Innovatia

Responsible investors will shape Australia’s future F inancial markets, and particularly the in- vestment industry, have taken up the ban- ner of sustainability and are sending a Simon O’Connor says a significant force is emerging within financial markets that has the potential to shape a stronger, more sustainable and equitable future across Australia.

quite simply, companies that create a safe working environment, protect human rights, promote diversity, respect stakeholder com- munities and minimise their contribution to climate change represent better investments. Responsible investors are seeing that factoring in people, society and the environment, along- side financial performance, when making and managing investments leads to better-in- formed decisions. It enables them to navigate turbulent times – to avoid the biggest risks and capture more opportunities. Australia’s responsible investment market is continuing its upward trajectory, with the Re-

sponsible Investment Association Australasia’s (RIAA) 19th annual Responsible Investment Benchmark Report Australia showing that re- sponsible investment now represents 37 per cent ($1.149 trillion) of Australia’s total $3.155 trillion in professionally managed assets. The ongoing growth of this market has been driven by three main factors: 1. an acknowledgement that managing ESG risks supports strong investment out- comes 2. an alignment with strong client preference for investments that avoid harm and do good 3. a growing focus by regulators on how in- vestors are managing significant ESG risks such as climate change and modern slav- ery. Global and national data show superior fi- nancial performance continues to be a defining feature of responsible investments. With a 20- year history behind this industry, there is now a strong body of evidence that shows investing responsibly delivers stronger risk-adjusted re- turns by avoiding the biggest risks and seek- ing investment opportunities. RIAA’s annual study shows responsible-investment Australi- an share funds and multi-sector growth funds outperforming mainstream funds over one-, three-, five- and ten-year time horizons. The views of investors and most Australians are aligning on issues. Nationwide research conducted by RIAA in 2020 shows the over- whelming majority of Australians now expect their savings (87 per cent) and superannuation (86 per cent) to be invested responsibly. Two

clear message to large corporations across the world that expectations have lifted regarding how they manage their environmental, social, cultural governance (ESG) and ethical impacts. What we’re seeing is more than a mere trend. A permanent shift has occurred, driven by a de- sire to deliver stronger long-term investment outcomes that align with client interests and contribute to shaping a prosperous and sus- tainable future. Responsible investors have emerged as a ma- jor force in Australia in the wake of a 20-year evolution from a niche collection of investors that sought to avoid harm into a sophisticated network that manages the full gamut of invest- ment risks, including those across ESG. Now, the next iteration of this shift is emerging: an in- vestment market that seeks to have real-world impact in shaping a stronger future. Underpinning this is the recognition that,

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