Join our investing community

ethical investment

Discussion in 'General Investing Discussion' started by rahmalia, 11th Sep, 2009.

  1. rahmalia

    rahmalia New Member

    11th Sep, 2009
    Melbourne, VIC
    Hi guys, wondering what anyone is thinking about ethical investment/responsible investment, you know those managed funds invested in ethical companies, or companies who are socially responsible, or are aiming for the company to act in a way that is aligned with long-term sustainability of not just the company, but also the earth?

    This also includes those companies which are focusing on creating and researching better alternative energy and clean technology solutions to provide to the market.

    Do you reckon the growth and the return is good? And how to choose which companies/fund assets to invest in?

    What do you guys think?
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

    1st Jul, 2009
    SE Queensland
    Hi Rahmalia

    My brother invested in ethical funds, but didn't make any money.

    My understanding, for fund choice is: negative and positive filters.

    A negative filter would prevent the purchase of a fund that tested products on animals.

    A positive filter would allow the purchase of a funds that promoted the use of water efficent farming.

    Work out your personal filters to choose your business. If at any time either of your filters are changed (new management) dump your funds. Can you make any money? Maybe. Sounds like hard work though! And my brother is a very intelligent, high ranking green scientist.

    Best of luck,
  3. AsxBroker

    AsxBroker Well-Known Member

    8th Sep, 2007
    Sydney, NSW
    Hi Rahmalia,

    A few I know of are AMP Capital Sustainable Share Fund (AMP0450AU), BT WS Ethical Share Fund (RFA0025AU), Challenger W'S Socially Respons Shr Fund (HOW0121AU), Hunter Hall Australian Value Trust (HHA0001AU) and Perpetual's WS Ethical SRI Fund (PER0116AU).

    I'm sure Colonial First State also have a socially responsible investment (SRI) fund.

    I think the only difference is that you feel better than you are investing in SRI businesses, it's just like taking your own re-usable bags to buy your groceries every week.

    There are some papers which say that SRI is more profitable...

    Not that I'm sceptical but Perpetual released a paper saying that Active Asset Management outperform Indexing. Now it's all good to say it but in reality how do you know which fund is going to outperform each year as none outperform year after year consistently...

    As Johny said, most SRI funds will have negative filter screening.


  4. Megan Lewis

    Megan Lewis New Member

    15th Sep, 2009
    Elands, NSW
    more info on ethical investment

    Hi Rahmalia

    First up, I need to disclose that I work for the peak body for responsible investment in Australia and NZ (RIAA).

    Ethical investment has its roots in the apartheid fuelled politics of the 1970s and for a long time, the primary approach to this style of investment was to apply screens. This meant a fund manager either did or didn’t invest in a company based on a particular set of values (typically based around tobacco, gambling, prostitution, armaments, uranium).

    While this type of screening is still used, increasingly fund managers are actually analyzing how a company performs across an extensive set of environmental, social and governance (ESG) criteria. They do this in addition to their financial analysis of a company before they make the decision to invest in the company or not. They look at issues such as the company’s carbon exposure, their water usage, executive remuneration packages, OH&S policies, and environmental management systems.

    Internationally, there are also an increasing number of “thematic” funds (for example based around water, waste and energy) though these haven’t really landed on our shores yet.

    Also, fund managers and super funds who practice responsible investment are starting to track the impact of their investment practices by looking at outputs such as the carbon footprint of their portfolio.

    With the launch of the United Nations Principles for Responsible Investment (Principles for Responsible Investment - Official Home) there are now over US$18trillion worth of assets managed with consideration of their ESG impact.

    How does this relate to you and can you make money out of it?

    In Australia, there are over 100 different responsible investment products to choose from – ranging from savings accounts to Australian/international/balanced products to individually managed accounts to superannuation funds. If you want to know more about these products, go to and check out the organisations who are members of RIAA. Also take a look at the organisations who have been certified by RIAA – you can find out exactly how what ESG issues they take into account, why and how.

    Can you make money? As with any investment, there are no guarantees however the performance of RI funds has been strong in Australia. Again, you can find more information about this at, and then select Research from the Nav Bar, then RIAA Research and then find the 2008 RI Benchmark Report. The 2009 Report is due out in November.

    Hope this helps.