Australia is witnessing a boom in socially responsible investing (SRI), with a recent survey by the Australian Institute of Superannuation Trustees showing a 75% increase in trustee recognition of SRI as a separate asset class, and a growth of 56% between 2005 and 2006 in managed SRI portfolios. In fact, SRI managed portfolios grew 70% percent from $4.5 to $7.67 billion, during the 2005 financial year alone and in the 2006 financial year they continued to grow to $11.98 billion. Mainstream managed funds only grew 15.5% during this time.

According to annual benchmarking report on responsible investing by the Responsible Investment Association of Australasia (RIAA) published late last year, SRIs, including managed portfolios, community finance and green loans grew by 43% between 2006 and 2007, reaching $19.4 billion. The report also stated that, “for the first time this year (2007) the study identified a total figure for broad responsible investment amounting to $52.8 billion.”

Such growth in Australia is a reflection of international trends in SRI. During 2007 in the UK, the amount of money put into ethical savings and investments reached £10.6 billion, breaking through the £10 billion barrier for the first time, and up by almost 20% on 2004 figures. “This period is a major milestone for the UK’s socially responsible investments sector and underlines how UK consumers are increasingly thinking about how they can have influence as ethical investors,” said the Co-operative Financial Services (CFS) Chief Executive David Anderson.

In Australia, these trends are set to continue as awareness grows of the role that the corporate world plays in issues of sustainability.  Louise O’Halloran, RIAA Executive Director, attributes the recent growth in responsible investing to, “the imposition of a price on carbon across the world.” She also believes that “pricing signals will trigger the interest of investors and increasingly there are price signals for more than just carbon. There are pricing signals now coming on water, on waste, on any natural resource that is scarce.”

Increasing by 380% between 2004 and 2007, managed responsible investment portfolios have grown from $4.5 billion to $17.1 billion in the Australasia region. The latest RIAA report attributes this growth to:

• Positive investment performance $2,096m
• Net flows to existing managed portfolios $2,248m
• Inflows into new funds and mandates $779m

Source: Responsible Investment 2007, RIAA)

References

• 'Responsible Investment 2007 - A Benchmark Report on Australia and New Zealand by the Responsible Investment Association Australasia,' RIAA,  October 2007
• Wan, N. 'Social awareness can produce returns,' The Australian Financial Review, May 28, 2008
• Watkins, J. 'Green banking in the UK,' Financial World, July / August 2007
• 'The rise and rise of Sustainable Responsible Investments,' http://www.investorbuddy.com.au/eco-ethical-investments