Ethical investors are flexing their financial muscle

Ethical investing has come a long way in the 25 years Terry Pinnell has been offering advice.

Back in the 1990s, there were just three appropriate funds where he could invest clients’ money. 

And the usual question he faced was: “Isn’t it like charity? Will I make any money?”

Now with ethical funds outperforming the benchmark nine times out of 10, according to the chair of the Ethical Investors Co-op, it’s not surprising that it has more than $2bn funds under management.

With Ethical Investment Week running from next Monday, InFinance caught up with Pinnell to talk about the seismic shifts he has witnessed.

“A lot of it is because people are becoming more aware of environmental concerns,” he said.

“Social issues are high on people's agendas as well. People are actually realising that their money has power. 

“They see things like climate change and are asking what can I do about it? 

“And one of the things they can do is use their financial power, through their superannuation funds and their investments. They realised they can make a difference in that regard. That's one of the major issues that has come to pass.”

As a result the number of funds has grown from the three that were around 25 years ago, according to Pinnell.

“Now with the superannuation funds and investment funds available to people, we’ve seen exponential growth. Fund managers are realising that this is the trend,” he said. 

“When you've got people like the Bank of Australia saying we're not going to invest in any fossil fuel companies, that's a new sort of paradigm really.

“With all of the banks now saying they are not going to invest in coal anymore - and the insurance companies saying the same thing - the trend is huge.”

Ethical Investment Week, which is entitled The Sustainability Revolution has nine events around the country, will see the Co-op unveiling its ratings of the funds that have an ethical/responsible/ESG agenda. It is also producing a guide for those interested in ethical investing.

Pinnel says the FPA interpretation of FASEA guidelines has a clause suggesting advisers ask clients if they have any “environmental, social or ethical considerations that are important to them” which he believes is a game changer.

He says: “If you don’t do that or if you ignored them then you weren't acting in their best interests, which is totally against the FASEA regulations. 

“This is a whole new parameter as far as I’m concerned. 

“If the client says yes, I’ve got these concerns then they will have to find an ethical fund or SRO that will comply with their client's wishes. 

“One of the other reasons that ethical investment has grown so much is because nine times out of 10, it out-performs normal investment funds.

“So I don’t get the questions about ethical investing being like charity anymore and will I make any money.”

Clearly climate change is front and centre of many in financial services these days. 

And in a world first, Mark McVeigh, a 24 year-old from Brisbane, is taking legal action against his superannuation fund for not factoring climate change into its investment decision.

The case against REST, the Retail Employees Superannuation Trust, will be back before the Federal Court this month where the Judge is expected to set a hearing date.

To find out details about the Ethical Advisers Co-op and next week’s event, go to www.ethicaladviserscoop.org