At this week's inaugural Environmental, Social and Governance Research Australia (ESG RA) Awards, chair Rob Fowler said he hoped the group wouldn't be around in five years.
Perhaps he was being a little optimistic, but by then he expects ESG will be a no-brainer for fund managers and superannuation funds and therefore the group would no longer be needed.
"We strongly believe that as investors we can make better decisions, and improve returns for our members and clients, if we take into account long-term environmental, social and governance factors that are often ignored in the more traditional forms of financial analysis," he said.
And it seems some headway is already being made.
Amanda McCluskey, head of sustainability and responsible investment at Colonial First State Asset Management, who headed up the research evaluation committee for the awards, said brokers had presented increasingly better quality research.
"When we founded ESG RA in March last year there were only two researchers consistently producing high quality ESG research in Australia. Now, despite the challenges presented by the global financial crisis, most of the major Australian brokers have established some form of capacity in this area," she said.
"While the key topics by these brokers overwhelmingly remain focused on carbon trading and environmental issues, we expect the market will deepen its understanding of social governance issues over time."
Recently, institutional investors have acknowledged that climate change will inevitably have a wide-ranging impact on economies and financial markets.
This week it was announced that AustralianSuper and VicSuper along with global consulting firm Mercer, the Carbon Trust and investor partners that included the Norwegian Agency Pension Scheme, the Ontario Municipal Employees Retirement System and the Maryland State Retirement and Pension System have launched a study exploring the impact of climate change scenarios on asset allocation.
The research, to be led by the Grantham Research Institute on Climate Change and the Environment and Vivid Economics, will identify potential new investment opportunities and possible future risks related to climate change over periods until 2030 and 2050.
AustralianSuper chief investment officer Mark Delaney said the exercise was an important opportunity to understand how different climate change scenarios will impact future investment returns.
"Whilst no one knows precisely how climate change will evolve, by considering the impact of a number of scenarios on our fund we will be better prepared for what eventuates," he said.
"Working with global pension funds and other large investors will promote valuable dialogue and exchanges of ideas."
According to Tim Buckley, a portfolio manager at Australian clean energy fund Arkx, the potential opportunities that exist from investing in clean energy are where investors should be putting their emphasis, rather than looking at the risks.
"We're looking at the companies that are doing something and we find that pretty inspiring," he said.
However, Buckley said the Australian government is letting the team down when it comes to climate change.
"We're one of the only clean energy funds in Australia yet the sector is not looking that positive because of the lack of government direction and commitment, yet internationally there are huge strides being made," he said.
"It's imperative that governments act, yet in Australia it's not happening."
But it's not all doom and gloom. Arkx recently finalised a deal with the Westpac-owned Ascalon, which has seen the bank take a 30 per cent stake and invest $5 million in the fund. Buckley said Westpac will have exclusive Australian distribution and the fund would now look to launch into the retail space.
"We've got a really strong balance sheet and we'll launch a PDS (product disclosure statement) in a couple of weeks and then have it on platforms and have it available for retail investors ... there are huge investment opportunities offshore and we actually have the balance sheet to fund that expansion," he said.
Australia also has a second climate change fund in the form of Change Investment Management. The fund was formed after the departure from Arkx of Lisa Wade and Nikki Ashton in January.
Media reports say its first offering, the Carbon Opportunities Fund, has received commitments of $5 million from mostly high net worth individuals.
The fund has invested in Australia-based wind farm developer Infigen Energy, but the Australian component will remain small until government policy on renewable energy and clean-tech industries becomes clearer.
"Unfortunately, it's much easier to invest in liquid, offshore stocks than it is to invest in Australia. But high net worth individuals and superannuation funds are recognising the opportunity in investing in the transition to a low-carbon economy," Wade told The Australian newspaper.
United Nations Principles for Responsible Investment executive director James Gifford said the ESG RA was a good example of Australian funds moving forward.
"I am delighted with the progress of ESG RA. That progress is certainly consistent with the high uptake of principles of responsible investment in Australia, and bears out the view that fund managers and superannuation funds in Australia are very much aware of the investment implications in both a risk and return sense," he said.
So, with any luck, in five years' time we won't be hearing much out of ESG RA as Fowler hopes.
