Ethical investment on the rise

Responsible investment is the preferred approach for an increasing number of institutional and individual investors as an alternative to conventional investment practices, according a report from the Responsible Investment Association Australasia (RIAA).

Wednesday, December 15th 2010, 8:03AM

by Benn Bathgate

The report defines responsible investment as being when the relevant assets under management of fund managers have integrated environment, social and governance factors included in their mainstream investment process.

It also found responsible investment in New Zealand increased by $2.6 billion for the year ending June 30 2010, up to $17.2 billion from the year earlier $14.6 billion.

The most significant factor cited for the rise in New Zealand's responsible investment pool was the $2.2 billion increase in the NZ Superannuation Fund and the inclusion of the $230 million Trust Waikato.

The Responsible Investment 2010 report examines the growth of responsible investment in Australia and New Zealand and has found a 10% increase in managed responsible investment portfolios, a 50% increase in responsibly invested financial adviser portfolios and a 29% increase in Australian signatories to the Principles of Responsible Investment.

"It reaffirms that taking environmental, social and governance issues into account has become the best practice for those looking to improve investment performance in the short and long term," the report said.

"RIAAS's benchmark report shows that not only is responsible investment a smart choice, it largely outperforms the average mainstream funds over one, three, five and seven years for Australian shares and international shares."

Since 2009 the report found that core responsible investment - defined as a combination of specialised managed funds, community finance, green loans, RI charity investments and financial adviser portfolios) rose 13% from A$16.1 billion to A$18.9 billion.

"We continue to see world changing events in areas which are deeply interconnected such as climate change, energy security, water scarcity, food shortages and environmental risk which are all driving responsible investment," said RIAA executive director Louise O'Halloran.

"The 2010 Benchmark report figures exemplify the disappointment experienced by more and more people about the inability of traditional financial models to recognise the inherent impact of environmental, social and governance issues on investments. Taking these into account is both profitable and smart."

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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