The recent environmental disasters that have occurred across our country, from drought to fires and floods, have many Australians thinking about how they can have a positive impact on the environment. One way to contribute to a brighter future is through environmentally-sustainable investments, and it’s something we are regularly asked about.
It’s a growing trend in Australia; in fact, according to a report by the Global Sustainable Investment Alliance, 63% of all managed assets in Australia and New Zealand are responsibly invested, the highest proportion globally.
If you are considering sustainable investing, here are some answers to our most commonly asked questions to help you get started.
What is sustainable investing?
Essentially, sustainable investing means you are taking a long-term view of the economic, social and environmental impact of your investments, and making conscious choices that align with your values.
It is not a one-size-fits-all approach; values and ethics are a deeply personal thing, so it’s important when you think about sustainable investing, to really dig deeper into exactly what that means for you.
Is it just a fad?
There is no doubt it is here to stay. With increasing urgency to find renewable energy alternatives and sustainable materials, it’s something that will only grow.
Recently, the world’s largest fund manager pulled billions of dollars out of fossil fuels, and while there is still more to be done, this is a good indicator that things are changing. And when it comes to the behaviour of companies, most investors and shareholders across the globe are supporting a change in the agenda.
What are my investment options?
At a high level, there is a range of different investment classes that are considered sustainable. Industries you might look to include clean energy, waste management, energy efficiency, food and agriculture, water, sustainable materials, healthcare, and technology, to name just a few.
There are many pre-packaged sustainable investment options on the market, but the important thing to be aware of is that these don’t allow you to tailor the investment to your values. What is considered ethical by that investment company may not be the same as your own views.
Direct investing, where you choose your own investments, gives you the advantage of building a tailored portfolio that ensures you are not directly or indirectly supporting practices that don’t align with your values. It also means you can take a deeper look at the organisation and its practices before you invest. Sometimes, an organisation that screens as ‘ethical’ has governance or board practices you might not agree with, banks can be a great example of this.
When it comes to having a positive impact with your investments, it can be helpful to get expert advice and work with a financial adviser who is prepared to really understand you and build a portfolio that aligns with your needs.
Is sustainable investing a good financial move?
We often say you need to invest with your head as well as your heart, so of course, returns are an important consideration; not every ethical organisation is sustainable from a financial or business perspective.
There is a wealth of research that suggests you can get better returns from taking an ethical approach, but it’s important to make sure you are choosing the right investments from both a moral and financial standpoint. It is possible and, as with any financial decision, it pays to get advice from someone who really understands your context and goals.
How can I ensure my superannuation is invested sustainably?
Sustainably invested super is a hot topic right now, with pressure being put on many of the big super companies to review their strategies, but it may take years to see action. In the meantime, although it can feel overwhelming, you can take control of where your super is invested.
A good financial adviser will work with you to review your super and make the changes required so you can rest easy, knowing your money is not supporting destructive practices, directly or indirectly.
How do I get started?
A great first step is to really reflect on what ethical or sustainable investing means to you. Think about the types of companies you want to invest in, the products, services, and management practices you want to support – and those you don’t. Talking to a financial adviser can really help. At Apt, we build individualised, ethical portfolios for our clients every day that ensure their money goes to a brighter future for us all.
Get in touch and arrange a no-obligation chat to discuss how your investments can have a positive impact on our planet and it’s future.
General Advice warning
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.