Australian voters are putting their money where their mouth is

The election surprise for many was just how influential issues such as climate change were.1

Jessie Pettigrew, Head of ESG and Sustainability at BT, said that Australians’ interest in environmental – as well as social and governance issues – has been building momentum for some time, judging by how much money has been flowing into sustainable investments.

A growing number of Australians are directing their investments towards sustainable strategies that prioritise consideration of ESG issues. BT has seen money heading into sustainable investments grow year on year,2 with a 44% increase across managed accounts in the March quarter alone3.

According to the research by Responsible Investment Association of Australasia (RIAA) and cosponsored by BT, around $1,280 billion of Australians’ money is now in sustainable investments4.

“We are seeing momentum continue to grow in sustainability, and more and more Australians are aware of how these issues are impacting our community and livelihoods. We’re seeing money flow to investment options that can demonstrate how they’re considering issues like climate change, labour rights and biodiversity,” Ms Pettigrew said. “There are new products coming to market and we’re adding more new sustainable investment options all the time, driven by this increased demand.”

Historically, women and younger people have been more interested in sustainable investing than other demographics; however, these days almost everyone is interested, with the majority of Australians (86%) believing that it’s important for their financial adviser to ask them about their interests and values in relation to their investments.5

“Notably, Millennials who have long been interested in sustainable investing started turning 40 last year,” Ms Pettigrew said. “And this could be why we are seeing what were once considered fringe issues become mainstream. Many of those investors are professionals with growing investment portfolios.

“There’s ample evidence which indicate that investments that take ESG factors into consideration can outperform over time, as well as during periods of market volatility,” Ms Pettigrew said. “For example, sustainable companies performed better, and responsible investment funds outperformed the general market during the worst of the market volatility in 2020. Investors don’t have to sacrifice returns – far from it, they might benefit from improved returns.”6

For those who are new to sustainable investing, here are some tips on how to get started

1. Understand why you are interested in sustainable investment

Whilst historically sustainability information has been used to determine what not to invest in, that’s not the only reason people are interested in this area.

Investors might wish to allocate money to companies that produce positive environmental outcomes, such as clean energy companies or those that are better addressing issues like gender imbalance or labour rights, through funds that positively screen or invest in an ESG thematic.

Others are seeking to understand that companies with good ESG management practices often have better risk/return profiles, and getting bang for their buck is a priority. These investors are returns-driven, and so are interested in how ESG integration and asset stewardship, for example, might drive companies’ performance.

Ms Pettigrew said: “Knowing what is important to you, or why this is an area that you’re keen to explore, will help determine what product types and features to look for when selecting an investment.”

2. Don’t be put off by the jargon

Despite having specific definitions, sustainable investing, responsible investing and ethical investing are often used together or interchangeably. Organisations such as the Responsible Investment Association Australasia has some good resources7 that can help cut through the confusing investment terminology.

“The point is not to get too caught up in labels,” Ms Pettigrew said. “It’s all about understand how and where your money is invested.

“It’s also important to remember that a financial adviser can help you navigate the growing area of sustainable investing. Financial advisers help clients invest in a way that aligns with their values, goals and needs.”

3. It’s not all or nothing, and you can start small

If you decide that this is an area you’re interested in, you don’t have move all your money tomorrow. You might decide to allocate a small amount of money to a strategy that is interesting to you, alongside your other investments. Or you could choose to move, for example, the equities portion of your portfolio to a sustainable strategy, but not other asset classes.

“It’s a similar approach to a flexitarian diet or meat-free Mondays, instead of adopting a strict vegetarian approach,” Ms Pettigrew said. “We’re seeing more and more people start small with sustainable investing and then decide which way they want to go.”

And don’t forget about your super. Ms Pettigrew said: “Superannuation is one way all Australian workers are already investing. So, if you’re interested in aligning your savings to your values, a first step for people is to ask their super fund what kind of sustainable investment options they offer. Checking out their website is a good place to start,” said Ms Pettigrew.

1 Vote Compass survey conducted by ABC from April 11, 2022 to April 17, 2022, based on 97,159 respondents. Further information: https://www.abc.net.au/news/2022-04-22/vote-compass-federal-election-issues-data-climate-changeeconomy/101002116

2 Funds under administration in sustainable investments across all BT platforms increased by 80% from March 2020 to March 2022

3 Funds under administration in ESG managed accounts options increased from $17.5m to $25m from Dec 21 – Mar 22

4 In 2020, 154 investment managers applied a leading approach to responsible investment, overseeing approximately $1, 281 million in assets, Responsible Investment Benchmark Report 2021 Australia, https://responsibleinvestment.org/resources/benchmark-report/

5 RIAA (2020). From Values to Riches 2020 : Charting consumer expectations and demand for responsible investing in Australia, https://responsibleinvestment.org/wp-content/uploads/2020/03/From-Values-to-Riches-2020-full-report.pdf

6 RIAA (2020). COVID-19 and the performance of responsible investments, https://responsibleinvestment.org/wpcontent/uploads/2020/11/RIAA-Briefing-Note-COVID-19-and-performance-of-responsible-investments_Nov-2020.pdf

7 For example, https://responsibleinvestment.org/wp-content/uploads/2020/11/RIAA-Fact-Sheet-Introduction-to-Responsible-Investment-Nov-2020.pdf

More Information 

Lisa Parrett
Media Relations, BT
M: 0432 933 796
E: Lisa.Parrett@btfinancialgroup.com