Responsible investing hits Aussie milestones

Yasmine Raso

Senior Journalist, Financial Newswire

13 September 2022

The value of Australian assets managed by a responsible investment framework or approach has reached $1.54 trillion and now makes up 43 per cent of the total market, according to the latest edition of a Responsible Investment Association Australasia (RIAA) study.

The 21^st annual Responsible Investment Benchmark Report for 2022 also found 45 per cent of investment managers are holding firms accountable for their activities related to environmental and social issues, more than doubling in the last two years from 21 per cent in 2019.

Researched in collaboration with EY and detailing from 1 January to 31 December 2021, the report also said the power of investors to influence company activities and strategies related to certain issues had grown, with 45 per cent of investment managers now reporting on their corporate engagement activities.

The amount of assets managed with responsible investment approaches increased by $616 billion since last year, with ESG integration ($752 million), corporate engagement and shareholder action ($726 billion) and negative/exclusionary screening ($705 billion) the top three.

“This year’s study shows that we’ve hit a tipping point of the responsible investing trend. Companies can no longer tick a box by providing cursory ESG metrics. Investors are expecting real, measurable action towards environmental and social issues,” Estelle Parker, Executive Manager, Programs at RIAA, said.

“Investment managers are also getting much better at backing up their claims around the sustainability of their portfolios, as they don’t want to find themselves on the wrong side of tightening greenwashing regulation and scrutiny.

“A record 74 investment managers out of 140 have been identified as Responsible Investment Leaders, who explicitly and systematically consider ESG factors in the allocation of capital, and are decidedly transparent, reporting publicly not just on their activities to improve environmental and social sustainability, but also the outcomes they achieve.”

While climate remained a major theme for positive and negative screening in responsible investing, the theme of gender diversity and female empowerment also climbed in popularity from 10^th in 2020 to 6^th in 2021.

“Investors are facing more demand and increasing scrutiny on their approach to responsible investment and the market is responding, with more funds being managed responsibly than ever before,” Emma Herd, Climate Change and Sustainability Services Partner at EY, said.

“As a wave of mandatory reporting and product disclosure regimes come into force, understanding the current state of the market and the range of approaches being adopted by responsible investors is critical.”