AUSTRALIA - Trustees of superannuation funds should be embracing sustainable investing, according to new research.
The research paper from Russell Investment Group reviewed longstanding impediments to sustainable investing, such as whether sustainable investment strategies constrained investment returns and compromised fiduciary responsibility. Subsequently, it suggested that new research and evolving market practices have removed these traditional roadblocks.
The research showed that Australian super fund trustees have been coming under increasing public pressure to take sustainability factors, such as the environment, social & governance (ESG) into account in their investment strategies.
Reviewing a list of more than 40 empirical studies into the performance of ethical, SRI and sustainable investing approaches, the paper said there was no necessary performance penalty from pursuing a sustainable approach.
In addition, it concluded that there was unlikely to be a performance premium from pursuing a sustainable investing approach when account was taken of appropriate risk and style effects.
As a result, Russell Investment Group said this finding addressed the core concern that a negative performance impact from sustainable investing would compromise trustees' fiduciary responsibility to act in their member's best interests.
Commenting on the findings, Scott Donald, director of capital markets research at Russell, said: “Whilst attention to such sustainable investing has traditionally been deemed inappropriate for fiduciary decision-makers, we are now seeing a global effort to recognise the interests of a wider range of stakeholders and to incorporate timeframes longer than is common in the investment management industry.”
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