Ethical investments continue to be shunned

Australia’smanaged fund industry has been hamstrung in its attempts to gain widespread support for ethical investment funds because of a lack of knowledge about the sector amongst investors.

This is the keynote finding of a research project into ethical investment funds by Assirt, which found Australian investors were continuing to overlook ethical investments when considering their savings options.

The research, based on a survey of more than 2,000 investors, found that of those 19 per cent who owned managed funds outside of compulsory superannuation, only one-third had heard of ethical investments.

Worse still, very few of these investors even understood what the term ‘ethical investments’ actually meant, with 33 per cent indicating they were not aware if the managed funds they held invested in ethical companies.

Assirt market research manager Vanessa McMahon says the findings confirm that ethical investments continue to maintain a low profile, despite the push by a range of mainstream fund managers into the sector in recent years.

But McMahon says the lack of widespread recognition of ethical investing should be taken up as a challenge rather than an admission of defeat by the financial services sector in Australia.

According to the survey, once the basic features of ethical investing had been explained, 15 per cent of investors indicated they would strongly favour ethical funds to more tradition investment funds.

A further 24 per cent of investors indicated they would slightly favour ethical funds once their characteristics had been explained, while 41 per cent indicated they would treat ethical funds on a par with other managed funds.

Only 14 per cent of investors would not favour ethical investments even though they understood what they were about, the survey found.

“The lack of awareness about ethical funds is disappointing but also represents an opportunity. The statistics show that more than 65 per cent of managed fund holders don’t think about ethical funds or don’t know enough about them to make an investment decision. That’s a very large audience to educate,” McMahon says.

According to McMahon, of the people surveyed by Assirt, more than 60 per cent visited a financial planner, making advisers the key link in the effort to inform investors about ethical funds.

The Assirt survey, thought to be the largest of its type conducted in Australia, was commissioned by Challenger International, whose Socially Responsible Investment Fund returned more than 17 per cent in the 12 months to the end of March 2002.

Challenger executive director John Barry says a lack of information and not poor investment performance is behind the slow take of ethical funds.

“Performance is not a barrier for investing in ethical funds. Only 12 per cent of managed fund holders cited poor returns as a reason for shunning ethical funds,” Barry says.