Putting your Money where your Heart is – Ethical Investments
Millennials – take a bow. Not only are you concerned about how your super and investments are invested, you are also more likely than any other age group to act on your beliefs when choosing a super/investment fund.
Research commissioned by the Responsible Investment Association Australasia (RIAA) reveals that 75% of Millennials prefer to invest in a responsible super fund than one that only considers maximising financial returns. Well ahead of Gen X on 66% and Baby Boomers on 68%.
Across all demographics, the proportion of people who would rather invest in a super fund that “considers the environmental, social and governance (ESG) issues of the companies it invests in and maximises financial returns”, as opposed to a fund that focuses solely on maximising returns, has risen by 27% since 2013.
That’s a pretty strong trend which sends a clear message not only to superannuation and investment fund managers, but also to the wider corporate community – people care about more than just profits. They also want their investments to contribute to the greater good.
What makes an investment ethical?
Ethical investment funds may use positive screens to select companies that are doing ‘good’ things, or negative screens to exclude companies doing ‘bad things’. Or they may do a bit of both.
There are, of course, different views as to what is ‘ethical’. Someone with strong religious convictions may be interested in a very different range of investments than someone with deep environmental concerns. Typically, though, ethical funds tend to avoid investing in companies involved in weapons manufacture, alcohol, tobacco, gambling or fossil fuels while favouring renewable energy companies, sustainable technologies or healthcare.
Even then it can be difficult to decide if a particular company is ‘good’ or ‘bad’. Many people avoid investing in companies that mine uranium, but those same companies may also extract the materials needed to build wind turbine towers. Or a bank that finances coal mines may also lend to solar farms and energy efficiency projects.
Given the wide range of ethical considerations, you may need to do some in-depth research to find the fund or funds that best match your values.
Is your fund doing the right thing?
While you may have an ‘out of sight, out of mind’ attitude to your super and investments, it’s important to remember it’s your money and you get to choose where and how it’s invested. Start with your fund’s website or disclosure documents and look for the environment, social and governance section.
Most large super funds offer a range of investment options, only some of which may match your idea of ‘ethical’. However, there may be a direct share option, allowing you to construct your own portfolio of shares in companies that are compatible with your values. Or you may look to the increasing number of investment managers that apply ethical filters across their entire range of funds.
Advice moves with the times
Fortunately it’s becoming easier to track down the investment funds that suit you with advisers more switched on than ever to the needs of the ethical investor. Talk to your adviser or give our office a call about the issues that are important to you so they can help you invest your super and investments where your heart is.
We believe it’s the responsibility of our generation to ensure that we invest in the right companies to ensure we look after our environment for the generations to come – every little bit helps!
Sources:
“From values to riches. Charting consumer attitudes and demand for responsible investing in Australia.” Responsible Investment Association Australasia https://responsibleinvestment.org/
MK Wealth Solutions is a Corporate Authorised Representative No 100223 of Synchron ABN 33 007 207 650 AFSL 243313. The information provided in this article has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your personal financial adviser before you make any decision regarding any products mentioned in this article. Whilst care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither MK Wealth Solutions and Synchron, nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.
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