Investing your super ethically can underpin your financial and emotional wellbeing in retirement. Simon O’Connor, CEO of Responsible Investment Association Australasia asks the question – “have you checked your investments lately”
After having spent our careers working hard to secure our family’s well-being and comfort, most Australians hope to enter retirement with sufficient wealth to enjoy the retirement years. You’ve probably spent plenty of time thinking about this; working with financial advisers to ensure you’re well set up to support the lifestyle you hope to maintain for many healthy and happy years ahead.
Many of us will also be thinking about the type of world we’ve contributed to, that will be passed on to the following generations, and perhaps our role in shaping that world – through legacy in our work, maybe even our volunteering and philanthropy. You’ll find your areas of passion, those things about the world you think could well do with improving, and possibly in your own way make a contribution to these areas.
But often many of us overlook the very tool that is our strongest in influencing the world that we’ll pass on to our children and grandchildren – and that tool is the financial nest egg of our superannuation.
For most Australians today, those retirement savings will likely be the largest investment we ever make, after purchasing a home.
While many of us are now aware of the power of our spending choices as we diligently seek out Fairtrade coffee and free-range eggs; yet so many are unaware this very same power can be applied to our investments. Though unlike coffee and eggs, these investments aren’t a part of our day-to-day lives, so we can tend to overlook the enormous influence they can have for our future on this earth.
Indeed, every investment you make through your superannuation is showing your support, whether intended or otherwise, through ownership of the companies you’re invested in. If our super investments are the fuel of the economy, then our investment decisions are directly shaping that same economy by the companies we choose to support. Or not support.
Charities and faith based groups have long understood this – cancer research charities understand that it would be entirely contrary to their mission to be investing their own funds in a tobacco company. Likewise, religious groups have long had in place ethical investing policies to ensure they aren’t supporting the very same companies that are causing the social harm they work to avoid, such as gambling, or particularly nasty weapons, or “adult entertainment” (that is not referring to musicals by the way).
Although it’s taken a little longer for us as individuals to start joining these dots, over the last three years, we’ve seen a tripling of funds flowing into ethical investments as more and more Australians are realising the power of these investment decisions in supporting the kind of world we want to live in and leave for our family.
Increasingly, Australians are asking their financial advisers and superannuation funds to ensure they are not invested in companies that run contrary to their own values – be that tobacco companies, companies engaging in child labour practices, those making cluster bombs and landmines, gambling firms, those who breach animal welfare standards, or disregard for their environmental impact.
If you’ve just said to yourself, ‘Surely I’m not invested in cluster bomb makers, or supporting child labour’, or words to that effect, you’d not be the first to be aghast at what sometimes turns up in a retirement portfolio when checked.
For many of us, the concept that we might be supporting companies that are engaged in activities such as those – in fact, not supporting but actual owners of those companies through our investments – might be abhorrent. But too many of us have never asked the question – where do my investments go?
Well it’s time that this ended. Because we do all care about the world we are leaving to our grandchildren, and it makes simply no sense to be investing our largest asset in a way that contradicts our own values and passions.
The good news is that a long history of ethical investment (or now referred to as responsible investment) shows us that investing in a way that considers ethical, social and environmental issues is entirely consistent with making strong returns on your investments.
Why? Quite simply, those more sustainable companies – the ones that pay their employees fairly, that don’t pollute the environment, that aren’t engaging in unethical conduct – are the companies performing best on the share markets. These factors have become a proxy for overall good management of a company, and so make a good investment, supported by research from esteemed institutions such as Harvard Business School and Oxford University and now well and truly accepted within financial markets.
Our own research has also shown this to be true with responsibly invested Australian share funds outperforming their benchmark and the average of mainstream funds over three, five and ten years.
This all makes sound investment sense, which is why we now have many of the largest investment institutions in this country committed to systematically assessing these environmental, social, and corporate governance factors in their everyday investment decisions.
We have recently hit a milestone in Australian financial markets where over half of all professional investors consider these factors in their strategies, and so we are now at a stage whereby issues such as climate change, human rights, corporate culture, diversity and a whole range of other important sustainability factors are at the forefront of review by Australia’s finance community.
So the question remains – have you checked your investments lately?
For anyone looking for more information on how to find investments that align with their values, visit: www.ResponsibleReturns.com.au
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