Retail investors lag wholesale on responsible investment
Responsible investments in managed funds have fallen 7 per cent during the past 12 months to $15.4 billion, according to the 2008 Responsible Investment Benchmark Report.
However, responsible investments within community finance institutions — including credit unions — were up 26 per cent to $859 million, a report compiled by Corporate Monitor found. Financial planning portfolios of ethical investments also fell 5 per cent to $962 million.
“The research has shown planners advising high-net-worth clients and charities are seeing an increase in their ethical investment portfolios,” Corporate Monitor executive director Michael Walsh told the Responsible Investment Association Australasia in Melbourne.
Despite the growth of planner portfolios, the returns for responsible investments have been in line with the overall market.
Responsible investment Australian equity funds have delivered a one year returns of -16.09 per cent, while similar international equity funds were down 16.64 per cent.
Balanced responsible investment funds were down 9.78 per cent, the report found.
In managed funds, the bulk of responsible investing is still in the wholesale market and accounts for 61 per cent of the total sector.
Wholesale responsible investment managers have $11.1 billion of assets while retail managers have $5.3 billion.
Private equity accounts for $1.5 billion of responsible investments.
Walsh said while responsible investing was growing, shareholder activity at company annual general meetings was still zero.
“We have a crisis of shareholder activism in this country,” he said.
“Nobody is putting the vote to boards on responsible investing issues.
“We need some good old fashion shareholder activism.”
While nobody is questioning board activities, Australian financial institutions are signing up for the United Nation’s Principles of Responsible Investing charter.
So far, 65 Australian institutions have signed the charter, representing US$575 billion of funds under management.
Globally, 410 organisations have signed up, representing US$15.9 trillion.
Walsh said Australia accounted for 16 per cent of the signatories but only 3.6 per cent of the global funds under management.
“There has also been an increase of 32 per cent in Australian signatories to the Investor Group on Climate Change,” he said.
“This group puts pressure on companies to report on climate change actions. “It is showing how the funds management community is becoming aware of these issues.”
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