Sydney: Investors are ploughing ever more into ethical funds to back their views on issues such as global warming and gender equality, but such investments can be confusingly similar to standard funds, except for higher fees and ‘green halo’ marketing.
The $23 trillion “sustainable, responsible and impact” (SRI)investment sector has received a rush of money since the Paris climate agreement and, more recently, in protest against US President Donald Trump’s plans to slash environmental regulations.
Europe is the dominant region for such investments, with $12.04 trillion, followed by the United States, with $8.72 trillion, while Asia lags some way behind.
US investors have poured $1.8 billion into actively managed US equity funds in the socially responsible category from November to January, according to Lipper data, while other funds saw a net outflow of $133 billion.
Even in fossil-fuel-rich Australia and New Zealand, SRI investment rose from $148 billion to $516 billion between 2014 and 2016, and from $729 billion to $1.09 trillion in oil-rich Canada, according to the Global Sustainable Investment Review released on Monday.
Gavin Goodhand, a portfolio manager at Sydney-based Altius Asset Management, said the company’s sustainable bond fund tripled shortly after the 2015 climate accord, where nearly 200 countries signed up to measures designed to curb greenhouse gas emissions.
“The Paris conference was the line in the sand for many of our retail customers, particularly the millennial generation, who want to do the right thing for the environment,” said Goodhand.
Governments are also tapping the trend, selling green bonds to fund projects such as wind farms or low-carbon transport, with Poland, France and Nigeria making their debut this year. Some managers, however, are sceptical.
“While environmental, social and governance factors should always factor into investment decisions, this is largely a marketing exercise,” said Steve Goldman, a global portfolio manager at Sydney-based Kapstream Capital.
