Ethical Investment Performance
Ethical Investments deliver great financial performance.
“It is increasingly clear that appropriate and properly executed RI (ethical investment) strategies can have a significant positive impact on the environment and society whilst at the same time generating sustainable financial returns that outperform comparable mainstream funds.” – RIAA*
Harvard University research shows strong financial performance.* (2)
“We find that firms making investments and improving their performance on environmental, social, and governance (ESG) issues exhibit better stock market performance and profitability in the future.” - George Serafiem, Harvard Business Review
The RIAA research shows more people are choosing ethical investment options with core ethical investment funds in Australia worth $299 billion at December 2018.
Ethical investment is also known as Responsible Investment and combines financial analysis as well as environmental, social, governance and/or ethical criteria when investing.
Ethical investments continue to deliver great financial returns.* The latest research shows Ethical Investment Australian share funds outperformed both the ASX300 and the average large cap Australian equities funds across one, five and ten years.(1)
Performance is net of fees. Ethical investment Australian and International share funds average performance to 31 December 2018*, RIAA Responsible Investment Benchmark Report 2019 Australia.*
After reviewing over 2,200 academic studies of sustainable investing around the world, research by Deutsch Bank (3), shows companies with higher ratings for Environmental Social and Governance (ESG) criteria are correlated with superior Corporate Financial Performance (CFP).*
“The results show that the business case for ESG investing is empirically very well founded. Roughly 90% of studies find a nonnegative ESG–CFP relation. More importantly, the large majority of studies reports positive findings. We highlight that the positive ESG impact on CFP appears stable over time.” - Deutsch Bank
In 2017 NAB commissioned a report by the Australian Centre for Financial Studies (4) into Socially Responsible Investing (SRI) which concluded
“Crucially, the international evidence on SRI funds suggests that over the long run, they generally match or outperform similar conventional managed funds.” – NAB*
Research by Barclays rating corporate bond providers on ESG factors found “a positive ESG tilt resulted in a small but steady performance advantage”*(5) and they found no evidence of negative performance impact.
“Conclusion: Sustainable Investing has been beneficial to bond returns” – Barklays Bank
Bank of America Merrill Lynch research found that Environmental, Social and Governance issues are too critical to ignore and “ESG-based investing would have offered long-term equity investors substantial benefits in mitigating price risk, earnings risk and even existential risk for US stocks – ESG would have helped investors avoid 90% of bankruptcies in the time frame we examined.”(7)
“ESG is the best signal we have found for future risk” - Bank of America Merrill Lynch
Ethical Investment experts at Gold Leaf Financial Services can recommend an ethical investment portfolio and ethical Super fund investments that matches your values and your goals.
Contact us today to arrange an appointment.
* Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
1. Responsible Investment Association Australasia 2018, ‘Responsible Investment Benchmark Report 2019 Australia’. Performance table page 5, data information page 20.
2. Serafiem, G, Harvard Business Review 2015, ‘The type of socially responsible investments that make firms more profitable’ accessed February 2017.
3. Deutsche Asset and Wealth Management Investment 2015, Friede, G., Busch, T. and Bassen, A, Journal of Sustainable Finance and Investment 2015, ‘ESG and Financial performance: aggregated evidence from more than 2000 empirical studies.’
4. National Australia Bank and the Australian Centre for Financial Studies, Foo,M, 2017, ‘A review of socially Responsible investing In Australia’.
5. Barclays Bank 2016, ‘Sustainable investing and bond returns’.
6. Kahn, M., Serafeim, G and Yoon, Aaron, 2015, ‘Corporate Sustainability: First Evidence on Materiality, 2015’.
Mandy and Scott's Vineyard Dream
Mandy and Scott always dreamed of buying a block of land not far from Melbourne with vineyards and starting a boutique winery. They wanted to be close to nature and grow organic fruit and vegetables for their family. A few years ago, Mandy received an early inheritance of $150,000 from her Grandma and she wanted to grow this money as a deposit on the vineyard.
They met with a Gold Leaf Financial adviser who recommended an investment portfolio in a range of assets such as shares, bonds and listed property, that was in line with their values and that would grow over time. She also recommended they add their savings of $900 per fortnight into the investment and when they received bonuses at work, use part of the bonus as a holiday and add part of the bonus into the investment portfolio.
By investing a regular amount each fortnight, they were surprised at how quickly their investment grew. They are now on track to having $400,000 to make their vineyard dream a reality.