But when it comes to the entire investment market, responsible investing only accounts for 16 per cent of total assets under management (TAUM).
According to the 2013 Responsible Investment Benchmark Report, responsible investment portfolios totalled $152 billion of TAUM as at 31 December 2012, while the total market was $934 billion.
As a percentage of the market, responsible investment portfolios have increased from 13 per cent of TAUM in December 2011 and 8 per cent in 2010.
Environmental, social and governance (ESG) integration is the primary method of responsible investment in Australia, accounting for 89 per cent of the market, according to the report.
Ethical or ‘socially responsible’ funds were a “modest” $15.2 billion of the market as of December 2012, the report said.
Financial advisers directly manage responsible investment portfolios for their clients through 30 firms, totalling $1,532 million.
When it came to performance, responsible funds delivered better returns when compared to the benchmark and the average of all mainstream funds in all but one category across one-, three-, five- and 10-year time periods in three investment categories: Australian equities, international equities and multi-sector growth funds.
The only category in which responsible investment funds did not outperform the mainstream average was multi-sector growth funds over one year (12.5 per cent versus 13.8 per cent).
Responsible Investment Association Australasia (RIAA) chief executive Simon O’Connor said the outperformance demonstrated in the report should “put to bed” the myth that responsible investment strategies lead to poorer returns.
“With more of the region’s investments being made under responsible investment mandates, the extra analysis undertaken for every investment decision means responsible investors have a deeper understanding of their investments, so it should be no surprise they are earning better returns,” Mr O’Connor said.
