Pessimistic economic outlook detracts from ethical priorities: RIAA

Ethical considerations fall down the list in terms of priorities for consumers seeking financial advice when there is a pessimistic economic environment, according to the Responsible Investment Association of Australasia (RIAA).

Compared to the last study in 2022, the top priority consumers had for their financial adviser was for them to maximise their investment returns, cited by 61 per cent of the 2,000 respondents surveyed.

This caused knowledge about responsible investment options to fall into second place, cited by 52 per cent.
In the previous 2022 study, 64 per cent of consumers wanted their adviser to have knowledge about responsible investing and 58 per cent wanted their investment returns prioritised.

The bi-annual From value to riches 2024: Charting consumer demand for responsible investing in Australia, produced in association with Australian Ethical surveyed over 2,000 Australians. 

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Discussing the report, Nayanisha Samarakoon, head of policy and advocacy at RIAA, said: “We have seen a return to prioritising investment returns at 61 per cent, but we do still find responsible investment is still very important at 52 per cent.

“The shift could be influenced by the more pessimistic economic outlook in 2024 which rose from 27 per cent to 41 per cent, and we found consumers with a negative economic outlook are much more likely to prioritise return maximisation.”

Of those respondents who had a negative outlook, 66 per cent said they would focus on prioritising returns compared to 57 per cent of people who had a positive outlook.

“Despite that change in the top priority, it is still important for advisers to be knowledgeable about responsible investment options, especially with those who are looking to invest in the next 12 months, who are more likely to have those expectations.

“The importance of ethical considerations in financial advice does persist during times of economic uncertainty, and that balance between ethical considerations and financial returns gains more significance as consumers navigate these challenging times.”

Overall, 88 per cent of respondents said they expect their investments to be responsible and ethical, up from 83 per cent in 2022. Only 5 per cent of Australians said they have negative perceptions about responsible investing.

Another area of focus was the need for an independent certification to prove that an investment is invested responsibly, in light of greenwashing concerns, and Samarakoon said this is something RIAA will be unveiling at its annual conference in May. 

“We will be launching a sustainability classification initiative and that will provide the ability to get more information out of those certified products by differentiating the variety of products covered by the certification and distinguishing them by how they consider, address or target sustainability. 

“We have always been in this space and now we are providing that next layer. We are seeing the government is interested in a product labelling regime and we are working closely with them on that. Part of that is making sure we have full coverage that also allays regulatory concerns.”