Pandemic, bushfire-battered consumers holding investment sector accountable, body says

The Responsible Investment Association Australasia (RIAA) has published a new report around consumer expectations and demands for responsible investing in Australia, based on a survey of around 1,135 Australians in February.

Among its key findings, nine out of 10 Australians were seen to believe the finance sector has a role in producing positive social, environmental and economic outcomes for the country.

Four in five (79 per cent) were reported to now think the Australian financial services sector has a role to play in ensuring the country is less vulnerable to climate change.

The recent conditions in Australia have prompted two-thirds of consumers (67 per cent) to think about their investments and prompted half (49 per cent) to think about whether their investments are contributing to climate change.

Further, two in five people (43 per cent) were said to think about switching financial institutions (including super funds, banks) to one that invests ethically or responsibly.

Nine in 10 consumers want ethical options from advisers

Nine in 10 respondents (88 per cent) reported they believe it’s important that their financial adviser provides responsible or ethical options. Around 90 per cent believe it’s important that their adviser invests responsibly and ethically across the board.

The majority (86 per cent) said it is important that their adviser asks them about their interests and values in relation to their investments, whereas 87 per cent said they feel comfortable discussing their interests and values in relation to their investments with their adviser.

However, prioritising maximum investment returns was the top expectation of financial advisers, for 57 per cent of participants, above being knowledgeable about responsible investment options (54 per cent).

The RIAA offers its own online tool, Responsible Returns, allowing consumers to find investment products aligning with their values. The body’s chief executive Simon O’Connor reported that from December to January, the number of people using the tool doubled.

“It was as if we had a moment where the penny dropped for many consumers that they have connected the bushfires to climate change,” he said.

“And what’s shifting is [them saying] ‘Well, if there's one thing I want to do to really strongly help action on climate change, I'm going to look at where my money's invested or where my super is going.’ We saw this surge of interest for people who wanted to make sure their own retirement savings are invested in a way that is acting on strongly on climate change.”

Two-thirds of Australians (67 per cent) who don't currently invest in ethical companies, funds or superannuation funds indicated they would be most likely to consider doing so in the next five years, with 32 per cent saying they would consider doing so in the next year.

Three-quarters (75 per cent) said they would consider moving their super or other investments (excluding banking) to another provider if they found out their current fund was investing in companies engaged in activities inconsistent with their values.

Previously, Mr O’Connor said, consumers had expected their money to be invested ethically and had strong intentions but had failed to follow through in being active and moving their money.

“So, what we're reading from this is that the barriers are starting to fall away here,” Mr O’Connor said.

“And consumers are moving from an intention to invest ethically and responsibly to the start of a big wave that's coming where people are going to start moving their money to invest in line with their values and taking action and that's starting to occur.

“We're at the cusp of a massive wave of consumer interest in how their money is invested. And for the finance sector, this is something of a warning to say you really need to understand the preferences of your consumers. Because there's a great risk here that if you're not reflecting those preferences is that we're going to lose out and we're going to lose customers and customers will move their money.”

The majority (86 per cent) of Australians were found to expect that their super or other investments (excluding banking) to be invested responsibly and ethically.

Around 87 per cent expect the money in their bank accounts to be invested responsibly and ethically.

The report noted that nine in 10 Australians (89 per cent) feel its important that their financial institution invests responsibly and ethically across the board and 85 per cent feel it’s important that their financial institution ask them about their values and interests in relation in investing.

Opportunity amid crisis

Mr O’Connor commented that if the finance sector responds well to the coronavirus crisis, there is an opportunity to rebuild trust following the royal commission. He pointed to the banks taking a proactive response.

“There's a huge expectation from Australians, that the finance sector has a role to play in ensuring we have a stronger society, environment and economy,” Mr O’Connor said.

“[It] really emphasises the important role that finance is going to need to play in any recovery and rebuilding of our economy, post COVID-19.

“We certainly see that [institutions in] the financial sector can demonstrate their usefulness to society, that they improve the day-to-day lives of Australians, that they improve the environmental outcomes of Australia, they can contribute to responding to climate change and health epidemics.”

Meanwhile, the number of Australians who believe responsible investing can drive stronger financial returns has shifted.

Three in five (62 per cent) now believe ethical or responsible super funds perform better in the long term – in 2017, only 29 per cent of Australians agreed.

Further, half (53 per cent) said they would be motivated to invest and save more money if they knew their savings or investments would make a positive difference in the world.