Under Ross’s leadership, RIAA has played a critical role in advancing responsible investment across Australasia. This has included RIAA’s ongoing focus on standards, certification, policy, advocacy and leading practice in responsible investment. Ross recently stepped down as Chief Executive of Superannuation at Australian Ethical and will shortly commence in a new leadership role in the development sector. He will remain on the RIAA Board for the next few months to support the transition.

“With shifting political, social and investment market dynamics, RIAA’s mission to align capital with a healthier society, environment and economy has never been more important,” says Ross. “It has been a privilege to serve on the RIAA Board over the past seven years, and to contribute to RIAA’s catalytic work in the growth and maturation of responsible investment.”

As Global Head of Responsible Investment at First Sentier Investors, Kate brings a strong legal background with deep expertise in sustainable finance and global experience. Kate’s commitment to advancing responsible investment practices is seen in her role as Chair of Investors Against Slavery and Trafficking APAC and her membership of the Advisory Group of the Net Zero Asset Managers Initiative.

“I am delighted to take on the role of Board Chair, building on the strong legacy established by my predecessors,” says Kate. “I remain committed to working with the Board to ensure that RIAA delivers on our mission and continues to support members through our strong and collaborative membership platform.”

RIAA extends its heartfelt gratitude to Ross for his exceptional service and welcomes Kate as its new Chair.

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Estelle Parker

The Responsible Investment Association Australasia (RIAA) welcomes the launch of the first consultation on Australia’s sustainable finance taxonomy. The consultation is seeking feedback on:

• the draft headline ambitions for the Australian taxonomy’s environmental objectives, and
• the proposed activities and draft substantive climate change mitigation criteria for the first three sectors to be developed under the taxonomy:
  • 1. electricity generation and storage.
  • 2. minerals, mining and metals.
  • 3. the built environment.

The process is being overseen by the Australian Sustainable Finance Institute (ASFI). Submissions are due by Sunday 30 June.

RIAA Co-CEO Estelle Parker called on interested parties to make a submission and reflected on this milestone in Australia’s sustainable finance policy. “The industry has been working towards this for years, and a lot of work has gone into this draft. RIAA’s CEO co-chaired the Australian Sustainable Finance Roadmap, of which the taxonomy was a key recommendation,” said Estelle. “RIAA is proud to have established ASFI in 2021, which has brought together many great minds of sustainable finance to drive development of the taxonomy.”

RIAA’s Head of Policy & Advocacy Nayanisha Samarakoon added that this model of collaboration between industry and government will continue to be necessary. “The sustainable finance industry, which understands the practical challenges, can collaborate effectively with policymakers who are working on the monumental task of transitioning Australia’s high-emitting economy to net-zero. By leveraging existing industry initiatives and working together, we can not only develop frameworks and solutions for transition which are foster early dialogue but also unlock significant cost savings for the public sector, allowing resources to be directed towards other crucial areas.

Estelle reiterated that Australia has potential to be a global leader, particularly in the critical area of minerals, mining and metals, for which there is yet to be a sector-specific taxonomy. “A fit-for-purpose, internationally aligned taxonomy will be a game-changer. It will empower the financial services sector to become a powerful engine for a resilient and sustainable economic future.”

RIAA will be holding a member event on 6 June to delve deeper into the taxonomy and explore how RIAA members can contribute most effectively.

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Estelle Parker

The Responsible Investment Association Australasia (RIAA) applauds the Australian Government’s commitment to the development of sustainable finance. The 2024-2025 Federal Budget includes funding for:

• the Australian Securities and Investments Commission (ASIC) and the Treasury for the development of a labelling regime for sustainability labels
• ASIC to investigate and respond to market participants engaging in greenwashing and other sustainability-related financial misconduct
• the Treasury, ASIC and the Australian Prudential Regulation Authority (APRA) to deliver the sustainable finance framework, including improving data
• the continued development of Australia’s sustainable finance taxonomy.

RIAA Co-CEO Estelle Parker is pleased that the budget has recognised the importance and the urgency of developing Australia’s sustainable finance sector. “For too long, Australia was a late starter globally in recognising the opportunities provided by sustainability to all sectors, from primary industries, to manufacturing and workforce development. We must not miss out on the global capital flowing to invest in the transition to a low-carbon future – it won’t last forever.”

Estelle emphasised the critical role of an internationally aligned financial product labelling regime, stating that it will help combat greenwashing and help shift capital towards funding the transition to a net-zero economy. “Our experience operating the Responsible Investment Certification Program, which is, to our knowledge, the world’s longest running responsible investment product labelling scheme, provides strong evidence for the value of a national product labelling scheme. Our internationally-aligned certification standard and rigorous application process have prompted numerous product issuers to significantly improve their product design, disclosures and marketing in order to gain certification. In fact, 70% of products seeking certification need to make changes before they can succeed. This in turn, improves the products provided to consumers and retail investors, and reduces the likelihood of greenwashing.”

RIAA believes a product labelling regime will ensure consistency and reliability and help with appropriate enforcement. “A regime that is informed by RIAA’s extensive experience in sustainable investment labelling can establish a leading practice for Australia,” Estelle said. RIAA, representing 75% of Australia’s professionally managed funds through its membership, urges the Australian Government to work with RIAA to use the existing Certification Program – which has a high degree of industry history and ownership – as the basis on which to develop an integrated, interoperable product labelling regime. “This collaborative approach will ensure a smooth transition and build upon the valuable expertise already established within the industry,” added Estelle.

The Federal Budget also includes various initiatives to bolster Australia’s sustainability efforts, from funding the Nature Positive Plan to the $22.7 billion Future Made in Australia package which should help support the private investment required for Australia to move to net zero. “Australia has a unique opportunity as a late mover to both leapfrog and be a global leader through harnessing the wealth of knowledge and experience of the oldest living culture on Earth and their deep intelligence about caring for country. Our economic success depends on swift yet thoughtful action which includes a balanced approach that avoids excessive regulatory burden while incentivising capital flow into sustainable initiatives. As the largest and most active sustainable finance industry group in the southern hemisphere, RIAA is looking forward to working closely with policymakers and industry to achieve a healthy and sustainable economy, society and environment,” said Estelle.

RIAA is also calling for robust reforms to protect biodiversity through Australia’s Environment Protection and Biodiversity Conservation (EPBC) Act, Commonwealth law reform on First Nations Cultural Heritage protection and further reduction in the regulatory barriers to investing in the transition, such as reforms to the Your Future, Your Super benchmark regime.

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Zsuzsa Banhalmi-Zakar

The MySuper products of super funds demonstrating leading responsible investment practice outperformed those of non-leaders on average in 2022, according to a new study released by the Responsible Investment Association Australasia (RIAA).

The Responsible Investment Super Study 2023, supported by PIMCO, has named 10 Responsible Super Fund Leaders^[1] out of the 53 assessed for the study. These funds commit to good governance and accountability; implement and measure responsible investment approaches through activities such as engagement and voting and ESG integration; regularly measure outcomes; and exhibit a high degree of transparency.

Dr. Zsuzsa Banhalmi-Zakar, Research Manager at RIAA said, “Aussies that are choosing to align their super with their values are not losing out on returns, demonstrating that strong financial performance and investing ethically are not mutually exclusive.”

The study also shows that legislation has reshaped the sector recently. The most significant change being the introduction of mandatory requirement for funds to disclose the assets they invest in (which came into effect in March 2022). As a result, 100% of super funds that were assessed for the study now disclose portfolio holdings, as opposed to 2021 when 62% published only their top 20 holdings or less.

“Australians are now better equipped to determine which companies and funds their super invests in and decide for themselves if it measures up to their values. Transparency of super fund portfolios is essential to monitoring potential greenwashing, although the current legislation does not include all underlying holdings,” said Banhalmi-Zakar.

“There is of course room to improve transparency practices elsewhere. For instance, only 30% of super funds publish voting records and even fewer publish their voting intentions before voting.”

Additionally, the Your Future, Your Super (YFYS) regime has driven consolidation within the industry, fostering fewer, yet larger super funds which was likely prompted by the identification and eventual closing of underperforming funds. As a result, APRA-regulated entities amounted to 76 super funds or trustees in 2022, compared to 167 in 2020.

“The result of this shift is a leaner, more resilient landscape that positions super funds to navigate challenges,” said Banhalmi-Zakar.

“RIAA is still concerned that the way the YFYS performance test is currently structured will disincentivise long-term sustainable investment approaches such as funds shifting their investments towards net zero commitments and reduced emissions. We continue to engage constructively with Treasury on a solution.“

The report also shows that climate considerations have taken centre stage, with 42% of super funds now having portfolio targets aligned with the Paris Agreement (net zero by 2050), compared with just 34% in 2021.

Super fund products of Leaders and those certified by RIAA as quality, true to label responsible investments have shown impressive contribution to lowering carbon emissions. RIAA certified funds have a 79% lower weighted average carbon intensity than non-certified super funds when counting scope 1, 2 and 3 emissions. For Responsible Super Fund Leaders’ products, it’s a 60% reduction compared to non-leaders.

“It is crucial for investors to be cognisant of the risks and opportunities created by the transition to a lower carbon economy, so we are encouraged that more and more Australian super funds are applying a range of climate metrics across their portfolios. This can enable better preparation for any market repricing associated with the low carbon transition,” said Grover Burthey, Head of ESG Portfolio Management at PIMCO.

Major strides were made in gender equity since 2021, with more large super funds reporting gender balanced boards. However, 38% of boards still fall short of the 40% women representation target.

“Our super industry still has a long way to go to meet the gender equity levels that super funds themselves are demanding of the companies they invest in. 58% of the 469 trustees are men and 42% are women, which represents less than a 2% increase in the number of women trustees since 2021,” said Banhalmi-Zakar.

The study also finds super funds are deepening their commitments to responsible investment and capabilities in ESG issues.

“The number of super funds that employ staff dedicated to managing ESG risks and opportunities almost doubled since the last reporting period, from 36% to 62%. This upskilling should ensure not only a continued focus on ESG in the sector, but more sophisticated approaches to responsible investment that have real outcomes.”

The Responsible Investment Super Study series is published every two years and is the most comprehensive research conducted on the responsible investment and ESG practices of Australia’s superannuation sector.

Read the report.

———

Notes:
[1] The Responsible Super Fund Leaders for 2023 are Australian Ethical Super, AustralianSuper, Aware Super, CareSuper, Cbus Super, HESTA, Future Super, Rest, Telstra Super and UniSuper.

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(L to R): Dean Hegarty and Estelle Parker

The Responsible Investment Association Australasia (RIAA) is pleased to unveil the appointment of Co-CEOs, Estelle Parker and Dean Hegarty to take up the leadership of the organisation, marking an important step for RIAA with dual CEO representation in Australia and Aotearoa New Zealand.

Following an extensive global search, the RIAA board proudly announces the promotion of two distinguished executives within RIAA, who will jointly take over as Co-CEOs upon the departure of current CEO, Simon O’Connor in early December 2023.

Over the past three years, Estelle Parker and Dean Hegarty have demonstrated exceptional leadership in advancing a more responsible and sustainable financial system as Executive Managers at RIAA. Their leadership has been instrumental in RIAA’s growth and impact, placing the organisation in a robust position today.

RIAA’s Chair, Ross Piper expressed, “The RIAA board is very pleased to announce the appointment of two proven and highly skilled executives as Co-CEOs. Estelle and Dean bring deep market knowledge, strong program delivery and commercial skills, as well as having demonstrated their leadership and expertise in responsible investment across our markets.”

The Co-CEO transition, effective upon Simon O’Connor’s departure, aligns with a comprehensive approach to ensure a cohesive and diverse leadership structure for RIAA. Ross stated, “Building on their deep existing relationships with our members and across other partners and government, Estelle and Dean’s collaboration is envisioned to provide solid momentum for advancing RIAA’s mission and strategy during a pivotal time for the sector’s growth.”

Ross emphasised RIAA’s ambitious mission to advance a financial system that aligns capital with a healthy and sustainable economy, society and environment, and the strong passion both Dean and Estelle have for driving this mission. He noted, “Their demonstrated success as an executive team, complemented by shared values, a strong working relationship, and a profound passion for RIAA’s mission, positions them ideally for the Co-CEO model.”

Estelle Parker has spearheaded the expansion and growth of the industry leading RIAA Certification Program. Her senior government diplomatic experience brings crucial expertise in government relations, policy making and many issues that responsible investors care about such as Human Rights and the SDGs. This is particularly crucial as the sector enters a period of responsible investment and sustainable finance legislative developments. Estelle has also been instrumental in leading critical external engagements, such as convening the official Australasian Consultation Group for the Taskforce on Nature-related Financial Disclosures (TNFD), leading RIAA’s involvement in the Dhawura Ngilan Business and Investor Initiative on First Nations cultural heritage protection and participating in government stakeholder committees. She has established herself as a strong spokesperson for the

sector. Under her guidance, RIAA’s programs have achieved heightened levels of professionalism, impact, and value delivery to its members.

Dean Hegarty, RIAA’s first Aotearoa New Zealand-based executive, has played a pivotal role in enhancing the organisation’s presence and activity in both Australia and New Zealand, contributing to substantial growth and organisational changes. Dean brings over a decade of experience leading teams in the not-for-profit sector and his efforts have resulted in significant membership growth, a more than doubling in size of RIAA’s annual conferences in both Australia and New Zealand, developing key industry partnerships, and established himself as the voice of RIAA in New Zealand.

The RIAA board acknowledged the joint expertise of Estelle and Dean across program delivery, government relations, commercial acumen, and leadership in responsible investment, forming a robust foundation for their roles as Co-CEOs in RIAA’s next chapter.

Ross Piper expressed gratitude to RIAA members for their unwavering support and engagement, at this important time of transitioning to new leadership. Outgoing CEO, Simon O’Connor, is recognised for a decade of highly effective leadership, leaving a lasting positive impact on the Australian and New Zealand investment and financial services sectors. The board looks forward to building upon this legacy for the next phase of RIAA’s growth.

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Simon O’Connor

The Responsible Investment Association Australasia (RIAA) strongly welcomes the Treasurer’s Sustainable Finance Strategy as a pivotal milestone, highlighting the significant role of investment labels in the responsible investment industry. The Strategy, with one of its priorities on developing a labelling system for investment products marketed as sustainable, marks a crucial step towards aligning the finance sector with Australia’s net-zero transition.

The Treasurer’s consultation paper sets the stage for a remarkable transformation in Australia’s financial landscape by introducing a labelling system for investment products marketed as sustainable. RIAA underscores the critical impact of this development on the responsible investment sector, which has been a priority outlined in the Strategy.

Simon O’Connor, CEO at RIAA, acknowledged the Sustainable Finance Agenda as a significant stride towards international alignment but stresses the urgency of Australia’s actions.

“The government knows it has a rare opportunity to rapidly change the landscape of investment and finance through this Strategy. But let’s not kid ourselves, whilst we’re not starting from scratch, we are late to this important policy discussion and so must move fast and leverage existing industry efforts to play catch up,” said Simon.

Simon further emphasised RIAA’s Responsible Investment Certification Program as an existing and highly reputable product labelling standard that has played a pivotal role in eliminating greenwashing. Simon welcomes the Treasury’s acknowledgment of this program in the draft Strategy and looks forward to discussions on how it can accelerate sustainable finance efforts.

Simon said this Strategy offers a powerful tool to combat greenwashing and foster a landscape where responsible investment is not just a trend but a commitment upheld by the entire industry. “For over 17 years of running the Responsible Investment Certification Program, many superannuation funds and investment managers have voluntarily taken the right path by seeking verification from us. This new Strategy signifies a significant shift. It implies that all superannuation and investment managers following a ‘responsible’ investment approach will soon embark on this journey. They will need to embrace transparency in their disclosures, ushering in consistency and assurance for Australian investors.”

The Treasurer’s consultation paper presents Australia with an opportunity to align with global trading partners in transitioning to a sustainable finance framework. It underscores the government’s vital role in shaping a sustainable finance agenda, a perspective long championed by RIAA.

As the largest and most active sustainable finance industry group in the southern hemisphere, RIAA together with our members, have been calling for such a strategy – and many of the elements outlined in this paper – for over ten years.

Australia’s financial system represents a potent lever in supporting the rapid clean energy transition. With the 2030 targets looming and a $3.5 trillion pension fund, one of the world’s largest, Australia stands at the forefront of global markets. Effective execution of the Sustainable Finance Strategy, with clear policy signals, will unlock this immense potential.

RIAA’s role in shaping sustainable finance

RIAA’s extensive experience and active role in shaping sustainable finance are evident in initiatives such as the Australian Sustainable Finance Roadmap and the world’s longest-running product labelling scheme in responsible investment.

To ensure the Strategy’s effective implementation, RIAA calls on the government to establish a Sustainable Finance Advisory Council, facilitating cross-sectoral collaboration among government, finance, and business. Efforts to eliminate greenwashing must build upon existing strong foundations and classification systems, empowering sustainable businesses to attract confident investors.

Simon O’Connor reaffirms RIAA’s commitment to further strengthening the Strategy. “This draft Sustainable Finance Strategy provides a strong start for Australia, and we strongly welcome it. RIAA will be keen to engage closely with the Treasurer, the Treasury, and other agencies based on our years of experience and unparalleled expertise in this area.”

The Strategy outlines several key areas which will be fundamental to achieve this, including:

• We welcome the recognition of the need to strengthened action to prevent greenwashing through ESG product labelling regulations, and the acknowledgement of the opportunity to build off existing domestic approaches such as RIAA’s long-standing and world-leading Responsible Investment Certification Program.
• We welcome the acknowledgement that a comprehensive Sustainable Finance Strategy must seek to reform any measures that are running counter to the Strategy’s aims, and note the urgent need for reform of the Your Future, Your Super performance test that currently disincentivises long-term sustainable investment approaches, which RIAA is already engaging. constructively with Treasury on. Sensible reform on this test can deliver in the best financial interests of members whilst also ensuring alignment of superannuation with a low carbon economy, as well as sustainability themes other than climate.
• We commend the government acknowledging the critically important role of investor stewardship in supporting a stronger and more sustainable economy. We strongly support more effective and transparent investor stewardship, and there is a critical role for government to support this investment approach which RIAA research shows is now the most widely-used responsible investment approach.
• Legislating climate related disclosures, which RIAA has been strongly supportive of, with a clear view to how broader sustainability and nature disclosures can follow in their wake.
• Continuing to support the Taskforce on Nature-related Financial Disclosures (TNFD) and International Sustainability Standards Board work on sustainability disclosures. As convenor of the official TNFD Consultation Group for Australasia, RIAA calls on the government to move rapidly beyond climate to adopt the broader ISSB – and eventually TNFD – standards.

This provides a further opportunity for an integrated, Whole-of-Government approach to tackling the acute and interrelated challenges of climate change and biodiversity loss, ensuring the finance sector plays its part.

• Support for a sustainable finance taxonomy that will help to articulate what are those green industries that will support a low carbon transition, which RIAA helped seed through co-Chairing the Australian Sustainable Finance Roadmap. For credibility, it will be essential that this remains deeply grounded in the science, not the politics.
• Support Whole-of-Government work to address the data gaps that RIAA’s 500-strong member base tells us are a key challenge to understanding impacts, risks (and opportunities) within investment decision- making.
• Better understanding the systemic financial risks that climate change and the net zero transition pose for our economy, and supporting credible, net zero transition planning. This will give investors certainty to make long-term decisions.
• And positioning Australia as a global sustainability leader, ensuring international alignment of Australia’s sustainable finance agenda – a no-brainer for any country seeking to remain an attractive market for investors.

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Estelle Parker

New research released by the Responsible Investment Association Australasia (RIAA) has revealed that ESG considerations are now deeply embedded across investment markets in Australia.

RIAA’s 22nd annual Responsible Investment Benchmark Report has uncovered 93 percent of the professionally managed funds worth $3.3 trillion are managed by investors with public commitments to responsible investment, indicating a transition toward a new state of maturity.

Despite this, increasing standards has led to only 36 percent, or $1.3 trillion of total managed assets, being managed in a way that demonstrates a leading approach to responsible investment. Estelle Parker, Executive Manager of RIAA emphasised the significance of this shift.

“While this reflects a new level of commitment to responsible investment, we are seeing an industry that is responding to industry and regulatory efforts to tighten standards, with many domestic and international fund managers reporting a more conservative number of responsible investment assets for 2022, a pattern we’ve been witnessing in other markets overseas. Today, it is simply not sufficient to claim a commitment to responsible investment without the evidence to back it up,” she said.

Global markets have moved rapidly to lift expected standards of practice in responsible investment in the last two years and Australia is no exception, from greenwashing guidance to standardisation of ESG product labelling and the development of green taxonomies to formalised stewardship codes.

ESG considerations, across the board, are being hardwired into financial market laws and regulation, including the recent amendments to APRA’s superannuation fund trustee guidance.

“These policy efforts and elevating industry standards have started to separate the leaders from the pack, as a sign of a rapidly maturing and professionalising market. In 2023, there were a total of 77 responsible investment organisations attaining the high standards of responsible investment against RIAA’s scorecard, up from 74 in the previous year,” said Estelle.

“In 2022 it was a challenging investment market for responsible investors, with a period of significant growth for the mining and energy sectors, which are typically sectors responsible investors have a lower exposure to particularly as they move to lower the carbon intensity of their portfolios,” said Estelle. This year’s report shows some underperformance of Certified Responsible Investment Products over one year, however performance over the medium and long term periods stayed on par with or better than benchmarks, with particularly strong results across managed growth funds.

The report also revealed, a strong uptake in capital flowing to more sustainable investments in 2022 with sustainability-themed investments having grown by 46% to reach $235 billion, including almost $30 billion in sustainability-linked loans and $80 billion targeting climate change areas like renewable energy, human rights, biodiversity and sustainable water management.

“Investors are keen to see action on climate and other sustainability-related issues, and want to make sure that their investee companies are not greenwashing. So they’re using their ability to engage and vote to make sure claims are backed up by action. If you’re going to make a net zero commitment, this needs to be backed up by a clear and achievable plan,” said Estelle.

This year RIAA’s Responsible Investment Scorecard was refined, and the standard set higher, to reflect evolving expectations of responsible investment leadership both domestically and internationally.

Not only is the number of investment managers paying attention to responsible investment growing, but they are also getting better at it. The number of fund managers who were able to attain the highest responsible investment standard against RIAA’s scorecard reached a record 77, signalling a strengthening of approaches by more market participants.

“This reflects a new level of awareness surrounding responsible investment, whereby nearly all professional investment managers are focused on responsible investment, but that’s no longer sufficient to be classed as a leading responsible investor in a world of rapidly lifting standards. What was once considered leading practice in Responsible Investment is now the baseline, with stewardship setting responsible investment leaders apart,” said Estelle.

“Investors have an increasing influence on shaping the future of companies, and ensuring there is greater support for initiatives across climate change and human rights. Recent litigation by ASIC, towards companies engaging in greenwashing, is a clear sign that ESG is no longer a tickbox that can be utilised for marketing, as investors now expect transparent and quantifiable action on social and environmental issues,” said Estelle.

“While economic uncertainty and market volatility has undoubtedly impacted responsible investing in Australia, our research has uncovered tremendous growth in capital which has been earmarked to support sustainability themes. It’s now critical that the government seizes this opportunity to tap this tidal wave of green capital ready to be put to work to drive the low carbon transition. The soon to be released Sustainable Finance strategy by the Treasurer has the potential to both continue to lift standards in responsible investment, while also unlocking capital to help accelerate the transition.” said Estelle Parker, Executive Manager, RIAA.

Emma Herd, Partner, Climate change and Sustainability Services, EY Australia, Co-Lead of EY Net Zero Centre, said responsible investment in Australia in 2022 moved into a new phase, one characterised by the ever-increasing expectations for transparency and performance.

“The bar keeps rising and what was considered leadership even a few short years ago is now business as usual. Heightened scrutiny is generating new caution for funds making sustainability claims. But the need to drive more capital into sustainable outcomes is critical if we are to adequately respond to the biggest social and environmental challenges of our time. Growing the pool of funds managed must, and will, continue to accelerate,” she said.

Key findings

• 93% of all professionally managed funds in Australia are now managed by investors with a public commitment to responsible investment.
• Australia’s responsible investment market is valued at $1.3 trillion in 2022 or 36% of the market made up of those demonstrating a strong and comprehensive approach to responsible investment.
• A new threshold for Responsible Investment Leaders led to 54 fund managers named as Responsible Investment Leaders, and 23 fund managers awarded the new Responsible Investor designation.
• Money is flowing to outcomes for people and planet, as investments into sustainability themes increased substantially in 2022, reaching $235 billion (from $161 billion in 2021).
• The impact investment sector nearly doubled from $30 billion in 2021 to $59 billion in 2022.
• Norms-based screening is soaring in popularity, increasing by 85% to $255 billion as responsible investment managers mature and adhere to global norms like the Paris Agreement and the United Nations Declaration on the Rights of Indigenous Peoples.
• The performance of RIAA certified funds consistently stays on par or better than benchmarks over medium and long term periods, with managed growth funds particularly excelling.
• Natural capital is emerging as an increasingly popular positive screening theme, with 46% of survey respondents screening for biodiversity preservation and conservation, while climate change-related issues continue to be a priority.
• Responsible investors are responding quickly to new sustainability reporting and taxonomy guidance overseas, with many domestic and international fund managers reporting a more conservative number of responsible investment assets for 2022, a sign of an industry and regulatory efforts to tighten standards.

Read the report.

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Simon O’Conner

In an age where climate concerns and social consciousness dominate headlines, it’s no surprise that investors are increasingly seeking investments that align with their values. With several high-profile cases recently exposing alleged greenwashing practices, many investors are left wondering if they can trust a company’s sustainability claims.

Four out of five Australians now expect funds in their bank account and super to be invested responsibly and ethically. Likewise, 74 percent said they’d consider moving to another provider if their current fund was investing in activities not consistent with their values.

With the Australian Securities & Investments Commission (ASIC) cracking down on greenwashing claims, and the recent Vanguard and Active Super cases highlighting the seriousness of false ethical allegations, investors need to better understand where their money is invested.

Where is your super fund contributing to?

For many Australians, a significant portion of their investments lies within superannuation funds. It’s, therefore, crucial to understand how these funds are managed and whether your superfund aligns with responsible investing. It’s worth investigating your super fund provider’s ESG policies, how they choose their investments, and whether they can substantiate their claims.

The good news is that standards are emerging globally that will, eventually, ensure that greenwashing is eliminated from financial products like superannuation. When you’re buying fairtrade coffee, free range eggs or purchasing green power, it’s important to know the product has legitimacy regarding its claims.

In each of these cases there are detailed programs of assessment that are undertaken to ensure consumers are not misled and that products live up to consistent standards. The same is emerging for financial products, whereby consistent standards around labels, names and terminology are rapidly emerging to ensure finance companies are held accountable.

Australia’s standards for financial products

To date, the Responsible Investment Association Australasia (RIAA) has been the primary driver in lifting standards in the area of responsible and sustainable investment in Australia. For 16 years we’ve been responsible for a labelling program that requires the highest consistent standards, as a baseline for ensuring finance products are delivering on their promise and not misleading consumers. This program now has over 300 finance products certified, meeting the highest standards of transparency.

While this traction has been challenging on a broader scale, the industry is starting to take notice with the big end of town finally catching up, and ASIC recently taking steps to clarify what they expect from the green claims made by finance companies.

On a global scale, an agreement on the definitions of key terms is being finalised, through a project of the CFA Institute, the Global Sustainable Investment Alliance and the Principles for Responsible Investment. This project is a vital building block that will assist with the end of greenwashing.

If we don’t define terms like ‘organic’ or ‘free range’ then we’re bound to see further unscrupulous companies using these phrases loosely. Likewise, defining the terms around responsible investment such as ESG, stewardship, negative screens and impact, will ensure there is less risk of them being misused. But this alone is not enough.

The importance of the government’s upcoming Sustainable Finance Strategy

We now know that most Australians want their retirement savings invested in an ethical and responsible manner, but increasingly consumers are also stating they want their investments to do further good. As people become more aware, greater responsibility sits with financial institutions to ensure they’re acting ethically and are communicating in a transparent honest manner.

Our consumer research shows that 84 percent of people want their super fund to take action on climate change, such as reducing greenhouse gas emissions of the companies they’re invested in. Despite this, Australians know we have a big task ahead of us to achieve our net zero commitments by 2050 and to ensure our country doesn’t suffer from severe droughts, floods, heat waves and bush fires.

For our nation to do that, we have major investments ahead of us and we won’t achieve these climate targets without activating our finance sector. The Treasurer’s forthcoming Sustainable Finance Strategy presents a monumental opportunity to ensure the finance sector is aligning in support of a clean energy future, in a manner that the bulk of Australians are calling for.

There’s an opportunity for the government to step up the sustainable investment product labelling requirements, in a manner similar to the UK and the EU, and to acknowledge the strong work already done in our market. In this strategy we need the government to provide a big injection of support, to ensure all products are meeting their sustainability promises.

Because no one wants a caged egg, or an unethical superfund when they’ve chosen otherwise. To eliminate greenwashing, the government must deliver on the Sustainable Finance Strategy and ensure consumers can choose eggs, coffee, chocolate, power, or sustainable super funds with trust and transparency.

By Simon O’Connor, Chief Executive

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Estelle Parker

With increasing attention on greenwashing in finance, the largest and most comprehensive responsible investment conference in the Southern Hemisphere, RI Australia 2023, will take place in Melbourne and online on 10-11 May 2023. Held by the Responsible Investment Association Australasia (RIAA), the two-day conference will bring together more than 800 sustainability leaders and industry practitioners with 90 expert speakers across more than 30 sessions to demonstrate best practice in the burgeoning sustainable finance sector.

This year’s theme is “Scaling new heights in ESG and impact”, and RIAA’s Executive Manager, Estelle Parker, says it comes at a time when the responsible investment industry is facing a reckoning to deliver on the positive outcomes promised and combat greenwashing. “The industry has been thrust into the sights of governments, regulators, and not least its clients who care about the impacts of their investments. No one can afford to not be paying attention right now,” she says.

The efforts of regulators to address greenwashing will be a significant focus; with Karen Chester, Deputy Chair at the Australian Securities and Investments Commission, delivering a keynote address on ASIC’s direction. Dr. Sean Carmody, Executive Director of the Australian Prudential Regulation Authority, will join the discussion on how Australia’s forthcoming sustainable finance taxonomy will provide much needed definitions of what constitutes a sustainable investment.

A session Estelle predicts will draw significant attention is cheekily titled “ESG: Woke & Broke?”. This session will delve into the current political attack on ESG investing by far right conservative elements in the US, and explore whether this could happen in Australia and elsewhere. Fiona Reynolds, Independent Director and Advisory Board Member who will be speaking during this opening session says, “we need to prevent ESG becoming the political football. How do we as an industry stop ESG from entering the culture wars? This isn’t just a US issue, it impacts all global investors.” Estelle Parker says that, ultimately, ESG is not political, “it constitutes good investment practice and is mainstream now. Investors don’t want governments preventing them from considering certain risks in investment decision making.”

RIAA’s research shows that approximately $726 billion in assets under management in Australia is now managed via a stewardship or corporate engagement approach. Stewardship codes have proliferated around the world. Prominent amongst these is the UK’s, which sets a high bar to entry, and has provided a blueprint for further stewardship codes globally. “This is why we invited Claudia Chapman, Head of Stewardship at UK’s Financial Reporting Council to be one of our international keynote speakers. She will share her experience developing and implementing the UK Stewardship Code and explore where next for stewardship. I would expect the growing focus on collaboration and systems change to achieve positive real-world outcomes will form part of this,” says Estelle.

While undoubtedly a step in the right direction, RIAA research shows a perception that the growth in corporate engagement and stewardship may be flooding corporate boards with a sea of requests from investors. A panel session including corporate leaders such as Patricia Cross from OFX, Dr. Guy Debelle from Fortescue Future Industries, and Mark Rigotti CEO of the Australian Institute of Company Directors (AICD) will provide insights on what corporate engagement looks from the inside and practical advice for investors to work more collaboratively to alleviate the burden on companies and achieve the real-world outcomes desired.

RI Australia 2023 will place a spotlight on First Nations luminaries. Karen Mundine, CEO at Reconciliation Australia, and Phil Usher, CEO at First Nations Foundation, will speak on Voice to Parliament and how investors be a genuine partner in reconciliation and self-determination. Professor Peter Yu AM, Vice President (First Nations) at ANU, Benson Saulo, the first Indigenous person to be appointed an Australian Consul-General, and Leah Armstrong, Managing Director at First Australians Capital, will speak on First Nations investment markets. Ian Hamm, Chair of the Indigenous Land and Sea Corporation and new Board member of the AICD, will speak on Caring for Country and how investors can partner with First Australians.

Russia’s invasion of Ukraine was a wake-up call for investors, and RIAA’s Human Rights Working Group has been busy working on a guide to navigate investing that may be affected by armed conflict-related issues with experts from organisations like the Australian Red Cross. Delegates at the conference will be presented with the exclusive launch of the ‘Investors and Armed Conflict: A Guide’, a toolkit that provides essential frameworks and insights for investors and companies seeking to protect human rights and mitigate risks associated with armed conflict. “This is going to be a vital toolkit for investors to support human rights in conflict-affected regions like Ukraine and Myanmar, and what they can do before, during and after conflict,” says Estelle.

RI Australia 2023 is set to be a jam-packed conference with sessions covering a diverse range of topics, from modern slavery and workplace culture to big tech, human rights and reputation management. There will be interactive workshops on target-setting and promoting ESG within organisations, as well as sessions tailored to financial advisers, including responsible investment for beginners, and advice on how to construct a good responsible investment portfolio. Attendees will also gain insights into consumer research and demand.

With over 500 members representing US$29 trillion in assets under management, RIAA is dedicated to ensuring capital is aligned with achieving a healthy society, environment and economy.

“Not only is the program comprehensive featuring the latest trends and emerging issues, we see this as an unique opportunity for attendees to develop their skills and knowledge, make connections and explore growth opportunities in the sustainable finance space,” says Estelle

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Estelle Parker

The number of Australian assets managed using a rigorous, leading approach to responsible investment has hit a record value of $1.54 trillion, now accounting for 43% of the total market, according to a new study by the Responsible Investment Association Australasia (RIAA).

In addition, a record 45% of investment managers are holding companies to account on matters relating to environmental and social issues, and reporting back to investors on the outcomes achieved. This number has more than doubled in the past two years, with only 21% of investment managers engaging in such activity in 2019.

The findings come as part of the latest Responsible Investment Benchmark Report, researched in collaboration with EY. Responsible investment, also known as sustainable or ethical investment, is a broad-based approach to investing which factors in people, society and the environment, along with financial performance, when making and managing investments.

Recent high profile action from shareholders with companies such as AGL shows investors have significant influence in shaping their future direction and strategies on issues such as climate change.

This year’s report found that this approach – also known as corporate engagement – saw the greatest increase out of any responsible investment strategy in 2021. Approximately $726 billion in assets under management is now being used by fund managers to agitate for change on ESG issues, up 54% from 2020.

The study also shows excellence in responsible investment materialises into substantial financial returns.

Products certified under RIAA’s Responsible Investment Certification Program on average outperformed the market in the medium to long term, and over some time frames achieved two or three times the returns. This outperformance is seen both when comparing RIAA certified funds to the overall market, as well as to products of investment managers who self-declare as practising responsible investment.

“This year’s study shows that we’ve hit a tipping point of the responsible investing trend. Companies can no longer tick a box by providing cursory ESG metrics. Investors are expecting real, measurable action towards environmental and social issues,” said Estelle Parker, Executive Manager, Programs at RIAA.

“Investment managers are also getting much better at backing up their claims around the sustainability of their portfolios, as they don’t want to find themselves on the wrong side of tightening greenwashing regulation and scrutiny.

“A record 74 investment managers out of 140 have been identified as Responsible Investment Leaders, who explicitly and systematically consider ESG factors in the allocation of capital, and are decidedly transparent, reporting publicly not just on their activities to improve environmental and social sustainability, but also the outcomes they achieve.”

Emma Herd, Climate Change and Sustainability Services Partner at EY said: “Investors are facing more demand and increasing scrutiny on their approach to responsible investment and the market is responding, with more funds being managed responsibly than ever before. As a wave of mandatory reporting and product disclosure regimes come into force, understanding the current state of the market and the range of approaches being adopted by responsible investors is critical.”

Climate change remains a standout focus for investment managers, targeted through negative and positive screening practices as well as a growing number of sustainability-themed loans and investments. An emerging positive screen topic in 2021 was gender diversity and women’s empowerment which jumped in priority from 10th place in 2020 to 6th in 2021.

RIAA’s Benchmark Report is the most comprehensive review of the responsible investment sector in Australia. The 2022 report, the 21st such report, reviewed the investment practices over 2021 of 140 financial institutions.

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