Driven by a new generation of ideological investors, growing awareness of social and environmental issues, and the promising performances of ethical funds, it’s now easier than ever to align your values with your investments.
In this article, we run the numbers, break down what ethical investing might mean to you, and give you some pretty compelling reasons why you need to get involved with the ethical business boom.
Ethical investing is coming of age. With a growing awareness of climate change and broader environmental, social and governance (ESG) issues, investors are much more discerning when it comes to what their money is supporting. These days, there are more ways to invest ethically, responsibly and sustainably than ever before. Funds like Cruelty Free Super are taking a more proactive approach to investing in companies that have a positive impact on society and the environment, or avoiding ones that don’t.
And the numbers add up. According to the Responsible Investing Benchmark Report 2017, 9 in 10 Australians expect their superannuation or other investments to be invested responsibly and ethically.
The report also shows that 4 in 5 Australians would consider switching over their super or other investments to another fund if their current one took part in activities that didn’t gel with their values.
In the past three years, it’s also been reported that investments in funds with a ESG considerations have quadrupled to well over $600 billion, and that ethical funds have actually outperformed their equivalent mainstream funds over the past 10 years*.
But where is all this growth coming from? Along with ethical funds outperforming mainstream ones, the ethical investment boom has been spearheaded by a new generation of savvy investors – particularly millennials – who are aligning their investment choices with their personal values.
But it’s not just the younger generations who are citing the importance of sustainable investing. The Schroders Global Investor Study 2017, which surveyed more than 22,000 investors around the world, found that 78% of investors say that sustainable investing has become important to them.
And while millennials seem to be leading the charge (86%), Gen X-ers (79%) and Baby Boomers (67%) are also jumping on board the ethical investment bandwagon, with the percentage of each generation rising considerably in the past five years.
Industry insiders believe the "core ethical" sector will double within the next three to five years. This means around $50 billion more will stream into ethical funds, attracting 700,000 new investors.
Around the world ethical investing and ESG is clearly in a boom. Ethical super funds are increasingly gaining the edge over their mainstream counterparts, and there are more opportunities than ever to incorporate your ideologies into your investments.
And thankfully, there are funds out there who are going a step further than taking just a broad-brush ethical approach to their investments. There is, in fact, an entire sector emerging known as "core" ethical investment products. And it's not slowing down. In fact, according to the Australian Financial Review, industry insiders believe this "core ethical" sector will double within the next three to five years. This means around $50 billion more will stream into ethical funds, attracting 700,000 new investors.
Ethical investing means different things to different people. It could mean avoiding companies that have a negative social or environmental impact. This is called “negative screening” and it might mean screening companies involved in animal cruelty, coal-seam gas, gambling, tobacco, detention centres, or uranium mining.
You could also take a more proactive approach and invest in companies you believe have a positive social or environmental impact. This is called “positive screening”, and would involve purposefully selecting companies doing good things - like recycling, waste management, renewable energy, or animal rights.
If you’re like most of us, and you don’t have the expertise or time to analyse and select companies yourself, you can invest in an ethical listed investment company (LIC) fund, or an exchange-traded fund (ETF) with a basket of assets picked by a professional manager.
When it comes to your superannuation, it’s about looking into funds that call themselves ethical, sustainable or socially responsible. But even then, it pays to take your time, do some solid research, look into the performance of each fund and what they support, and make sure your ideologies match theirs.
We all have superannuation, which means we’re all investors. Importantly, this means we all have a choice in where our investments go and what they support.
If you're ready to align your super with your ethical values, Cruelty Free Super might be your answer. We're Australia’s only vegan-friendly, ethical super fund. When you switch to us, you can rest easy knowing your super is invested in line with your ethics. No more animal testing, farming, eating, hunting or exploiting.
We also invest in positive industries like education, recycling and renewable energy, avoid companies that profit from the misery of other humans or animals, and screen out all companies with involvement in running or financing detention centres.
But it’s not just ethical investing we’re passionate about. We’re also committed to doing everything we can to grow your super, helping you take more control of both the planet’s and your future. And with ethical funds consistently outperforming traditional funds over the past 10 years*, we’re pretty confident we can deliver.
*Source: Responsible Investment Association of Australasia, 2017, Benchmarking Report, 10 year performance returns to 30 June 2017. These facts & graphs do not represent Cruelty Free Super's returns.
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