“I wish I could say this is an isolated example,” Kirkland said, explaining the regulator’s concern about a small cohort of advisers who transfer client funds into high-risk investments after being referred by cold-calling telemarketers.
The industry has little chance of fighting through the legislative backlog and getting immediate wholesale change made to the ill-designed CSLR. There are things the government can do in the interim, said the FAAA, but who’s listening?
Ethical investing surges despite higher bar and greenwashing scrutiny
A staggering $3.3 trillion, or 93 per cent of all professionally managed assets, are now linked to responsible investing according to the latest Responsible Investing Association of Australia (RIAA) Benchmark Report.
The development is an encouraging sign for the sustainable investing movement given significant headwinds experienced over the past 12 months. The Australian managed fund industry as a whole finished 2022 $40 billion down on the previous year due to the global economic slowdown, while increased regulatory scrutiny over greenwashing concerns led to a tightening of definitions by many large companies, which led to smaller proportions of managed funds being reported as responsibly invested.
ASIC released new guidance on greenwashing in June, 2022. The regulator then took the extraordinary step of warning investment funds and superannuation funds about misrepresenting their ESG credentials in June this year, and commenced a greenwashing case against Active Super just last month.
In a sign of the ESG movement’s resilience, however, the number of funds that met the RIAA’s responsible investment threshold actually rose from 74 in 2021 to 77 in 2022.
This comes despite the threshold’s barrier being raised considerably.
“This year, to reflect evolving expectations of responsible investment leadership domestically and internationally, the standard to be named and investment leader was raised,” the 2023 report stated. “Responsible investment leaders are now classified as the top 20 per cent of fund managers, which constituted 54 responsible investment leaders in 2022.”
Provider Australian Ethical was one of just 53 domestic fund managers named as a Responsible Investment Leader in 2023. According to Australian Ethical’s head of client relationships Leah Willis, the report indicates a strong pipeline for sustainable investments moving forward.
“Australian Ethical has been investing responsibly for 37 years, and we will continue to keep ethical investing at the heart of everything we do,“ she said. “The report shows the responsible investment market has reached a turning point. We believe that only the pureplay fund managers who have a strong history, focus and deep expertise in responsible investing will succeed.
“We’re confident that the structural drivers supporting ethical investing and a more sustainable, low-carbon future have never been stronger,” she added. “We predict markets will have to divest from sectors that do harm because the long-term value of the assets they produce will likely decline. We believe our ethical approach places us ahead of that curve and we’re well positioned to reap those returns in the long-term.”
The RIAA report identified concerns over financial performance as the “top barrier” to responsible investment growth, “even though RIAA certified products performed on par with or better than benchmarks over the medium and long term,” the report notes.
Greenwashing was reported as the second most preclusive concern, up 39 per cent from 2021.
