The Rise of Socially Responsible Investing by Liz Chevel

responsible investing by Liz Chevel
  • by Liz Chevel

Socially responsible investing is currently redefining the investment landscape with more and more investors voting with their heart, as well as their head. Instead of merely looking at returns, people are increasingly interested in investments that align with their personal values. But does investing responsibly have to mean a sacrifice on your returns? We take a closer look at ethical and sustainable investing and what it means for your hard earned money.

What is Socially Responsible Investing (or SRI)?

Sustainable is different to ethical and we should draw the difference here; it is not one style.

Responsible Investing is sometimes referred to as “sustainable”, “socially conscious”, “green” or “ethical” investing. It is a style of investing whereby investors seek out investments and in particular businesses and corporations that align with their personal values and ideals and do not cause people to wrestle with their conscience with regard to where their money is invested. Some of the issues that investors place high importance on include the environment, consumer protection, slave labour, animal rights, weapons, tobacco, gambling, religious beliefs, employees’ rights as well as human rights, among others. Essentially, investors reward those companies they see are acting as good corporate citizens and eschew those who do not.

Corporations are Taking Notice

Any corporation who is publically listed are realising that responsible investing is here to stay. Not only that, its popularity is growing at an impressive rate. According to the Responsible Investment Association Australasia (RIAA), 2017 Responsible Investment Benchmark Report (2016) the value of investments made with ethics and sustainability in mind has quadrupled in Australia over the past three years to $622 billion. Globally the trend is also on the rise with approximately $1 of every $9 under professional management in the U.S. classified as a socially responsible investment.

“There’s been a massive awakening in ethical investing,” says RIAA CEO Simon O’Connor. “Investors have realised they can invest in a way that helps rather than harms the planet, without sacrificing returns. We are rapidly heading towards a ‘tipping point’.”

Businesses understand that “being good” is good for business and that any conflict with any of the issues investors are starting to avoid could spell a PR nightmare. Investors are coming to expect full disclosure when it comes to where their money is being invested and what activities it is funding.

“It takes 20 years to build a reputation and five minutes to ruin it.” – Warren Buffet

How are Responsible and Ethical Investment Funds Classified?

You need to understand exactly what you are investing in! You could end up with a skewed or overly concentrated portfolio – refer to Cuffelinks Looking behind the screens article.

Some funds do not have a tolerance for big mining whereas others do; some are “closet indexers” who just leave out a small number of stocks on ethical/sustainable grounds; you could end up over-exposed to the major Australian banks for example

The Rise of Ethical Investment Funds

Not only are corporations noticing that consumer demand for ethical investing is growing, the managed fund sector is also catering for this trend.

“In my view the successful companies of the future will be those that integrate business and employees’ personal values. The best people want to do work that contributes to society with a company whose values they share, where their actions count and their views matter .”
Jeroen van der Veer, Committee of Managing Directors (Shell)

Profit from Your Principles

Analysing stocks using multiple additional screens is by its nature a labour-intensive process and investors should therefore expect management fees to be higher than for a non-SRI fund in a similar sector. This means that SRI funds have to perform better than non-SRI ones to produce the same net return.

However The RIAA report showed that SOME core responsible investment share funds in Australia have outperformed non-ethical funds over most time periods meaning that investing responsibly does not have to mean sacrificing your returns.


Investing ethically does not mean having to sacrifice performance. Investment funds are increasingly providing options for investors who are demanding that their money is secure with corporations that do business in a responsible and ethical manner. However you do need to understand what you are investing in so if you are interested in knowing more about the options available to you speak to myself today.

About the author

liz chevel

Elizabeth Chevel, Financial & Wealth Adviser

Liz Chevel is a Financial & Wealth Adviser with more than 10 years experience in the financial industry. She is director and a founder of Trigona Financial Empowerment which is an Authorised Representative of Dover Financial Advisers.  She has a number of certifications in business and finance, but the personal approach toward each client is what makes her different.

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