Nearly half of investment managers holding companies to ESG goals: RIAA

More investment managers are holding companies accountable in keeping their ESG goals. The Responsible Investment Association Australasia (RIAA) reports that 45 percent of investment managers are holding companies responsible.

In the latest Responsible Investment Benchmark Report, it showed that this number has doubled from 21 percent in 2019.

The report highlighted that the number of Australian assets managed using a rigorous, leading approach to responsible investment has hit a record value of $1.54 trillion, now accounting for 43 percent of the total market.

Recent high profile action from shareholders with companies such as AGL shows investors have significant influence in shaping their future direction and strategies on issues such as climate change.

This year’s report found that this approach – also known as corporate engagement – saw the greatest increase out of any responsible investment strategy in 2021. Approximately $726 billion in assets under management is now being used by fund managers to agitate for change on ESG issues, up 54 percent from 2020.

The study also shows excellence in responsible investment materialises into substantial financial returns.

Products certified under RIAA’s Responsible Investment Certification Program on average outperformed the market in the medium to long term, and over some time frames achieved two or three times the returns.

This outperformance is seen both when comparing RIAA-certified funds to the overall market, as well as to products of investment managers who self-declare as practising responsible investment.

Estelle Parker, executive manager, programs at RIAA said companies can no longer tick a box by providing cursory ESG metrics. Investors are expecting real, measurable action toward environmental and social issues.

She said, “Investment managers are also getting much better at backing up their claims around the sustainability of their portfolios, as they don’t want to find themselves on the wrong side of tightening greenwashing regulation and scrutiny.

“A record 74 investment managers out of 140 have been identified as Responsible Investment Leaders, who explicitly and systematically consider ESG factors in the allocation of capital, and are decidedly transparent, reporting publicly not just on their activities to improve environmental and social sustainability, but also the outcomes they achieve.”