How a planner can help you invest ethically

Money and Life
(Financial Planning Association of Australia)

Believe it or not, you can grow your retirement nest egg and do good at the same time, especially with the help of a good financial adviser.

website recently launched by the Responsible Investment Association of Australasia (RIAA) reveals the wide choice of ethical and socially responsible investment options available in Australia and New Zealand.

Many of these options are offered by well-known and experienced investment managers, but their approaches to responsible investing can vary widely.

Some just avoid investments in areas such as tobacco or fossil fuel companies. Others skew their investments towards companies and themes that will have positive impacts on the environment – for example, renewable energy, green property or recycling and waste management. Some do both.

Still others use their share ownership to engage with the companies they invest in and to try and get them to improve their practices for the greater benefit.

Various research studies have shown that ethical investments can outperform other mainstream managed funds and their benchmark indexes.

It’s a myth that by investing according to your values, you have to sacrifice performance. That’s no longer the case.

There are many reasons for this.

For example, ethical companies often thrive because they target industries of the future, that solve problems and result in the more efficient use of the earth’s resources.

In addition, a focus on environmental, social and governance (ESG) issues can suggest that these companies are managing risks, including those such as climate change and human rights issues, more carefully. By doing this, they are creating more sustainable companies and are eliminating possible threats to their earnings or reputation.

That said, not all ethical investment managers are the same. Their fees and charges can vary widely, and their different approaches to investing can also lead to large differences in their returns.

For example, cutting out some investments, such as mining and fossil fuels, could cause an investment portfolio to underperform the market and over time accumulate less for someone to retire on.

This poorer performance can be especially true in the Australian market which is skewed towards mining and resource companies.

But that’s exactly where a good financial planner can make all the difference.

A starting point when working with a client is to clearly define and understand his or her values – be that a concern for animal cruelty or the environment, or a desire to support more sustainable energy via windfarms or solar power.

Then, examine if these values can be aligned with existing products and investment options already available in the market.

A good financial planner can help tailor your investments to your specific requirements at lower fees, compared to some of the investments options available.

Consider speaking to a CERTIFIED FINANCIAL PLANNER® to assess what ethical investments match your values and which investment strategy would better suit your needs.


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