Its aim is fourfold: to update figures for the 2009-10 financial year for the various forms and segments of responsible investment; to present analysis of its level of growth (or decline); to show comparisons with the total managed investment market; and to provide a summary of the latest reported overseas figures. For the second year in a row it contains a separate report showing benchmarks for clean technology investment. We have added for the first time a RIAA membership directory to the 2010 edition highlighting the key players in this industry.

Financial Adviser Responsible Investment Portfolios

Figures for this segment were gathered by surveying financial advisers with a declared interest in advice on responsible investment. Of that group, 23 firms responded that they advise on direct responsible investment portfolios which total $1,461 million. This is up 50% from the adjusted 2009 figure of $972 million.

This equates to about three times the level of increase in the Australian sharemarket in that period, suggesting there has been strong growth in the amount of assets invested in this manner. This compares favourably with a decline of 21% in 2009 and 3% in 2008 during the financial crisis; after strong growth of 46% in 2007 and 42% in 2006.

The longer term trend of strong (albeit volatile) growth in this segment indicates that screened direct share portfolios are becoming a more favoured means for financial advisers to meeting responsible investor needs. This is consistent with a broader trend away from managed funds and towards direct equity portfolios in the mainstream finance sector. The trend is most evident within private client businesses that are part of larger financial institutions and banks.

This segment also suffers from under-reporting as advisers that are known to provide this type of service are sometimes unwilling to share what they regard as commercially sensitive information.

A copy of Responsible Investment 2010 can be downloaded from the RIAA website. (http://www.responsibleinvestment.org)

Alternatively, you may download it directly from AdviserVoice.

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• a 10% increase in managed responsible investment portfolios
• a 50% increase in responsibly invested financial adviser portfolios
• a 29% increase in Australian signatories to the Principles of Responsible Investment

Released at the “Inside RI” event on 15 November, Responsible Investment 2010 – the real facts about the growth and the size of RI in Australia and New Zealand, is the 10th annual Benchmark Report commissioned by the Responsible Investment Association Australasia (RIAA). It reaffirms that taking environmental, social and governance (ESG) issues into account has become best practice for those looking to improve investment performance in the short and long term.

In a time when many are still reeling from the effects of the global financial crisis, the consumer demand for responsible investment products has almost doubled with ethical advisor portfolios growing an extraordinary 50% from AU $972 million to AU $1.46 billion after a decrease of 21% in the 2009.

This was also confirmed at a community briefing held at RIAA’s 7th International Responsible Investment Conference in September 2010 with 93% of the attendees stating they would adopt a responsible investment approach in the future.

RIAA’s benchmark report shows that not only is responsible investment a smart choice, it largely outperforms the average mainstream funds over one, three, five and seven years for Australian shares and international shares. Balanced growth managed funds outperformed mainstream funds over five and seven years.

Since the difficult times investors were facing in 2009, the RIAA report reveals that core responsible investment (a combination of specialised managed funds, community finance, green loans, RI charity investments and financial adviser portfolios) rose 13% from AU $16.15 billion to AU $18.19 billion.

Furthermore, managed responsible investment portfolios alone rose 10% from AU $14.02 billion to AU $15.41 billion. Growth in responsible investment portfolios fared better than the broader market of managed portfolios which rose 9% in that same period.

“We continue to see world changing events in areas which are deeply interconnected such as climate change, energy security, water scarcity, food shortages and environmental risk which are all driving responsible investment. These issues have serious implications for societies, economies and the entire investment chain. The 2010 Benchmark report figures exemplify the disappointment experienced by more and more people about the inability of traditional financial models to recognise the inherent impact of environmental, social and governance issues on investments. Taking these issues into account is both profitable and smart,” said Louise O’Halloran, Executive Director of RIAA.

Another shining star in responsible investment is community finance. This dynamic investment strategy continued on a steady growth path increasing 15% from AU $1.16 billion to AU $1.33 billion.

Over half all funds under management in Australia are now signed to the United Nations backed Principles for Responsible Investment. The RIAA report shows there has been a rise in Australian signatories up 29% from 2009 with 112 Australian signatories now representing 14% of the globally signatory base. Funds under management for this group are approximately US $591 billion.

“This year’s study is the most expansive edition of RIAA’s benchmarking report to date including revised definitions; data on ESG integration levels in Australian fund strategies; an enlarged section on broad RI initiatives; the second annual Cleantech Report; a comprehensive list of the growing body of Australian-based ESG research; and a full RIAA membership directory. This report is a tribute to the ever growing list of accomplishments of the RI industry in Australia, and most especially to the members of RIAA”, said Louise O’Halloran, Executive Director of RIAA.

A copy of Responsible Investment 2010 can be downloaded from the RIAA website. (http://www.responsibleinvestment.org)

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