The Disconnect between Values and Investments

One-third of consumers choose to buy from brands they believe are doing social or environmental good. This report from Unilever shows that increasingly people care about the impact on the planet that results from the products they buy.

A recent Lowy Institute survey revealed 59% of respondents believe climate change is a “serious and pressing problem”. In Australia, children are taking to the streets to protest government inaction.

But when it comes to our superannuation and investments – there is a disconnect. In 2017, only 12% of professionally managed assets in Australia were invested in core responsible investments. (Core responsible investment applies at least one of the following responsible investment strategies: screening of investments – negative, positive or norms-based screening; sustainability-themed investing; impact or community investing; corporate engagement and shareholder action – RIAA.)

It’s not that the intention is missing. 9 out of 10 Australians expect their super/investments to be invested responsibly and ethically.

So what is blocking the path from intention to action?

Typical responses when I ask people about investing responsibly include:

  • I’ve never really thought about it
  • I didn’t know you could do that
  • I wouldn’t know how to do it
  • I thought my returns would be lower

Education and awareness have the potential to drive a massive shift. And research from RIAA for 2017, shows that core responsible investments have matched or outperformed the average mainstream manager over most time periods.

 

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Source: Responsible Investment Association 2018 Benchmark Report

 

There could be many reasons for a conflict between our investments and values:

  • raising money for cancer support services and being invested in tobacco companies
  • being passionate about helping others with health and nutrition but invested in companies contributing to obesity
  • a vet invested in companies where animal cruelty is part of their research process

Significantly, 4 out of 5 Australians would consider switching their super/investment if their current fund engaged in activities inconsistent with their values. But does the typical investor know what their fund is doing? I would say no.

Would additional super fund reporting increase responsible investment? If you knew how much exposure you had to the activities below, would you change your investment strategy? Make a switch to more ethical options?

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Graphic: Future Super

No doubt there would be change.

If you care about living in a sustainable world and the future of the planet, it makes sense that you’d want to invest businesses that have that same purpose at their core.

Here’s an interesting idea from Matthew Weatherley-White – what if environmental, social and governance (ESG) investing was the default option for all investors. If you don’t want to invest that way, you opt-out.

 

 

Now that would be a game changer. If most Australians want their investments to be responsible and ethical, maybe not such a crazy idea.

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