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What is responsible investment and why does it matter?

Best Ethical & Responsible Investment : Should You Do it?

The following information is general in nature. Please consult with a financial professional before making any important investment decisions. 

While securing your finances remains an important consideration, there’s a different element of your future that’s come into the fray: ethical interests. No longer are we only interested in strong returns and attractive bank balances, we also want to do our part to protect the world and meet our social obligations. 

In the current climate, our social and environmental needs are just as important as the financial reward when it comes to choosing our super fund. In recent years, more and more superannuation funds have popped up promising to deliver strong results while also ensuring that their money is funding ethical projects and steering away from potentially environmentally damaging outcomes. 

What are the main ethical superannuation funds?

If you’re looking for a fund that focuses on not just your own future but the future of others and generations to come, it’s easy to find one that’s as kind with your wallet as they are on the planet. According to Money Magazine and a study conducted by the Responsible Investment Association of Australia (RIAA), these are the top 14 responsible investment superannuations:

  1. Australian Ethical
  2. AustralianSuper
  3. Crescent Wealth
  4. CareSuper
  5. Cbus
  6. Christian Super
  7. First State Super
  8. Future Fund
  9. Future Super
  10. HESTA
  11. Local Government Super
  12. NZ Super Fund
  13. Unisuper
  14. VicSuper
  15. Vision Super

Considerations included environment, governance and ethical factors. But most interestingly, responsible investments outperformed the average return of the total pool of superannuations used in the study. 

RIAA’s number one choice, Australian Ethical has three main pillars:

  1. Planet: “Every decision is made with empathy and compassion for the planet and all those that inhabit it.”
  2. People: “Environmental and social concerns need to be given equal weight to financial outcomes.”
  3. Animals: “We do not invest in anything that is unnecessarily harmful to animals.”

Australian Ethical’s key objectives are typical of responsible superannuation funds, focusing on the planet and the people. 

Pros of ethical investing

Whether you’re choosing a super fund that invests in ethical projects or your own investment choices are made with social issues in mind, you can rest easy knowing your money is going to a greener and sustainable future. 
While it’s a great feeling knowing your investments aren’t doing more harm than good, your money is also going towards driving social change. For example, your funds might go towards an up and coming company that is working on sustainable energy. Not only can you profit from this company, you can also contribute to fighting climate change. 

Cons of ethical investing

Although your money is working more responsibly and you have the future in mind, your returns might not be as attractive as picking other funds or investments. By sticking to ethical and responsible companies, you limit yourself to the projects available. 
Some top-tier companies on the ASX might also not have the best track record when it comes to sustainability and social issues, so you’ll miss out on any large returns that they may achieve. 
Finally, if you choose to invest directly in ASX companies rather than through a managed fund, you’ll also find yourself spending a little more time researching the company’s strategy and whether they meet the criteria for your ethical standards. 
Making responsible investments is the easy part – choosing between attractive returns and doing your bit for the planet is the hard part. 

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