Ethical funds outperform mainstream investments

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Responsible investments have outperformed both the benchmark and the average mainstream fund over short and long term, according to a new report released by the Responsible Investments Association Australasia (RIAA). 

The 12th annual Benchmark Report found funds under management (FUM) in responsible investment portfolios in Australia totalled $152 billion or 16 per cent of total assets under management. 

“With eight of the top 10 investment managers in Australia having now declared themselves responsible investors by signing on to the UN Principles for Responsible Investment, it would be fair to say that responsible investment has become mainstream,” said RIAA chief executive officer, Simon O’Connor. 

“The strong outperformance of ethical and responsible investment funds should finally put to bed the myth that a more responsible approach to investing leads to lower returns.” 

The best-performing Australian equities fund in 2012 was an ethical fund, according to RIAA, though responsible investment funds grew only a modest 4.2 per cent last year - from $14.6 billion to $15.2 billion. 

“With more of the region’s investments being made under responsible investment mandates, the extra analysis undertaken for every investment decision means responsible investors have a deeper understanding of their investments, so it should be no surprise they are earning better returns,” O’Connor said. 

The report, which mapped the ethical investment sector’s performance against mainstream funds across Australia and New Zealand, highlighted that responsible investment was a 'blossoming sub-sector’ within the financial industry across superannuation, funds management, banking, community finance and financial advisory services.

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