24th Jan 2018
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Ethics drives big rewards for superannuation
Author: Olga Galacho
An ethical way to make money

Hold the front page! Some big businesses are sacrificing financial returns to take an ethical stand. The major banks are among those corporations that have succumbed to a wave of activism questioning the lending practices of polluting companies.

But the most dramatic and unexpected recent backflip was by the former ‘Big’ Australian, BHP Billiton. Despite being a coal miner, the world’s second largest resources company has threatened to quit the Minerals Council if the industry group continues to lobby against  climate change mitigation policy.

It can be argued that leaving it so late to adopt a more ethical stance on global warming has cost BHP and other miners dearly. Failure to respond to the increasing global aversion to fossil fuels has affected bottom lines, with miners stung by the slump in coal prices.

Increasingly, investors are embracing the renewable energy sector over ‘polluting’ businesses. As demand for clean energy grows, those buying into the new model are profiting, rather than forgoing returns.

The performance of Australian Ethical’s superannuation fund indicates that mainstream investment returns can be matched and even surpassed with a portfolio of ethical stocks. Within the fund, super members can choose a risk profile that aligns with their investing style. Within Australian Ethical, four profiles (growth, Australian and international shares and advocacy) each outperformed average returns for the sector over the past year.

Data published by the Association of Superannuation Funds of Australia shows that the average fund return was 10.1 per cent, compared with a range of 10.5 per cent to 12.5 per cent returns for ethical funds.

While the advocacy fund predominantly invests in clean and sustainable companies, a small number of assets do not pass the ethics charter. They are retained purely so that Australian Ethical can lobby those organisations.

“As an advocacy fund, one of the main purposes of the fund is to engage directly with companies to pursue improved corporate behaviours in line with the Australian Ethical Charter,” it states.

The fund manager argues that: “Having unethical investments excluded from our ‘investable universe’ doesn’t lead to lower performance potential; it just means there is more money available to make positive, profitable investments.”

The funds do not invest in coal companies or businesses that exploit workers or grow tobacco. Instead, profitable fields that do attract the funds’ support are clean energy, medical solutions, innovative technology, sustainable products, healthcare and energy efficiency.

A 2017 report by the Responsible Investment Association Australasia concluded that: “Ethical funds have outperformed non-ethical funds over most time periods”.

The association says that almost 90 per cent of Australians expect their superannuation and other managed funds to invest responsibly and ethically. Other findings from its extensive survey include:

  • four in five Australians consider important social issues when investing. The top three issues are renewable energy, healthcare and medical products, and sustainable practices
  • the top three things Australians want to avoid investing in are animal cruelty, human rights violations and pornography
  • Millennials are the most likely group to prefer investing in a responsible super fund rather than a fund that only considers maximising returns
  • 68 per cent of baby boomers preference ethical investments
  • Women (72 per cent) are more likely than men (67 per cent) to prefer a responsible super fund over one that only considers maximising returns

Would you sacrifice some of your income to take an ethical stand? Is ethical investing political correctness gone mad? Should more companies consider if their operations are ethical enough?

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    COMMENTS

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    mike
    24th Jan 2018
    11:28am
    No. We own some of the worlds biggest coal reserves and AGL is selling our natural gas overseas leaving Australians unable to afford gas and electricity in their own countries, and yet our coal is used in China and elsewhere in the world yet we cannot use it here because of the blasted greenies and so our elderly and pensioners and retirees and young people have to suffer.What utter rot. USE OUR COAL
    Julian
    24th Jan 2018
    1:05pm
    Good point.
    Janus
    24th Jan 2018
    2:14pm
    Mike clearly cares not a hoot for the future of his grandchildren, or maybe he just does not understand the science and the evidence. We won't suffer, but the next couple of generations will.

    Australia does not have to sell its coal, or it can restrict itself to selling high grade coal for steel making. If there was a dollar in making landmines, I suspect mike and others would be in on that too.

    And no, I am not a "Greenie". I am a scientist. I actually support low emission energy, such as nuclear, and also population control, although I don't think that is possible now. The world just can't keep on this current pathway, and we have left it too late to change.

    So sad, but true. Most of us fail to understand the bigger longer term picture, perhaps not by choice but probably by inability.
    Old Man
    24th Jan 2018
    12:04pm
    Big business has an obligation to its shareholders, first last and foremost. It has no right to reduce its profitability just to appease a very small, but vocal, group of protesters. Some of these protests have been proven to be based on falsehoods. Big business should be making decisions based on the safety of its investments and and the ability of the investment to return the capital.
    Anonymous
    25th Jan 2018
    8:39am
    But the article correctly points out that healthy profits are achievable with ethical investments.
    floss
    24th Jan 2018
    1:00pm
    If our government both parties had the brains to keep our gas for Australians we would not be in the mess we are in as to energy supply . It may even rank as the greatest mistake in Australian history.
    Julian
    24th Jan 2018
    1:07pm
    You'd swear that when politicians make stupid decisions, it's purely in the name if self interest, or they've been bribed.
    KSS
    24th Jan 2018
    1:24pm
    "The association [Responsible Investment Association Australasia] says that almost 90 per cent of Australians expect their superannuation and other managed funds to invest responsibly and ethically.

    four in five Australians consider important social issues when investing. The top
    three issues are renewable energy, healthcare and medical products, and
    sustainable practices

    the top three things Australians want to avoid investing in are animal cruelty,
    human rights violations and pornography

    Millennials are the most likely group to prefer investing in a responsible super fund
    rather than a fund that only considers maximising returns

    68 per cent of baby boomers preference ethical investments

    Women (72 per cent) are more likely than men (67 per cent) to prefer a responsible
    super fund over one that only considers maximising returns."

    Well what else would you expect them to say!
    Old Man
    24th Jan 2018
    2:20pm
    And 83.7% of statistics are made up.

    24th Jan 2018
    6:30pm
    I refuse to allocate any of my super to so called "ethical investments" on principle
    old frt
    25th Jan 2018
    8:17am
    How true OM, stop pandering to the non contributing & poisonous green lobby . Australia used to have an inland sea and there used to be a land bridge between the Australian mainland and Tasmania in the south and also to New Guinea in the north, did modern man cause these changes? NO. Nature did our planet is constantly changing and we must learn to live with these planetary changes not what the greens try to BS us with.
    Careworn
    26th Jan 2018
    10:13pm
    Let me think, is money more important to me than animal cruelty. Do I really want to be supporting the live export trade and other abominably cruel and polluting practices. NO, and neither should any other person with a conscience. There should only be ethical super.

    27th Jan 2018
    7:45am
    So it seems many here are happy for Adani to destroy the Barrier Reef? And I guess it's fine for the greedy developers to wipe out the koala population, as long as people make money? Destroy bushland to build skyscrapers. Destroy farming land to produce poisonous gasses rather than using the power of the wind and sun. Run the rivers dry. Who cares, as long as we are lining pockets and storing up million in bank accounts in the Caymans?

    God help our grandchildren and their children. Already we are seeing record heat and cold and far more hurricanes, tornadoes, floods, etc. than ever before in history. Reputable scientists are predicting the world we be too cold to live in by 2090. But it's okay folks. Climate change isn't happening. It's just ratbags ranting about nonsense. As long as you keep loading up your bank account, all will be well. (At least we have to hope so, because we are never going to put an end to greed!)
    old frt
    27th Jan 2018
    5:22pm
    Reputable scientist also claimed our dams would never be full again.
    Now they are making each way bets calling it climate change .
    Our planet is constantly changing, learn to live with it.
    Wind power is to unreliable.Solar power panels required to deliver descent power would destroy more area than any coal mine currently in production. Solar also rely to much on battery backup which is a whole new danger in their disposal.
    Careworn
    28th Jan 2018
    9:07pm
    Ultimately nothing good comes from being unethical.


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