Sustainable investing is a term commonly used to describe investment decisions that take into account ‘ESG’ analysis, which is based on environmental, social and governance (ESG) factors. These factors, at times, have also been known to affect the risk and return of investments.
Investors have indicated they think it’s important for financial advisers to ask about their interests and values in relation to investments1 and one of these areas of interest that is gaining traction in Australia is sustainable investing. Of the $2.25 trillion invested in professionally managed assets, 44% is in responsible investments2.
Many investors also believe companies that apply corporate ESG practices tend to enjoy higher profitability and may therefore be better long-term investments3.
Read the article for more on current trends.
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Despite the growing level of investor interest, there is a lack of information and tools that investors can use to help evaluate investments on a sustainability basis.
This presents an opportunity for financial advisers to provide guidance and support by confidently talking to their clients about the options available to them.
BT believes these investment options prioritise sustainability outcomes as part of the investment process. For example, the list includes investment options that target companies with higher sustainability scores, or that meet specific environmental or social goals. The investment approach of these types of funds varies, however they may include a focus on an asset’s sustainability criteria as well as its ability to deliver financial returns.
BT has partnered with Morningstar and Sustainalytics to provide a set of scores which can identify an investment’s performance in relation to ESG issues. These are available for the ASX200 listed companies and those managed funds that invest primarily in Australian and international shares. Scores are based on a scale of 0 to 100, where 100 represents the highest exposure to unmanaged ESG risk and 0 indicates lowest exposure to ESG risk.
Advisers and investors can access several helpful tools and articles, through the BT Academy website, that can help inform their investment approach and decision making.
To find out more about using BT Panorama to identify risks and opportunities that may preserve and grow the value of a client’s portfolio in the long term, download our e-book.
Find out about the wide range of sustainable and ethical investment options available on BT Panorama.
1 From Values to Riches 2020, Responsible Investment Association of Australasia https://responsibleinvestment.org/wp-content/uploads/2017/11/From-values-to-riches-Charting-consumer-attitudes-and-demand-for-responsible-investing-in-Australia-2017.pdf
2 Responsible Investment Association of Australasia Benchmark Report 2019 https://responsibleinvestment.org/wp-content/uploads/2019/07/RIAA-RI-Benchmark-Report-Australia-2019-2.pdf
3 Morgan Stanley Institute for Sustainable Investing Report 2019 https://www.morganstanley.com/pub/content/dam/msdotcom/infographics/sustainable-investing/Sustainable_Signals_Individual_Investor_White_Paper_Final.pdf
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