05.Your role as investor
Where can you invest?
Your super fund
Most large super funds offer a sustainable option, often outsourcing the investment function to a large fund manager. You don’t have to put all your eggs in one basket — super funds often let you divide your investments among several options (for example, their ‘responsible’ and ordinary share funds).
Most of the same investment funds and managers are available outside super. A number of specialist funds invest in areas that are considered responsible and sustainable, such as renewable energy.
You could always invest in particular shares, and in companies you believe are acting responsibly and ethically, without going through a managed fund. And some super funds allow individual share selections from ASX 200 companies.
It's your call
Responsible investment’ helps people to invest in line with their values and their financial needs. However, investors are hampered by the fact there’s no single definition for what can be called ‘ethical’, ‘sustainable’, ‘socially responsible’ or ‘socially responsive’.
You might, for example, oppose banks that charge penalty fees (which may themselves be illegal) to disadvantaged consumers, while you have no ethical issue with companies that brew beer, conduct stem cell research or mine uranium for nuclear energy.
Or perhaps none of that matters to you, but you buy into the risk-management argument that ‘sustainable’ companies — those showing good environmental, social and corporate governance performance — are likely to be more profitable in the long run.
Whatever your view, the bottom line is that if you want to take ethical or sustainability criteria into account when investing, you need to find out exactly where your money is going, so you can make an informed choice.
Don’t get caught out by the ever-changing industry jargon. You may be able to choose amongst ‘ethical’, ‘sustainable’, ‘socially responsible’, ‘eco’ and ‘socially responsive’ funds, but what counts is where their dollars are flowing, not the marketing spiel.
it’s important to do your own research when comparing funds.
The Ethical Investment Association is a good starting point, detailing the investment strategies of ethical and sustainable funds that have been certified through its certification program.
Another option is to get professional advice (an adviser accredited by the EIA may be able to help). Make sure your adviser is licensed by the Australian Securities and Investments Commission (ASIC).
The Ethical Investor magazine and website ranks the social, environmental and corporate governance of Australian companies and investment funds. It also covers corporate governance, the ethics of mainstream investment and information on socially responsible finance products.
Principles for responsible investment: these principles were developed by an international group of institutional investors, reflecting the increasing relevance of environmental, social and corporate governance (ESG) issues to investment practices. The process was convened by the United Nations Secretary-General. Details of the principles and signatories, which include Australian fund managers, are available at unpri.org.