, Vietnam and the Maldives.
This is the warning from the latest report from the Intergovernmental Panel on Climate Change (IPCC), and it’s unsettling.
“Every extra bit of warming matters, especially since warming of 1.5°C or higher increases the risk associated with long-lasting or irreversible changes, such as the loss of some ecosystems,” said Hans-Otto Pörtner, co-chair of an IPCC working group.
But there’s also hope.
We can limit global warming, but, as the IPCC said, only through making massive changes.
Enter: the Australian investor
“What’s interesting in Australia with compulsory superannuation is that every Australian of working age is an investor, even though many of us don’t think of ourselves as an investor,” the CEO of the Responsible Investment Association of Australasia (RIAA), Simon O’Connor told Yahoo Finance.
“It means that we ultimately are making decisions as to the kinds of businesses and companies we are supporting or not through our superannuation and our investments.”
More and more Australians are realising this.
Figures show that 90% of Australians expect their super to be invested ethically and O’Connor put this down to non-government organisations’ (NGOs) efforts to raise awareness of the power of superannuation and ethical investment.
But for most people, their ethical investment is only an investment if it actually delivers a solid financial return.
And finding an investment that is both profitable and ethical is not always easy. Even defining it can be tricky.
For some people, it means ensuring their money isn’t supporting big tobacco companies. For others, their ethical investment needs to have a positive impact like sustainable energy or clean water.
5 ethical funds delivering a healthy return
Here are 5 examples of funds invested ethically delivering varying rates of returns.
1. The BetaShares Global Sustainability Leaders ETF is a newer entrant to the ETF market, having only entered in January last year. It provides investors with exposure to 100 large global stocks considered to be climate leaders. It’s also got a management fee well below the usual fees associated with ethical unit trusts and listed investment companies, at 0.49 per cent.
Latest returns: As at 30 September 2018, the ETF has made a one year return of 27.59 per cent, after fees and a one month return of 0.10 per cent.
2. The AMP Capital Responsible Leaders International Shares Fund offers exposure to global ethical stocks, with an annualised return of 17.86 per cent and a four-star Morningstar Sustainability rating.
Latest returns: This fund has delivered a one month return of 0.04 per cent as at 30 September 2018 and a one year return of 17.86 per cent.
3. Then there’s the Pendal Sustainable Balanced Fund, formerly known as the BT Sustainable Balanced Fund. BT was one of the first investment managers to move towards ethical strategies. It’s spread over Australian and global shares.
Latest returns: This fund has returned a one-year average of 8.69 per cent, post-fee but has softened recently, with a one-month return of -0.93 per cent.
4. ASX listed Australian Ethical Investment targets stocks which it considers positive for the environment and society and avoids mining, coal and oil. Instead, it focuses on healthcare and renewable energy.
Latest returns: It has a suite of managed retail funds, with its balanced fund making a one month return of 0.7 per cent as at 30 September 2018, and a one-year return of 8.8 per cent.
5. You could also invest via your superannuation. Australian Ethical Super is described by consumer advocate group, CHOICE, as “certified ethical”. Superannuation products within this fund will exclude companies involved in coal, coal seam gas, oil, weapons, tobacco, logging and gambling.
Latest returns: Its growth option has made a one month return of 0.6 per cent, as of 30 September 2018 and a one year return of 10.1 per cent per annum.
Not so fast: have you done your homework?
Funds and vehicles described as “tobacco-free” may not invest in tobacco directly, but could be supporting it through their investments in the biggest tobacco retailers; Woolworths and Coles.
This means investors need to consider their beliefs and just how strong they are. Once they’ve done that, they need to do their research.
The RIAA’s Responsible Returns website is a good place to start. It allows investors to compare funds by objectives, asset classes and investment products.
For example, a search for investment products excluding fossil fuel and logging exposures with an emphasis on sustainable water and energy draws out 13 investment providers, including Australian Ethical Investment, Nanuk Asset Management, BetaShares and Perpetual Investments.
Investors and would-be investors should also consider asking their financial adviser, fund manager or super fund what their approach to ethical investing is, O’Connor added.
“I really encourage people to ask the question; “Is this money actually being invested in a way that I can sleep soundly at night and be comfortable with?” And even better than that; “Can I be having a really great, positive impact with the way my retirement savings are being invested?”
Here are 24 Australian asset managers with products paying keen attention to the environmental, social and governance (ESG) factors of their investment and corporate decisions, according to the latest benchmark report from the RIAA:
• AB Global (AllianceBernstein)
• Aberdeen Standard Investment
• AMP Capital
• Amundi Asset Management
• Australian Ethical
• AXA Investment Managers
• BNP Paribas Asset Management
• Pendal Group
• Colonial First State Global Asset Management
• Dexus Property Group
• IFM Investors
• Investa Property Group
• JCP Investment Partners
• Lendlease Investment Management
• Magellan Asset Management
• Maple-Brown Abbott
• New Forests
• RARE Infrastructure
• Solaris Investment Management
• Stafford Capital Partners
• Stewart Investors
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