Shaping the future: what clients want from their investments

Simon O'Connor

By

15/11/2017

OPINION | Every investment decision local investors make plays a role in shaping the future of Australia.

Recognition of that simple concept brings with it a deep responsibility for all who are involved in finance and capital markets. The scale of the responsibility brings with it enormous opportunity, particularly for those institutional asset owners that are custodians of the nation’s $2.3 trillion superannuation savings pool – a powerful source of patient capital.

How do we then invest in a way that builds and develops the Australian economy to support the long-term returns we are aiming to achieve? Furthermore, how do we invest in a way that builds the kind of economy, society and environment our clients and members want to retire into?

As responsible investors, we have spent many years with a sharp focus on avoiding risk – financial risks, environmental, social and governance (ESG) risks, ethical risks and reputational risks. Now it is time for the conversation to move beyond just an avoidance of risk, to how we are supporting assets and enterprises that will underpin a prosperous, fair and sustainable Australia.

Australia-wide polling, conducted by Lonergan Research and launched today at Responsible Investment Association Australasia’s Responsible Investment Australia 2017 conference in Sydney, shows consumer demand for responsible and ethical investment is on the rise, as this industry continues to grow in size and influence.

The research shows 9 in 10 Australians expect their superannuation or other assets to be invested responsibly and ethically. Four in five Australians surveyed said they would consider switching their super or other investments to another fund if their current one engaged in activities inconsistent with their values.

This is the opportune time for a broader conversation about where our capital is being directed to, not just diverted from.

Indeed, to underpin those long-term sustainable returns we are all seeking for our clients, it is essential that we retain a sharp focus on constructively building an Australia that is not only prosperous, but also built on strong social and natural capital.

What is much clearer today than even three years ago is that our clients are now demanding that financial markets play a socially constructive role in the economy. A growing number of ordinary people want to know that their savings are supporting the emergence of tomorrow’s industries, removing support from companies that are doing social harm, and investing in the kinds of assets and infrastructure that we’ll need deep into this century in Australia.

With this growing consumer demand comes rising expectations for the financial services industry and a requirement for greater accountability and transparency in the way we are managing our clients’ investments. Responsible investing offers a great chance to respond to these challenges and engage deeply with clients, but it will require us shifting from a focus on investment processes to investment outcomes.

Responsible investors are well positioned to take up this challenge to shape the future.

Simon O’Connor is chief executive of Responsible Investment Association Australasia. This column is based on an excerpt from his opening address to the RIAA annual conference 2017, held at the Powerhouse Museum, Sydney, November 15-16.