Investors are taking a more active approach when it comes to the management of their superannuation funds, Responsible Investment Association Australasia (RIAA), chief executive, Simon O’Connor, believes.
O’Connor said investors were increasingly looking at environmental, social and corporate governance (ESG) issues to guide investment decisions.
“What we anticipate is a sharp rise in the number of Australians who are engaging much more deeply and regularly with the way their retirement savings are invested, with a focus on the contribution their investments are having on shaping the world they will retire into,” he said.
“Building on the trend of the last two years where we have seen a rapid emergence of consumers demanding that their retirement savings are invested and banked in line with their own values, we conclude that what we are heading towards is nothing less than the democratisation of capital.
“This will result in consumers taking a much more active interest in how their money is invested, enabled by technology, social media, NGOs (non-governmental organisations) harnessing their members on important issues, and the rise of gen-y.”
O’Connor reported that 50 per cent of total assets under management in Australia were invested under responsible investment strategies, and highlighted the risks to investments that mismanagement of non-financial issues has had on businesses’ share prices in recent times.
“What BHP Billiton’s recent tailings dam failing at the Samarco Mine in Brazil shows us all too clearly is that issues such as safety and environment are continuing to drive valuations of companies, and unfortunately more often on the downside than the upside,” he said.
“Off the back of the recent Volkswagen emissions scandal, that has wiped out 60 per cent of their share price, we see all too frequently examples as to why leading global investors are analysing, rating, reviewing and engaging with companies on a daily basis based on issues that in the past were seen as ‘soft’ or on the margins.
“These ESG Issues are increasingly central to good investment outcomes.”
