Shannon Freney, SAA Head of Advice & Responsible Manager 

Sustainable investing isn’t new. However, it is becoming more mainstream. From climate change to gender diversity, more and more people are finding value in aligning their money – to their values.

In 2021, Australia’s sustainable investment market increased 20 percent to a record $1.5 trillion. The Responsible Investment Association Australasia (RIAA) 2022 benchmark report found sustainable investments represent as much as 43 percent of total professionally-managed funds.

In addition to traditional shares and fixed interest, sustainable investments offer a wide range of assets, including property, alternatives such as forestry, infrastructure, private equity and cash.

Most large Super funds offer a sustainable investment option, with some offering this as the default preference. At SAA, we have many clients who choose to invest a portion of their Super into ethical or responsible portfolios. 

There are many different forms of ethical or responsible investing, including ESG (Environmental, Social and Governance) Integration, Values-Based Investment, Impact Investing, Negative Screening and Sustainable Investing. 

You can also buy sustainable managed funds, including a growing list of exchange-traded funds (ETFs.) ETFs, as the name implies, refers to funds that trade on exchanges, and which generally speaking – track a specific index. When you invest in an ETF, you have access to a bundle of assets, which you can then buy and sell during market hours. This potentially lowers risk and exposure, while simultaneously helping to build a diversified portfolio.

So what are sustainable investments?

Focus on people and planet:

Sustainable investing is also known as ethical, responsible and ESG (Environmental, Social and Governance) investing – with a focus on people, society and/or the environment.

Sustainable investments are selected using a variety of screening methods, including:

  • Positive screening selects the best investments in their class
  • Negative screening excludes harmful sectors, companies or activities such as arms, gambling, animal testing, tobacco and fossil fuels
  • Norms-based investing screens for minimum standards of relevant business practices
  • Impact investing has the explicit intention of generating positive social or environment impacts.i

The term ESG investing is used when a fund or company commits to sustainable investing in the following three areas, and may cover a range of factors, for example:

  • Environmental – air and water pollution, biodiversity and climate change
  • Social – child labour and labour standards, ethical product sourcing, gambling and human rights
  • Governance – board diversity, corruption, business ethics, corporate culture and whistle-blower schemes.

The report found gender diversity and women’s empowerment are also gaining popularity.  

Sentiment aside – sustainable investing is not all warm and fuzzy. Performance still matters.

Performance gains:

Initially, sustainable investing often came at the expense of returns, but that is no longer necessarily the case.

The report compared the performance of what it termed responsible investment funds and mainstream investments funds (on average and net of fees) over the past 10 years, to December 2021.

Responsible, multi-sector growth funds consistently outperformed mainstream funds and their benchmark over 1, 3, 5 and 10 years. Responsible Australian share funds generally outperformed or were on par with mainstream funds. Only responsible international share funds disappointed, underperforming mainstream funds across all timeframes.

Watch out for greenwashing:

Increased demand for sustainable investments has led to a rapid increase in the number of products available. The rush to cash in on the trend has sometimes led to what is now commonly known as greenwashing. The Australian Securities and Investments Commission (ASIC) describes greenwashing as the practice of misrepresenting the extent to which a financial product or investment strategy, is environmentally friendly, sustainable or ethical.

ASIC warns investors to review the product terms. For example, a fund might describe itself as ‘no gambling’ but may invest in companies that earn less than 30 percent of revenue from gambling. Look for a clear explanation of how the product will achieve its aims and don’t rely on vague language like considers, integrates or takes into account.

SAA and sustainability: 

At SAA, we are proud of our partnership with Lonsec, which continues to help shape, quantify and build our diversified, actively managed portfolios. Alongside Lonsec’s Investment Committee, we work hard to identify sustainable investment solutions, such as the Ethical Investment Mid-Cap Portfolio, comprising of small and medium-sized Australian companies, that meet strict environmental and socially responsible standards.

Click on the below link to learn more about the portfolio, and the various companies involved in delivering positive environmental and social impact to society – along with financial gains.

Ethical Investment Advice, Mid-Cap Portfolio (

For those seeking sustainability, along with financial returns from your investments, the good news is that momentum and choice is growing. Please reach out if you would like to evaluate your current investment options, and explore integrating more sustainable investment solutions into your wider portfolio.

Information contained in this document is considered to be true and correct at time of publication. In addition, the information provided is general information only, and does not take into account any individuals’ objectives, financial situation and needs. Before acting on any information contained herein, you should consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs.***