When it comes to ethical investing, millennials can take a bow. Not only are they concerned about how their super is invested, they’re more likely than any other age group to act on their beliefs when choosing a super fund.
Research commissioned by the Responsible Investment Association Australasia (RIAA) reveals that 75 per of millennials prefer to invest in a responsible super fund than one that only considers maximising financial returns. This is well ahead of Gen X on 66 per cent and Baby Boomers on 68 per cent.
Across all demographics, the proportion of people who would rather invest in a super fund that “considers the environmental, social and governance (ESG) issues of the companies it invests in and maximises financial returns”, as opposed to a fund that focuses solely on maximising returns, has risen by 27 per cent since 2013.
This significant trend is clearly demonstrating ethical investing is becoming more and more important to investors.
What is ethical investing?
Ethical investment funds may use positive screens to select companies that are doing ‘good’ things, or negative screens to exclude companies doing ‘bad things’. Or they may do a bit of both.
There are, of course, different views as to what is ‘ethical’. Someone with strong religious convictions may be interested in a vastly different range of investments than someone with deep environmental concerns.
Typically, ethical funds tend to avoid investing in companies involved in weapons manufacturing, alcohol, tobacco, gambling or fossil fuels while favouring renewable energy companies, sustainable technologies or healthcare.
Even then it can be difficult to decide if a particular company is ‘good’ or ‘bad’.
Many people avoid investing in companies that mine uranium, but those same companies may also extract the materials needed to build wind turbine towers.
Given the wide range of ethical considerations, you may need to do some in-depth research to find the fund or funds that best match your values.
Is your fund doing the right thing?
While you may have an ‘out of sight, out of mind’ attitude to your super, it’s important to remember it’s your money and you get to choose where and how it’s invested. Start with your fund’s website or disclosure documents and look for the environment or/and social and governance section.
Most large super funds offer a range of investment options, only some of which may match your idea of ‘ethical’. However, there may be a direct share option, allowing you to construct your own portfolio of shares in companies that are compatible with your values.
Or you may look to the increasing number of investment managers that apply ethical filters across their entire range of funds.
Advice moves with the times
Fortunately, it’s becoming easier to find the investment funds that suit you with advisors more switched on than ever to the needs of the ethical investor.
Our team of investment specialists can help you find an investment fund which suits your ethical standing. Get in touch with us to book an appointment today.
General Advice Disclaimer:
This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.
