The Romans had a phrase for everything, including finance: pecunia non olet (\u201cmoney doesn\u2019t stink\u201d). But you now know that your consumer dollars, from food to clothes to travel, reflect your values. This extends to your financial decisions, too; the way you invest your money shapes people, your environment and your world.
<\/p>\n\n\n\n
It is increasingly possible \u2014 and even mainstream \u2014 to align your money with your values. Broadly speaking, avoiding investing money in companies with poor performance in environmental, social or corporate governance (ESG) areas, and\/ or investing in companies that perform well in ESG areas, is known as responsible investment. Ethical investment takes that one step further, to making choices in line with particular values or ethical views.<\/p>\n\n\n\n
The Responsible Investment Association Australasia (RIAA), an industry body that represents ethical and responsible fund managers, banks, super funds and financial advisors, reported in 2018 that in Australia, $866 billion is managed as responsible investments, representing 55 per cent of all professionally managed assets in the country, up from $622 billion in 2017, a growth of 39 per cent year on year.<\/p>\n\n\n\n
Want to invest in renewable energy? Want to avoid investing in fossil fuels? How about finding companies that produce food in environmentally sustainable ways, or don\u2019t make a profit off animal cruelty? It\u2019s possible, according to Michelle Brisbane, CEO of Ethical Investment Services in Kew, Victoria.
<\/p>\n\n\n\n
Doing good can also mean doing well in your investments. RIAA\u2019s 2017 benchmark report found that \u201ccore\u201d responsibly invested Australian share funds and balanced multi-sector funds have outperformed their equivalent mainstream funds over three-, five and 10-year horizons.
<\/p>\n\n\n\n
\u201cOn an individual level you could think about what you want your money to be supporting or avoiding,\u201d explains Brisbane. If you are passionate about the environment or human rights, look for investments that have a good track record or policies in these areas. If you are passionate about avoiding companies that support tobacco or animal testing, then it is possible to invest in organisations that avoid these things.
<\/p>\n\n\n\n
Before you invest anywhere you should have an understanding of what your money will be doing and the type of risk you are taking, as well as the amount of time that you should ideally invest your money for, and the level of return you can expect from the investment. \u201cOne way is to look at the historical performance of the investment and that can give you some idea of what to expect,\u201d Brisbane says. \u201cThere is always some risk with investment and past performance is not an indicator of what can happen in the future.\u201d
<\/p>\n\n\n\n
The next step might be to examine your superannuation fund options to see if they align with your values. More and more superannuation funds are offering either sustainable or ethical options, but Brisbane notes that it\u2019s worth doing your homework and checking under the bonnet to make sure that funds are a \u201ctrue to label\u201d ethical offering. To help you with that, RIAA has developed a certification program that looks at fund managers, financial advisers and superannuation funds to see if their offerings fit with their responsible investment criteria. It has a free-to consumer website, Responsible Returns<\/a>, that can help you evaluate your choices. If you have more significant investment holdings or a desire to invest in products other than your superannuation fund contribution, you can also make ethical choices with those investments as well. To assist investors who want to choose fund managers, the Ethical Advisers Co-operative has also developed an Ethical Fund Ratings system<\/a>. The goal of the ratings system and RIAA\u2019s Responsible Returns website is to overcome one of the industry\u2019s biggest challenges: greenwashing, or funds and choices that look ethical but don\u2019t stack up when examined, Brisbane says. When looking for an adviser, seek one with whom you can develop a professional relationship. According to Brisbane, \u201cIt\u2019s important to find an adviser who gives you a sense of security and helps you understand your options and what you are doing. The adviser relationship is usually a long-term relationship with someone who can guide you through your investment journey.\u201d
<\/p>\n\n\n\nStep four: Think about other investments
<\/h4>\n\n\n\n
<\/p>\n\n\n\n
<\/p>\n\n\n\n