(BLOOMBERG) Responsible investing pays dividends in Australia’s $ 3.4 trillion Australian pension pot (S $ 3.3 trillion).
Funds seen as sustainable leaders controlled 42% of the assets in the country’s default savings plans last year, up from 28% in 2019, according to the Responsible Investment Association of Australasia (RIAA).
The top 13 funds – which incorporate environmental, social and governance (ESG) practices, are transparent and demonstrate a commitment to good governance and accountability – have also outperformed their competitors over three, five and seven years, a the group said in a report Thursday.
Australians “move their money to reap not only the benefits for society and the environment, but also their retirement savings,” said Simon O’Connor, chief executive of the RIAA.
“Super funds that do well in responsible investing see their funds grow, leaving laggards at the risk of losing market share.”
The shift comes as Australian workers grow concerned about how their retirement savings are being invested, pressuring funds to adopt ESG practices and abandon investments in fossil fuel companies after last year’s deadly forest fires razed an area the size of England.
The funds are also acting after the Retail Employees Superannuation Trust settled a lawsuit filed by a fund member over its approach to mitigating climate risk by committing to net zero emissions in its portfolio by 2050.
Australia’s pension industry has shaken its reputation as a sector made up mostly of passive investors, hiring ESG specialists and incorporating these factors into their portfolios as climate change and malpractice gain public attention.
In major funds, ESG teams – which typically have more than three members – contribute to key investment decisions and asset class reviews, resulting in over 50 basis points outperforming their peers, a said the RIAA, which has more than 450 members managing A $ 40 trillion in assets.
Here are other key findings:
• Two-thirds of funds implement environmental, social and governance practices either to improve financial returns or to help manage investment risk.
• Asset owners overwhelmingly expect their investment managers to implement their responsible investment commitments, with 71% requiring ESG reports in their agreements, up from 39% in 2019.
• Responsible investment approaches influence asset allocation decisions as portfolios are rebalanced at 55% of funds, compared to 39% in 2019.
ESG integration has led to behavioral changes across Australian companies, from mining companies pledging to take more action on climate change to companies appointing more female directors and senior executives.
The change also forced the resignation of senior Rio Tinto group executives after the miner blew up a 40,000-year-old Aboriginal heritage site and caused the second boardroom upheaval in as many years at AMP after a sexual harassment scandal.
“Asset owners in Australia and New Zealand are pioneers in sustainable investing in the Asian region and globally, making the results of this study showing their growing commitment to sustainable investment practices. ‘particularly encouraging responsible investment,’ said Pacific Investment Management Co (Pimco), Global Head of Pacific Investment Management Co (Pimco). sustainability Ryan Korinke. Pimco sponsored the study.