Institutions drive responsible investment despite headwinds: RIAA

Responsible investing is buoyed by strong tailwinds coming from asset owners despite the political and regulatory headwinds, the Responsible Investment Association Australasia (RIAA) Conference heard this morning.

The sector is being emboldened by institutional investors' demand for sustainable investments in Australia and overseas, RIAA co-chief executive Dean Hegarty told delegates, despite increased complexity and pressure on the sector.

RIAA's recent Benchmark Report showed asset managers are the single biggest driver of responsible investments, while 88% of Australians say they expect investment experts to manage their money responsibly and ethically.

Further, RIAA's members currently represent more than 75% of the professionally managed assets in Australia.

"The 13 largest super funds in Australia are now part of RIAA's membership and attending this year's conference. RIAA's certification program also remains the standard in the market for high quality, true to label responsible funds, with over 350 products now certified," Hegarty said.

"We are now bolstered by representatives from all aspects of the investment market. Asset managers, research and data providers, banks, insurers, and of course asset owners."

In the ever-evolving landscape of regulation, geopolitical noise, tariffs and election cycles, intensifying scrutiny, and subsequent market volatility - demand and interest in sustainable investing perseveres. Hegarty sees investors staying the course.

"Commitments are being pulled back, and reporting burdens are in the spotlight. From greenwashing to greenhushing, the assumptions we're making, the justifications and especially the language we use are being challenged like never before," he said.

"And that's why we're here. To chart the course forward - with clarity, courage, and collective purpose."

Hegarty added that responsible investing touches all corners of finance. From private markets to passive strategies to credit - ESG tools can be integrated rigorously and credibly across a spectrum of asset classes.

The latest Benchmark Report shows the Australian responsible investment market grew to $1.6 trillion in 2023, marking a 22% increase from the prior year.

Such growth reflects the increase in the number of investment managers implementing responsible investment strategies and the rise in the average AUM allocated to these strategies. During the period, a record 291 investment managers are now actively engaged in responsible investment practices, up from 272 year on year.

While so much has been achieved, Hegarty said there remains much to be done, particularly "in the midst of a highly dynamic period that continues to change the environment we operate in."