Responsible
Reflections:
Adviser Insights
from the World of
ESG Investing
Responsible
Reflections:
Adviser Insights
from the World of
ESG Investing
- Introductions
- Responsible Investing and ESG integration defined
- Consumer interest is strong and growing
- Fund flows into ESG and other responsibly managed investments
- Adviser Reflection - ‘Clients have eyes wide open on these topics’
- Adviser reflection - ESG investing is for all ages
- Adviser reflection ‘Focus on economic sustainability’
- Manager Reflections - exponential growth in green bond issuance
- Adviser Reflections - ESG options now available across all asset classes
- Companies with poor ESG records pay a performance penalty
- Adviser reflections: ESG investments add alpha and reduce risk
- Responsible Investing is about more than just climate
- Manager Reflection: A balanced approach to ESG
- The challenges in looking under the hood
- Adviser reflection: navigating the nuances of greenwashing
- Questions to ask of an ESG manager
- ASIC guidance on ESG and advice processes
- Adviser reflections - best interests and financial stewardship
- In summary
Responsible Investing and ESG integration defined
The field of Responsible Investing is characterised by a diversity of terminology, much of it used interchangeably.
For the purposes of this paper, we will align to the terminology and definitions used by the Responsible Investments Association of Australasia (RIAA).
According to the RIAA, Responsible Investing – also known as ethical or sustainable investing – is a holistic investment approach where environmental, social, corporate governance (ESG) and ethical issues are considered in addition to traditional financial metrics when making investment decisions.1
A key aspect of Responsible Investment processes is risk management, and the formalised and systematic consideration of ESG factors throughout the process of researching, analysing, selecting, and monitoring investments is known as ‘ESG integration’.
But the remit of Responsible Investing goes beyond just the consideration of individual investment opportunities:
“Responsible Investing requires funds to execute stewardship duties and to improve the performance of companies, thereby contributing to the stability and sustainability of the financial system more broadly.” 2
Importantly, Responsible Investing is used by the RIAA as an umbrella term, covering a spectrum of more specialised fields, as per Figure 1 below.
Figure 1: RIAAs Responsible Investing Spectrum
Source: RIAA 3
To the extent that – on an Assets Under Management (AUM) basis – ESG integration is by far the most common form of Responsible Investing approach currently employed in Australia, as shown in Figure 2 below, much of the discussion in this paper will be focused accordingly.
Figure 2: Relative Size of Responsible Investment Sectors Australia (AUM)
2020 data for impact investing is combination of data from the Benchmarking Impact 2020 repact investment products released in 2020 collected via desktop research.
Source: RIAA 4
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References
01
Responsible Investment Benchmark Report Australia 2021, Responsible Investment Association of Australasia
02
IBID.
03
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04
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